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Finance (Cover)_Layout 1 7/10/17 4:47 PM Page 2
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Finance (Chap.1)_Layout 1 7/10/17 4:25 PM Page 6
July 2017
8
Reforms
16
Consumer
26
Marriage
32EGX
Bear Credit of Finance on the
Fruit on the Rise and Technology Upswing
O
ne of the strongest sectors of the Egyptian econ-
omy, the financial sector has significant potential
to grow. With the free float of the Egyptian pound,
financial institutions are finding the liquidity and freedom
to expand their services, but they will have to strike creative Khaled Sewelam
Director, Research and Publications
alliances with IT and mobile phone companies to attract the
86% of the population still unbanked. The latest edition of Amira Sheha
Research Manager
AmCham Egypt’s Industry Insight series explores the oppor-
Fadila Noureldin
tunities and challenges facing the banking and finance Author and Economic Researcher
industry today. First, we look at where the sector stands and Kate Durham
Editor and Head of Corporate Publications
how key reforms such as the float of the Egyptian pound, the
Value Added Tax and Central Bank mandates about loan Nessim N. Hanna
Senior Art Director
portfolios will impact bank services. Second, we outline the
Emy Emile
key areas of growth for retail banking – from homes to white Graphic Designer
goods as well as personal loans and credit card services. Amany Kassem
Advertising & Business Development Director
Third, as financial transactions by mobile phones are gaining
popularity and new regulations to facilitate mobile payments Nada Auf
Advertising & Circulation Coordinator
are in the works, we detail the new and established players
Aya Enaba
and what innovations lie ahead. Finally, we explore what Design & Administrative Assistant
lies ahead for The Egyptian Exchange as trading is at an Hani Elias
Production Supervisor
all-time high and more companies are launching IPOs.
HDB Final.pdf 1 7/10/17 2:50 PM C M Y CM MY CY CMY K
Finance (Chap.1)_Layout 1 7/10/17 4:25 PM Page 8
REFORMS
BEAR FRUIT
A
s Egypt looks back on the rocky road it has traveled since the 2011 revolution, 2016 could well
be the turning point toward a lasting economic recovery despite a shaky start to the year. Inter-
national reserves hovered at USD 16.4 billion by the end of 2015 compared to around USD
36 billion at the end of 2010. A persistent foreign exchange (forex or FX) shortage severely hampered
every sector of the economy, especially those relying on imports for essential commodities and pro-
duction inputs. The banking sector in particular was shackled by capital controls that limited dollar
deposits and transfers, as well as the ability to issue letters of credit (LCs). As the year progressed, banks’
foreign currency reserves were drying up, causing more people in search of dollars to turn to the parallel
market, paying up to twice as much per dollar than the official rate.
8. AmCham Egypt Industry Insight• Corporate Banking and Syndicated Loans
• Small and Medium Enterprises Finance
• Structured Trade and Export Finance
• Treasury and Investement Services
• Diversified Banking Services
www.ebebank.com
THE LEADING BANK FINANCING AGAINST EXPORTERS’
PROCEEDS AT THE EXPORT DEVELOPMENT FUND
EXPORT EXPERTS
Cairo Giza Industrial Zones
Cairo Branch Main Branch Obour Branch
BRANCHES: El Orouba Branch Mossadak Branch 10th Of Ramadan Branch
Heliopolis Branch Faisal Branch 6th Of October Branch
El Nasr Branch Nile Branch Other Govenorates
Saint Fatima branch Sheikh Zayed Branch
Head Office: Mansoura branch
Nasr City Branch (Soon) Mohandesin Branch(Soon) Damietta Branch
108 Mohy El Din Madinaty Branch
Abo EL Ezz St., Alexandria Tanta Branch
Sheraton Heliopolis Branch Assiut Branch
Roushdy Branch
Dokki, Giza, Egypt Stella Branch Port Said Branch
Smouha Branch
PO,Box: 38 El Agouza, Maadi Branch
Sidi Bishr Branch Ismailia Branch (Soon)
Post Code: 12311 Shobra Branch Aswan Branch (Soon)
Selsela Branch
Hotline: 16710 Moqattam Branch Beni Soief Branch (Soon)
Borg El Arab Branch
Fax: (+202) 33385942 - 33385940Finance (Chap.1)_Layout 1 7/10/17 4:25 PM Page 10
In March 2016, the Central Bank of Egypt (CBE) devalued While the float brings with it a host of challenges, infla-
the Egyptian pound by 13%, setting the rate at EGP 8.88 tion not least among them, it has also drawn an influx of
to the dollar in a bid to close the gap with the parallel mar- dollars back into the banking system and unleashed a new
ket. To contain inflation after the devaluation, the CBE’s optimism in the industry.
Monetary Policy Committee (MPC) simultaneously raised
basic interest rates by 150 basis points (bps), setting
overnight deposit and lending rates at 10.75% and
11.75%, respectively; the MPC bumped up the rates by an-
other 100 bps in June. Yet, the moves had little effect. By
July 2016, headline inflation had jumped to 15% (com-
pared to 8% in July 2015 and 11% in July 2014), and the
black-market exchange rate had risen by more than 30%.
