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Egyptian startups stranded by HSBC account closures
As if Egypt’s current political situation hasn’t done enough to disrupt business as usual for the country’s growing Small and Medium Enterprise (SME) sector, more troubling news has reached several small startups this week.
HSBC Bank Egypt, one of the largest multinational banks serving Egypt, has sent a letter to numerous young companies, essentially kicking them out as customers with little explanation as to why.
The letter states that despite HSBC Business Banking’s focus on helping Small & Medium Enterprises “grow and trade internationally” for over 30 years in Egypt, HSBC is reviewing its business customers in order to be able to “provide international expertise and support in line with [its] key strengths as a leading cross-border trade and business bank,” adding “but also due to HSBC’s stringent regulatory obligations as a global banking provider.”
It’s only after three paragraphs of self-praise, according to most recipients, that the bad news is delivered.
“Based on the above, I am sorry to advise that you will no longer qualify for business banking services from HSBC and we will need to close your account with us.”
HSBC says it will give customers 60 days to close their account, yet nearly all of the recipients say that they received a letter between 20-40 days after it was dated- causing a tremendous amount of anger and frustration.
Karine Kamel, who runs BridgEgypt, a small consultancy firm focused on corporate social responsibility that has been around for one year, says she felt “betrayed” by the bank. She received the letter yesterday- although it was dated over three weeks ago.
“I pay fees to get a service- it wasn’t as if they were doing me a favor,” she says. “It wasn’t a nice way to break up. I’d expect a call, very apologetic. Not a letter.”
“It wasn’t even personalized,” she added.
Some people didn’t even receive a letter. Karine says that a friend of hers, after hearing of others stories, nervously asked the teller today about the status of her account- and was shocked to hear that it would be shut down as well.
Moe Salem Korayem, Co-Founder and CEO of Social Fruits, a startup that has had a Business account with the bank since 2011, says this reflects a pattern of disorganization and incompetence from HSBC Bank Egypt.
He, like others, chose HSBC because it was the only bank offering internet banking with online transfers at the time. But, at the end of 2012, the bank shut down their internet banking service while they set up a new system- which took three months to unroll, and required customers to input all of the information again to activate. He complained and sent emails, but received no response.
“They didn’t even call,” he says. “I took it as an insult.”
“Now I’m starting to look for other services, but as far as I know HSBC is the only one that allowed internet backing with online transfers,” he says.
Why did this happen?
Multiple attempts to reach HSBC Bank Egypt by phone were not answered, and this shift seems rather confusing given that back in 2011, USAID partnered with HSBC Bank Egypt to “develop small and medium enterprises and increase employment opportunities.”
USAID announced that it’s partnership with HSBC would offer financial assistance of up to US $34 Million, in local currency, over nine years, to address “the issue of lack of access to finance for SMEs in Egypt, removing a significant impediment for economic growth and job creation.”
With a nine-year program and commitment of funding, why HSBC decided to dramatically reverse their assistance is up to speculation at the point. Yet it seems that this is part of a broader global strategy to drop some SMEs.
According to recent reports, HSBC sent out the same 60-day notice letters last month to customers in the United Arab Emirates (UAE).
Mahamad El Tanahy, Managing Director of Bright Creations, another Egyptian startup, says he’s worried about the sudden closures of SME accounts. Although he hasn’t received the letter yet, he works with a few startups, and knows it could happen any day now.
“I’ll suddenly have to notify all clients about this to change accounts which, depending on their internal system, might take some approvals,” he said in an email.
Despite loving the HSBC staff at his local branch, he feels this treatment is “totally unacceptable,” and it seems to be something out of local control.
Right now, aside from trying to figure out what the new criteria is that SME’s must meet, just for a sense of clarification and closure, many SME’s are racing the clock to find a new bank.
“I’ve spoken to about five other firms who also have the same problem, and we’re doing our research now to check out options,” says Kamel. ‘It’s just a big pain- it’s time and effort I already put into an account at HSBC a year ago.” And extra time, money, and resources on a repetitive task is something no small startup can afford.
To follow updates, the hashtag #HSBCEGFAIL is now picking up steam- and vented anger- on Twitter.
Jonathan Kalan is journalist and photographer specializing in technology, innovation and social development in emerging markets. A graduate of the University of California, Santa Barbara, he has traveled to over 43 countries and collaborated with NGO’s, social enterprises, technology start ups, and media companies, and was a Diageo Africa Business Reporting Awards 2011 Finalist. He is currently based in Nairobi, Kenya, where he freelance for various media outlets including BBC, Huffington Post, and CS Monitor, and also serves as Sandbox Network's Nairobi co-ambassador. He can be found on his website and on Twitter at @KalanThinks.
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