Raya Holding Discusses Potential and Applications of Green Microfinance at COP28

(Cairo – November 2022)

Usama Zaki: “Raya Has Designed a Business Model to Reduce Over 10 Million Tons of Carbon Emissions Annually by Transforming the Light Vehicle Sector, and We Call on All Stakeholders to Cooperate.”

Raya Holding for Financial Investments has announced a number of its current and planned efforts aimed at achieving sustainability and green transformation, particularly through its operations in the financing and manufacturing sectors. This was during a side event at COP27, entitled “How to Scale Green Microfinance in Egypt and Africa.”

The event, held in the Egyptian Business Pavilion in the Blue Zone in Sharm el-Sheikh on Tuesday, November 8th, highlighted the role of various key actors to promote green transformation through financing small and micro businesses, the remarkable efforts of key actors in the financial sector locally and internationally, the frameworks governing the microfinance sector, and how the microfinance industry can be utilized for green transformation across many industries.

The event was held with the high-level participation of Mr. Mohamed Farid, chairperson of the Financial Regulatory Authority and vice chairperson of IOSCO; Mr. Ahmed Kouchouk, Vice Minister of Finance for Fiscal Policies and Institutional Development; Mr. Yehia Aboul Fotouh, deputy chairperson of the National Bank of Egypt (NBE); Ms. Maya Hennerkes, Director of Green Financial Systems at the European Bank for Reconstruction and Development (EBRD); Eng. Hazem Maghazy, CEO of Aman Holding, the financial arm of Raya Holding; and Eng. Usama Zaki, CEO of the Manufacturing Sector at Raya Holding.

Speaking at the event, Usama Zaki said, “Green transformation is a long-term process that requires joint action.” He also called for the cooperation of all stakeholders concerned with environmental sustainability, including the public and private sectors, international entities, and the banking sector. Meanwhile, Moghazy underlined the importance of developing green financial products that benefit the end user directly, noting that it is an essential means to achieve green transformation.

An ambitious plan

Zaki added: “Through operating in over 11 diverse industries, Raya strives to utilize its wide-ranging experiences and ensure cooperation between its subsidiaries to achieve sustainability goals and green transformation, especially through the key points of intersection between microfinance and the manufacturing of light transport vehicles.” Given the direct impact of the transportation sector on carbon emissions, governments set their sights on this exact sector to achieve green transformation, and the same goes for Raya through its subsidiaries. Raya pays significant attention to transforming the light transport vehicle into an eco-friendly industry, which aligns with the governmental agenda aiming at reducing carbon emissions generated by the transport sector by 2030, he continued.

Zaki said that Raya is now developing a business model aimed at transforming light transport vehicles—numbering over 5 million vehicles, expected to reach 8 million vehicles by 2030, and currently generating nearly 25 million tons of carbon emissions—into green vehicles. By leveraging our manufacturing and green finance capabilities to convert half of these vehicles into green ones, we aim to significantly improve the environment by reducing over 10 million tons of carbon emissions annually. Furthermore, this practical model will have a significant socioeconomic impact by improving the lives of light vehicle owners, enabling them to save up to 80% of their monthly operating and maintenance expenses. Additionally, it will have a macroeconomic impact by reducing the consumption of over 5 billion liters of gasoline and reducing fuel subsidies, he added.

“We call on all stakeholders concerned with green transformation and climate adaptation to work hand in hand with Raya on transforming the light vehicle transport sector into a green one,” urged Zaki.

Opportunities and challenges

“The green microfinance sector is replete with opportunities and challenges,” said Moghazy, noting the potential of the extended market size, with the number of microfinance beneficiaries reaching 5.5 million and expected to grow steadily to reach up to 10 million beneficiaries by 2030. Besides, the rapid growth rate of microfinance in Egypt is also a notable advantage, with the annual growth rate of the microfinance industry reaching 40%.

However, all stakeholders must address issues like public awareness of green transformation’s benefits and need. Therefore, we should design and introduce green products and services that directly benefit end users and enhance their financial lives. This is how we can effectively involve the public in the green transformation. Another challenge is the higher risk of financing new green products or projects compared to other projects, as well as the relatively low return on investment (ROI).

Work is already underway.

Moghazy continued: “We believe there exists a responsibility on our shoulders to promote green transformation through green finance. Thus, we have launched several initiatives aimed at accelerating green transformation, such as Aman’s self-help initiative to transform gasoline-powered vehicles to work on natural gas. In the pilot phase, we independently transformed nearly 4000 vehicles through no-interest loans to encourage customers to engage in green transformation efforts.”

Meanwhile, Usama Zaki has voiced his optimism about the efforts aimed at promoting green transformation introduced by various key financial players. “Raya aspires to take tangible steps in its project to transform the light-vehicle transport sector into an eco-friendly one, and to share its success and the roadmap for long-term efforts in this regard at COP28,” he said.