The CBE was doing damage control as the government
laid the groundwork for a larger solution that combines
economic reforms designed to boost government revenues
and reduce public expenditures with an influx of interna-
tional loans to shore up international reserves. On the re-
form side, the state resumed its subsidy reductions on
electricity and fuel in August and in September imple-
mented a Value Added Tax (VAT) that raised the rate to 13%
and expanded the tax base. At the same time, the govern-
ment raised USD 6 billion in external funding as a precur-
sor to a three-year USD 12 billion extended fund facility
(EFF) with the International Monetary Fund (IMF).
With the foundations in place, the CBE made the dra-
matic decision on November 3, 2016, to free-float the
Egyptian pound for the first time in Egypt’s history, leaving
its value to be fully determined by market supply and de-
mand. The float signaled Egypt’s commitment to difficult
reforms, and the IMF signed off on the EFF a week later.
A Year of Tough Turns
Many observers felt the devaluation was long overdue. Amid banks with forex disbursed from its international reserves.
political uncertainty following the 2011 and 2013 revolu- With this limited supply of dollars, banks found it increas-
tions, the country’s main sources of foreign currency, tourism ingly difficult to fulfill their corporate clients’ foreign cur-
and foreign investment, had dried up. More recently, Suez rency requirements. Zeinab Hashim, CEO and managing
Canal receipts have dropped amid suppressed global trade. director of Abu Dhabi Islamic Bank (ADIB) Capital, the
“Egypt had a golden opportunity to devalue the local cur- UAE-based bank’s equity and debt advisory services arm,
rency following the aftermath of 2011. The political situation says, “By 2016, banks were opening LCs for their corpo-
and the economic challenges the country was facing were a rate clients by utilizing other clients’ dollar deposits,
solid justification for a cheaper Egyptian pound,” says Hani which were limited, as opposed to their own sources of
Farahat, senior economist at CI Capital. The effects of an over- foreign currency.”
valued local currency and subsidized dollar rate manifested Normally, banks access foreign currency through a num-
in the country’s growing trade deficit and dwindling reserves. ber of channels, including the foreign exchange interbank
Meanwhile, the widening gap between bank and parallel- market, where banks sell their excess dollars to other
market exchange rates drove up prices for investors and con- banks. “An interbank FX market is one of the fundamental
sumers alike. “The dual pricing of the dollar was causing an life-blood aspects of the banking system, and for the econ-
outflow of foreign currency resources at the expense of in- omy as a whole,” says Nadir Shaikh, Citibank Egypt’s man-
vestment growth and economic activity, which also reduced aging director, noting that four years ago, banks were
Egypt’s net foreign assets,” he explains. “This was accompa- trading up to USD 300 million a day. “Then for three years,
nied by lower revenues on the part of Egypt’s exports, which until November 2016, this market basically died.” Banks
we’ve seen decline over the years on the back of other exter- were allocating the dollars from their exporting clients to
nal factors.” their importing clients instead of selling to other banks,
In 2013, in an attempt to ration the outflow of foreign meaning there were no spare dollars in the system to cover
currency, the CBE introduced dollar auctions to supply shortfalls.
10. AmCham Egypt Industry InsightFinance (Chap.1)_Layout 1 7/10/17 4:25 PM Page 11
Reforms Bear Fruit
FX Interbank Market Activity in Egypt
CBE
The other major source of foreign exchange for banks is ex- tional foreign currency to meet their needs,” says Shaikh. As
patriate worker remittances, which at its peak in 2010 covered parallel market rates rose, families converted remittances in the
half of Egypt’s balance of payments deficit. “Previously, workers exchange bureaus and deposited the extra pounds in the banks.
abroad sending remittances transferred the funds to their fam- “With such a high differential, the banking system was losing a
ilies through local banks, which could be then converted at the substantial portion of FX flow from remittances, which could
official exchange rate. This would provide banks with addi- have been allocated to import-oriented clients,” says Shaikh.
Official versus Parallel Market Exchange Rate
CBE, xe.com, media reports
Financial Services .11Finance (Chap.1)_Layout 1 7/10/17 4:25 PM Page 12
Adding to the pressure on banks and the business en- Foreign investors, unable to repatriate profits, slowed
vironment were the CBE’s limits on dollar deposits and or postponed projects being financed by domestic
transfers. The deposit cap was meant to discourage im- banks. Meanwhile, demand for black market dollars
porters from buying and depositing black market dollars continued to grow: Right before the float, the parallel
for LCs needed to pay for shipments, while the transfer market rate had risen to EGP 18.5 to the dollar, more
cap was meant to keep foreign currency in the country. than double the official rate.
