Arab Spring: The Alexandria Business Association

The revolution in Egypt was a chance for the Egyptian people to get back the freedom and pride that were lost for a long time. However, starting January 28, the country experienced insecurity, uncertainty, and violence, especially by those who wanted to take advantage of the precarious situation. The imposed curfew also limited day-to-day activities.

The market was impacted greatly by the revolution, especially our organization the Alexandria Business Association (ABA). While all of the branches were closed until February 5, the head office opened by the end of January. All senior management were on call and responsive to the branches as well as the Board of Directors. It was very important for ABA to quickly respond to issues, especially for the three main stakeholders:

1. Board of Directors: ABA staff worked to get their support and the “green light” to be flexible and respond to situations in a timely manner. The Board was often provided with different possible scenarios, and worked to reach consensus on how to act quickly.
2. Staff: To ensure the stability of the organization and support our staff, it was very important to deliver accurate messages and avoid any negative impact of rumors, especially when communications were sporadic.
3. Clients: To assure clients that ABA was still going strong and that our solvency is guaranteed. We were keen to approach each client to evaluate their situation, provide assistance to the seriously affected, and maintain our commitment to all of our clients. One thing that diminished our impact was the announcement of the Social Fund of Egypt, which provided a three month allowance for all clients. In response, our clients wanted the same option, requiring a great deal of time and effort to persuade them that this would not help seriously affected clients and represent a waste of resources. This was enough for uncommitted clients to stop payment, especially given the absence of police and the crippled judicial system.

It was important for ABA to get back into operation as soon as possible, with a strong message to all of its stakeholders. The branches started operations on February 5 and loans were disbursed on February 6 (before Mubark even stepped down). It was a message to all that ABA will continue its role as a market leader.

Portfolio at risk (PAR) increased from 0.83% in December 2010 to 3.65% in January 2011, and further to 9.40% in February 2011. ABA responded to ensure future operations, including accelerated financial write off, shifts, reschedules, supportive loans, and the ABA bail fund (Takaful). (ABA’s Board supported the bail fund by providing 1.2 million Egyptian pounds.)

All of these measures resulted in the improvement of PAR to 6.07% in March, 3.39% in April, and down to 1.6% in July 2011. However, when taking into consideration the unusual actions applied, PAR would have read 5%. This level is still acceptable in such a crisis, and proved that ABA is strong enough to overcome tough situations and show flexibility, professionalism, transparency, and social responsibility. The strong actions taken and their results reflected the healthy relation between ABA and its stakeholders, Board, executive committee, management, staff, and clients.

ABA’s experience can provide lessons that the microfinance industry in Egypt can learn from, namely:

1. While the market became more risky, MFIs should continue to implement emergency plans.
2. The commitment of ABA staff and clients was strongly tested, but the crisis showed how they can become even more committed and reliable.
3. During such a crisis, an organization’s social role is more important than financial performance.
4. Building a crisis management team is a necessity.

ABA presents the following recommendations:

1. Revisit your mission and vision with a thorough understanding of your organization’s social role.
2. Strive for complete transparency, accurate reporting, and application of best practices.
3. Financial education, client protection, customer service, and effective human resources management should be the main drivers of MFIs; neglecting these factors will result in a major crisis.