Bringing Dollars Back to the Banks
By the end of float day, the official exchange rate had depre- The amount, which covered the government’s funding gap
ciated by 65% and the pound sat at EGP 14.65 to the dollar; fully in the FY 2016/17 budget and partially in FY 2017/18,
two weeks later, the Egyptian pound had fallen to 17.54 to the was raised across three tranches: USD 1.75 billion of five-
dollar. Dollars started moving back into the formal banking year bonds yielding 6.125%, USD 1 billion of 10-year
system as banks could now compete for dollars with foreign bonds carrying a yield of 7.50%, and USD 1.25 billion of
exchange bureaus. “Banks could now freely price as high as 30-year bonds yielding 8.50%.
they needed to get dollars, which meant that consumers no Buoyed by the eurobond’s success, sky-high interest rates
longer needed to use the parallel market,” says Hashim. and the eliminated risk of devaluation, foreign holdings of
Overall, forex liquidity in the banking system has im- local assets have hit their highest levels since 2011. “Before
proved, turning a corner in the first half of 2017. “In the the 2011 revolution, Egypt almost had USD 11 billion of
five-month period since the flotation, about USD 35 billion foreign asset managers’ money in local currency T-bills,
flowed into the banking system from bilateral agreements, which dwindled to nearly zero after 2011,” recalls Shaikh.
the eurobond issuance, customers selling dollars to the By June 2017, foreign holdings of treasury bills had shot
bank, filing remittances, and even more significantly, up to EGP 164 billion (USD 9.3 billion) compared to EGP
proper and strong recovery in the foreign ownership of 7.8 billion (USD 433 million) in November 2016. “Interest
local assets [T-bills and T-bonds],” notes Farahat. “The flota- rates offered are over the top at 18-20%. Nowhere in the
tion’s results went far beyond our expectations.” world do you have such a return. And while these are only
In January 2017, the government raised USD 4 billion from a fraction of pre-revolution levels, this is only within a four-
its eurobond issuance, which was three times oversubscribed. month period,” says Shaikh.
Foreign Holdings of Egyptian Treasury Bills
CBE
12. AmCham Egypt Industry InsightFinance (Chap.1)_Layout 1 7/10/17 4:25 PM Page 13
Reforms Bear Fruit
Following the strong appetite for January’s issuance, the gov- Meanwhile, the interbank market is back in business, posting
ernment raised another USD 3 billion in eurobonds issued in more than 2,000 transactions with a total value of more than
late May. The move came after the Cabinet raised the cap on USD 2 billion from November 2016 to January 2017, com-
total foreign debt the government can hold per year to USD 7 pared to 887 transactions worth USD 1.5 billion during the
billion from USD 5 billion. “The government’s current trend is same period the year before. Citibank’s Shaikh says, “The
to replace domestic borrowing [with] external borrowing in opening of the interbank market has facilitated the clearing of
order to reduce the cost of borrowing as local interest rates backlogs of dollar payments that were previously stuck.” By
rise,” Reham El Desoki, senior economist for Arqaam Capital, early April, the banking sector had opened USD 26 billion
told Reuters at the time. worth of LCs since the float.
Temporary Shocks
Floating the Egyptian pound has created some chal- population,” says Farahat. Given Egypt’s dependence on im-
lenges, which analysts expect will pass by the year’s end. ports for strategic commodities and manufacturing inputs,
Hardest hit by the surge in dollar prices were those who prices instantly hiked when the pound was floated and had
opened LCs before the float. “When the currency was risen by as much as 40% year-on-year in January 2017, two
floated in early November, the corporates found their months after the float. There are signs that headline inflation
pre-float liabilities had doubled in EGP terms,” explains is cooling, as it has been declining month-on-month since
Hashim. In February 2017, the CBE eased the burden by January, and stood at 30.9% as of May.
agreeing to settle companies’ credit lines opened before Immediately after the float, the MPC aggressively hiked
November. Under the agreement, the Central Bank interest rates by 300 bps, setting overnight deposit and
would cover currency differences of up to USD 500 mil- lending rates at 14.75% and 15.75%, respectively. The
lion to banks for firms with outstanding debts less than committee raised rates another 200 bps on May 21, 2017,
USD 5 million. In return, these firms can settle their debts to bring the overnight deposit rate up to 16.75%, overnight
in local currency terms over two years at a 12% interest lending rate to 17.75%, and discount rate to 17.25%.
rate using the exchange rate of the debt settlement’s date. While the move was endorsed by the IMF as the right way
“This short-term banking upset still remains today, but in to tame inflation, several analysts had argued against it, at-
much smaller degrees compared to a few months back,” tributing the mounting inflation to cost-push factors rather
says Hashim. “Banks are on the right track to relieve the than excess demand. With less than one in five people
stress on the business climate, and we expect the picture holding a bank account in Egypt, these experts argue that
to come together within six to 12 months.” higher interest rates only hike borrowing costs for the gov-
Of more far-reaching consequence is the inflation driven ernment and the thin slice of corporate and retail clients
by the sharp devaluation post-float. “The short-term down- with access to credit. However, the MPC said the move is
side of the flotation has been supply-side inflationary pres- to contain core inflation, which has not yet decreased, and
sures and lower consumption dynamics among the Egyptian the persistently high annual inflation rate.
Financial Services .13Finance (Chap.1)_Layout 1 7/10/17 4:25 PM Page 14
Headline Inflation
Ministry of Finance
Nonetheless, the steep inflation offers an opportunity for now incentivizes production and exporting, meaning there
many domestic industries, as consumers seek locally made will be more dollar inflows in the future,” ADIB Capital’s
alternatives for increasingly expensive imports. “When the Hashim says. Sectors best positioned to benefit include en-
currency was floated, the cost of imports went up, which ergy, agriculture and processed foods and consumer goods.
Clearing the Road Ahead
Despite the forex challenges, Egypt’s banks had a good year ating in the country dropped from 62 in 2004 to 39 to date,
in 2016, with combined profits of EGP 56 billion, up 60% over while non-performing loans went from 13.4% of total loans
2015 levels. Total banking assets and deposits also grew by in 2009 (first official figures) to 5.8% by the end of 2016.
59.4% and 44.3% year-on-year, respectively, as of December “The FSRP of 2004 resulted in a very strong wave [of] con-
2016. “Egypt has one of the most attractive growth profiles in solidation among our banks, which reshaped the banking
the MENA region as a result of years of underinvestment and system into a number of stronger financial institutions with
an ever-expanding population,” Bassel Khatoun, chief invest- solid foundations,” notes Farahat.
ment officer at Franklin Templeton Investments MENA Equities, The FSRP’s phase III kicked off in December 2016 to imple-
told Bloomberg TV in January 2017. Egyptian banks are ment the Basel III standards, focused on risk management,
backed by ample liquidity with a strong capacity to increase solid governance, transparency and disclosure. This phase will
lending. This is supported by a loans-to-deposits ratio as high increase the total capital adequacy ratio, which measures
as 47.6%, as of January 2017. (among other variables) the banking system’s financial strength
“Banking is one of the strongest sectors in the economy, and ability to meet financial obligations, incrementally from
with substantial capabilities to dampen any blows that the 11.25% in January 2017 to 12.5% by January 2019.
economy is hit by. It survived 2004, 2008 and 2011 very well The government has also signaled its intention to open up
and it is still going strong,” says Hashim. The sector’s strength private investment in state-owned banks, a practice off the
has its foundations in 2004 Financial Sector Reform Program table since 2008 when an 80% stake in Alex Bank was sold to
(FSRP), instituted in 2004 to enhance the sector’s efficiency, Italy’s Intesa Sanpaolo for USD 1.6 billion. In February 2017,
minimize credit risk and improve banking soundness. The the CBE announced plans to sell 20% of its stake in Banque
first two phases of the program implemented the interna- du Caire and 40% of Arab African International Bank. “Banque
tional Basel I and II standards, with considerable privatization du Caire is the transaction of the year, if its implementation
and consolidation in the market. The number of banks oper- happens by 2017’s end,” says Farahat.
14. AmCham Egypt Industry InsightFinance (Chap.1)_Layout 1 7/10/17 4:26 PM Page 15
Reforms Bear Fruit
Hashim adds, “The role of the government is to regulate the can the banking system continue to lend to the government at
banking system as opposed to taking part in managing banks. the expense of corporates, consumers and SMEs?”
The move to IPO is yet another positive statement signaling The banking system is drawn to T-bills and bonds for their
the government’s aim to increase its focus on regulation and sky-high interest rates, ranging between 18-20%, com-
ensure that more banks in Egypt are profit-driven.” pared to 14-16% for corporate loans. This is likely to
While these structural reforms open the door for stronger per- change going forward as the government tries to cut back
formance in the years ahead, there remain underlying chal- on domestic debt. The FY 2015/16 fiscal deficit was 12.2%
lenges that must be tackled along the way. One challenge is of GDP, but the state plans to bring that down to 6% by
to wean banks off government debt. Citibank’s Shaikh notes 2021, targeting 10.5-10.7% by the end of FY 2016/17 and
that about 45% of the banking sector’s assets are in treasury 9.5% by the end of FY 2017/18. This presents opportunities
notes, meaning “banks are lending almost half of their balance for banks to diversify their lending portfolios to business
sheets to finance the government’s budget deficit. How much and retail consumers.
Egypt’s Bank Map
EGP 85.4 bn * EGP 221.0 bn * EGP 127.9 mn
EGP 231.7 bn EGP 558.6 bn EGP 341.3 mn
Jordan
EGP 9.3 bn EGP 13.1 bn * EGP 3.5 bn
EGP 13.5 bn EGP 24.7 bn EGP 2.2 bn
Morocco
EGP 94.9 bn
Qatar EGP 158.2 bn International
Arab Banking
Corporation
* EGP 2.6 bn
EGP 7.8 bn
USD 1.1 bn
Bahrain USD 1.8 bn
* EGP 9.3 bn
EGP 8.7 bn
EGP 25.4 bn
EGP 24.1 bn
EGP 6.0 bn
EGP 3.8 bn EGP 64.1 bn
EGP 30.0 bn
Lebanon EGP 18.9 bn
EGP 8.6 bn
EGP 40.7 bn
EGP 24.4 bn
EGP 6.2 mn
* EGP 16.8 bn EGP 14.0 mn
EGP 31.6 bn
Kuwait *
EGP 7.0 bn USD 4.7 bn
EGP 12.3 bn USD 10.1 bn
EGP 30.0 bn
EGP 54.1 bn
EGP 18.3 bn AED 356.2 bn USD 1.7 bn
Emirates EGP 34.5 bn AED 400.3 bn USD 3.8 bn
EGP 15.6 bn EGP 8.0 bn EGP 17.4 bn
EGP 25.6 bn EGP 20.7 bn EGP 39.2 bn
Loans Deposits *Data as of end of FY 2015/16.
** Egyptian banks with Arab investments.
Compiled from bank websites.
Policy adjustments such as the float are attracting inter- pressures, the experts see a positive future. “Egypt has ex-
national support and investors, and have made it possible perienced a somewhat fall from grace over the past five
for banks to get back to the business of financing economic years because it has been plagued by social unrest, dollar
activity. But, Hashim cautions, “A potential threat is the shortages and currency issues,” said Khatoun. “But if you
government’s inclination to pull out of the reform program look at the [local currency’s] devaluation back in 2003, in
if inflationary pressures become too high and the social the years following that, we saw five golden years of eco-
safety net […] is not activated effectively,” Backing off the nomic growth at about 5.5% per year. And we don’t see
reforms, however, risks a return to the forex crises of the any reason why Egypt shouldn’t achieve [such] growth
past few years. As long as the state can manage the social rates going forward.”
Financial Services .15Finance (Chap.2) 2_Layout 1 7/10/17 4:28 PM Page 16
CONSUMER CREDIT
ON THE RISE
R
etail banking is one of the most promising sectors in Egypt with strong growth potential. By pro-
viding credit to consumers and micro, small and medium enterprises (MSMEs), retail banking pro-
vides the capital needed for economic growth. “The banking sector generally contributes the most
to the economy’s capital formation, which is largely backed by household savings. Households make up
more than two-thirds of the economy’s savings,” says Ahmed Issa, CEO of consumer banking at Commer-
cial International Bank (CIB) Egypt, the country’s biggest private bank. Households also account for about
75% of the banking system’s total deposits. “Additionally, Egyptian households make up most of aggregate
consumption, which accounts for about 80% of annual GDP,” Issa continues. “This indicates a vast con-
sumer-banking customer base and an obvious need for access to finance.” Egypt’s population exceeds
90 million people and average annual incomes are less than EGP 50,000, indicating vast potential for
consumer credit to grow.
16. AmCham Egypt Industry InsightABK - EGYPT RECOGNIZED AS ‘BEST NEW BRAND IN EGYPT’ BY THE BANKER MIDDLE EAST eahli.com Call 19322
Finance (Chap.2) 2_Layout 1 7/10/17 4:29 PM Page 18
Still, consumer banking has yet to fully hit its stride. per 100,000 adults) stands at only 23.4%, with banks
This is due in part to low financial inclusion, as less than concentrated in major urban cities. Thus residents in
15% of Egyptian adults have a bank account. In Egypt’s most of rural Egypt—which account for almost half the
cash-based economy, financial illiteracy plays a large population—have no access to bank branches or even
role, with the majority of consumers viewing credit and ATMs. In addition, the banks need to adapt their prod-
cashless transactions as security risks. Accessibility is ucts, such as mortgages and MSME loans, to meet the
also a problem. Egypt’s banking density (bank branches needs of the population.
Consumer Credit Growth
Central Bank of Egypt (CBE)
Banking Loan Portfolio (January 2017)
Retail lending has comprised an average
19.8% of banks’ total lending portfolios for the
past decade, posting a 10-year compound av-
erage growth rate (CAGR) of only 15.8% since
2006. This falls short of regional and other
emerging economies’ averages. For example,
consumer loans in the United Arab Emirates
currently account for 70% of banks’ loan port-
folios, even amidst tougher economic condi-
tions and lower oil prices. “In developing
countries such as Brazil and Mexico, lending
in the retail segment occupies up to 40-60%
of banks’ total lending,” adds Nadir Shaikh,
managing director of Citibank.
CBE
18. AmCham Egypt Industry InsightFinance (Chap.2) 2_Layout 1 7/10/17 4:29 PM Page 19
Consumer Credit on the Rise
In 2016, retail lending grew 18.5% over 2015 levels, yet basis points (bps) to counter the inflationary effects and in-
its share of total lending dropped to 17.3% from 24% in creased them by another 200 bps in May 2017. While the
2015 partly due to banks’ appetite for government debt, rate hikes have driven up the cost of retail debt, they have
which has grown by a cumulative 300% since 2010. “In attracted more liquidity in the banking system. Eight banks,
the past five years, banks have been more inclined to lend including Ahli United Bank and Bank of Alexandria
to the government than to individuals and the private sector changed their interest rates in response to the CBE’s deci-
due to the perceived higher risk of defaults compared to sion. State-run Banque Misr raised interest on three-year
the government,” says Shaikh. investment certificates to 17.25% from 16%, and raised in-
Others argue that there are fewer opportunities for retail terest rates on personal and auto loans to 18.5% from
lending. “Banks usually invest in government T-bills or 16.5%. Blom Bank also increased rates on short-term Cer-
bonds because they have excess liquidity […] when there tificates of Deposit (CDs) by a maximum of 200 bps.
are limited lending opportunities, the banks resort to in- On the bright side, foreign exchange restrictions are start-
vesting in [debt instruments]. [While] banks can earn more ing to ease and several banks—including CIB, Banque Misr,
revenue from credit facilities, including letters of guaran- National Bank of Egypt and HSBC—dropped international
tee, letters of credit, credit cards and retail banking serv- spending limits on credit cards in May 2017, indicating a
ices, there have not been many [of these] opportunities,” strong comeback for credit card receivables going forward.
Mohamed Ozalp, director and CEO of BLOM Bank-Egypt, The Egyptian pound’s steep devaluation post-float drove
told local media in September 2016. Retail lending is more prices of all consumer goods up, inspiring retail banks to in-
profitable than investing in notes, Shaikh notes, adding, troduce innovative models to increase loan activity. For ex-
“Before Citibank sold its retail banking arm, credit card re- ample, several retailers have partnered with banks to offer
ceivables were a substantial line of business, which installment payment plans on high-ticket merchandise such
charged 22-25% interest rates for consumers. Whereas cor- as mobile phones, electronics and appliances.
porate clients were charged about 14%, showing a much Egypt’s banking sector is definitely endowed with ample
higher spread.” liquidity that can capitalize on consumers’ shrinking pur-
Recent economic pressures have dampened consumer chasing power. “On the asset side, household deposits
lending. As a result of severe dollar shortages, many banks amount to 60-70% of GDP; however, household debt does
limited debt and credit cards usage abroad in the begin- not exceed 7-8% of GDP, which shows substantial variance
ning of 2016. Following the Egyptian pound’s float in No- between the banked population’s saving and borrowing
vember 2016, the CBE raised basic interest rates by 300 rates,” elaborates CIB’s Issa.
Loan and Deposit Growth
CBE
Financial Services .19Finance (Chap.2) 2_Layout 1 7/10/17 4:29 PM Page 22
Unleashing Consumer Lending
Expanding retail lending has been a topic among policy- voices, property contracts and other documents. MSMEs
makers for more than a decade now. Topping the agenda are often informal with little documentation or experience
is the pressing need to open up MSME lending. Formal and in financial reporting practices, which indicates a need for
informal MSMEs account for about 98% of businesses in less stringent procedures.
the economy and employ 70% of the workforce, which im- “Growing loans to SMEs around the country also means
plies a sizable boost to the economy if they are provided expanding branches to these areas so banks can physically
with suitable financing opportunities. Expanding credit to monitor SME clients from proximity rather than remotely,”
MSMEs will help grow one of the country’s most vital eco- Shaikh adds. In late 2014, the CBE approved “mini-sized”
nomic agents, enhance financial inclusion, formalize the branches with lower capital requirements to encourage the
gray economy and increase tax revenues. spread of banks into areas with low coverage. The measure
In January 2016, as part of an EGP 200 billion initiative has yet to gain much momentum, and as of December
to promote SME growth, the CBE mandated that by 2020, 2016, the annual growth in branches was less than 5%,
at least 20% of bank loan portfolios should be directed to- with about 3,950 total bank branches across Egypt,
ward MSMEs at lower-than-market rates. The initiative set In May 2017, the CBE launched a EGP 30 billion micro-
a 5% interest rate on loans to micro and small enterprises finance initiative to funnel loans to some 10 million benefi-
with up to EGP 50 million in revenues. Medium-sized en- ciaries over the next four years. Also supported by the
terprises earning EGP 50-200 million and operating in the Egyptian Microfinance Federation (EMF) and the Egyptian
fields of manufacturing, agriculture or renewable energy Financial Supervisory Authority (EFSA), the initiative allows
are eligible for 12% and 7% interest rates for short-term microfinance loans to count toward banks’ 20% quota for
and medium to long-term loans, respectively. While the MSME funding. Eight banks will offer subsidized funding to
CBE’s initiative offers much potential to broaden banks’ three microfinance companies and 752 EFSA-accredited in-
customer bases, some find the current eligibility require- stitutions and NGOs working under the EMF. These organi-
ments problematic. Citibank’s Shaikh explains that tradi- zations will then lend to individuals and micro-enterprises
tional loan approval methods require “a scoring system or in need of specific forms of financing. The initiative also lets
using financial statements, which SMEs in most cases don’t beneficiaries seek direct funding from the Microfinance Proj-
have.” Currently, MSMEs requesting loans must present ects Development Authority (MPDA, the former Social Fund
certified financial statements, tax returns, stamped sales in- for Development) and banks.
The Mortgage Market
EFSA
22. AmCham Egypt Industry InsightFinance (Chap.2) 2_Layout 1 7/10/17 4:29 PM Page 23
Consumer Credit on the Rise
Maximizing the Mortgage Market
Egypt’s high and growing demand for housing and its lim- ownership disputes, or because the residents live in informal
ited financing options make mortgages of key importance settlements. Additionally, long-term mortgage financing is only
to scaling up banking performance and improving con- granted after 30% of the unit’s construction is complete, so
sumers’ standards of living. Although Egypt’s home loan buyers must pay cash installments until that point, restricting
market was activated in 2001, it is nowhere near satura- the pool of borrowers to those who can afford off-plan pay-
tion. The total value of mortgages was only EGP 6.9 billion ments. These consumers can already obtain home financing
in 2016, comprising a negligible 0.36% of GDP and well from real estate developers, who offer more flexible payment
behind global averages. “In developed markets such the schedules and minimal interest rates.
U.S. and U.K., 80% of consumer lending is directed to- “Globally, real estate developers have a limited role in pro-
wards mortgages, and mortgages account for 60-80% of viding financing options for buyers. For example, developers
GDP,” explains Issa of CIB. “This means that developing cannot collect more than 30% of off-plan sales in the U.K. and
the mortgage market in Egypt is a key area to grow banking the remaining amount must be financed through mortgages.
assets and develop retail lending in Egypt.” In Egypt, 100% of the property’s value can be collected in cash
Mortgages have seen sluggish growth due to legislative bar- by the developer,” Issa elaborates. Developers extend payment
riers and cost-prohibitive financing mechanisms. For example, schedules up to 10 years for consumers over monthly, quar-
banks can issue mortgages only for legally registered proper- terly or annual installments, luring more consumers from
ties, but most of Egypt’s inhabited properties are unregistered, banks. However, experts anticipate much change as lending
either due to arduous registration procedures, formal frameworks continue to broaden.
The CBE’s Mortgage Finance Initiative In February 2014, the CBE unveiled an EGP 10 billion long-
term financing initiative for low- and middle-income housing
units, with interest rates based on income brackets. In February
ial Housi
oc 2016, the regulations were amended to add more income
ng
S
brackets and expand the pool of authorized lenders to include
or foreign mortgage finance companies. The CBE revised the eli-
Monthly Income gibility requirements in November 2016 to promote property
less than EGP 2,100 insurance policies, protect borrowers from discrimination
Interest on Home Loan based on occupation, and allow banks to finance 85% of a
5% property’s price. In June 2017, the CBE increased the income
thresholds for each bracket.
w-Incom Since its launch, banks participating in the initiative have
Lo lent EGP 6 billion to finance more than 62,000 housing units,
e
Monthly Income as of April 2017. In early 2017, the global market research Eu-
EGP 2,100 to EGP 3,500 romonitor named Egypt as the world’s fastest-growing mort-
gage market in 2017, forecasting an annual expansion of
18.9%, with almost 300,000 units expected to be owned
Monthly Income Interest on Home Loan through a mortgage by the year’s end. According to EFSA,
EGP 2,100 to EGP 4,750 7% mortgage financing has grown by 98% year-on-year in the first
four months of 2017, reaching EGP 722 million for the period;
87% of that financing went to residential properties.
le-Incom
idd “Over the past years, a lot has been done to develop mort-
M
gages in Egypt. There have been significant regulatory changes
e
Monthly Income
EGP 3,500 to EGP 10,000 and we’re on the right track,” says Issa. “What’s left is normal-
izing mortgage interest rates to induce more lending, which
will be a significant boost to the home loan market.” Since the
Interest on Home Loan Monthly Income float, overnight lending and deposit rates have increased a total
8% EGP 4,750 to EGP 14,000 of 500 bps to 17.75% and 16.75%, respectively, pushing the
cost of home financing up further. “For mortgage finance com-
panies not participating in the CBE initiative, the 300 bps in-
er-Incom
pp terest rate hike [in November 2016] caused interest rates on
U
e
Monthly Income mortgages to jump up to 17%.” Mohamed El Etreby, CEO of
EGP 10,000 to EGP 15,000 state-owned Banque Misr told press in early 2017. According
to EFSA figures, average mortgage interest rates had not ex-
ceeded 12.7% since 2011. “However, we expect the spike to
Interest on Home Loan be temporary until the market stabilizes and inflation is ab-
Monthly Income
10.5% sorbed, which will allow interest rates—including those on
EGP 14,000 to EGP 20,000
home loans—to cool down,” El Etreby added.
Financial Services .23Finance (Chap.2) 2_Layout 1 7/10/17 4:29 PM Page 24
Technology Take-off
Globally, the banking sector’s use of technology has been suit, such as state-owned The United Bank, which
increasing over the years, and Egyptian banks today are launched mobile banking in January 2017.
taking advantage of technology tools to lower the cost of Citibank’s Shaikh explains that digital banking in Egypt
servicing customers and attract more clients into the is “lagging behind many countries because the economy
banking system. The introduction of internet, mobile and remains very much cash-based. Also, the initial technology
telephone banking services has allowed for faster, more infrastructure required to jumpstart these services is expen-
convenient banking transactions as well as a wider client sive.” Banking technology’s growth has also been sluggish
reach. Beyond extending their physical footprint, banks due to regulatory concerns over cybersecurity and con-
have invested heavily in ATMs and technological infra- sumer data protection, which are gradually loosening up.
structure to grow digital banking. Yet, ATM penetration Another tech-based banking initiative is the ‘smart wal-
(the number of ATM machines per 100,000 adults) is at let’ concept. Adopted by major banks such as CIB, AAIB,
only 0.02%. “For retail banking to grow, banks need to NBE, Banque Misr and HSBC, this tool links the client’s
expand their investments in IT, customer experience and bank account to a smart phone application that allows
distribution networks as well as improve technologically consumers to pay phone, internet, electricity and car li-
savvy services such as internet banking and mobile bank- cense renewal bills as well as recharge mobile credit, trans-
ing so customers can fully access their accounts from fer funds to other wallet holders, deposit or withdraw cash
anywhere at any time,” says Issa. The latest figures on from ATMs and issue Virtual Card Numbers (VCNs) to
mobile banking, which launched in 2014, show that make secured online purchases.
fewer than half of Egypt’s 38 banks offer mobile banking As the transition from cash to credit continues, tech-
services to their customers. These include Banque Misr, based banking services will play a vital role in boosting
Arab African International Bank (AAIB), National Bank bank performance, enhancing consumers’ banking expe-
of Egypt (NBE), HSBC, Arab Bank, Emirates NBD, Arab rience and improving financial inclusion. The integration
Investment Bank (AIB) and CIB, which recently upgraded of technology in retail banking improves digital connectiv-
its application to allow customers to request cheque ity, which will allow for faster, more accessible banking
books, control and change supplementary card limits, services to unbanked consumers, MSMEs and residents of
and report lost/stolen cards. Other players are following Egypt’s more remote areas.
62,764
62 764 POS tterminals
i l
Key Digital
Banking Metrics
(as of Dec 2016)
9,832 ATMs
3.9 million Credit cards 20.7 million Debit cards
CBE
24. AmCham Egypt Industry InsightFinance (Chap.2) 2_Layout 1 7/10/17 4:29 PM Page 25
Consumer Credit on the Rise
ATM Distribution by Bank (number of machines and share of total as of Dec 2016)
Compiled from bank websites
Road to Financial Inclusion
In the absence of a widespread physical network of com- almost 23,000 customers per office. Egypt Post offers con-
mercial banks, Egyptians save and borrow money through sumers savings accounts, pension distribution and funds
informal and formal non-banking channels. On the infor- transfer, with a physical and digital network covering al-
mal front, households and MSMEs often raise capital via most the entire nation. Latest figures from the National Post
gam’iyas (Rotating Savings and Credit Associations, known Authority showed total deposits in Egypt Post at EGP 184
as RoSCAs). Gam’iyas are based on borrowers’ binding billion as of November 2016. After the pound’s float, Egypt
‘credible commitment’ to their lenders, and do not collect Post hiked interest rates on saving accounts to 10.25%
collateral or score a borrower’s creditworthiness. from 8% in order to compete with banks offering 18-20%
On the formal front, many Egyptians access funds from returns. For these reasons, along with the adoption of more
microfinance organizations and store their savings with the cautious lending strategies by banks, non-banking chan-
Egyptian Postal Service. The number of post offices, which nels have successfully managed to hold a substantially
is almost identical to the number of bank branches, serves larger market share than banks.
Egypt Post Services
As of December Year-on-year
2016 growth (%)
Number of post offices 3,931 6.0%
Average number of people served by each post office 22,670 1.5%
Number of pensions distributed through post offices 5,800,000 6.0%
Number of instant postal financial transfers 1,314,000 8.6%
Ministry of Communications and Information Technology
As the government continues to push for wider formal ac- Financial Inclusion Week.
cess to finance, the role of non-banking channels in im- Nonetheless, retail banking will remain a vital element
proving financial inclusion cannot be neglected or in Egypt’s road to financial inclusion. Key issues to focus
underestimated. “The road to financial inclusion does not on include resolving legislative barriers to mortgage
rely only on banks, but on other financial institutions that growth and MSME lending, heavily investing in banks’
can help, such as Egypt Post, NGOs specialized in micro- physical and digital distribution networks, incorporating
finance, and the [MPDA], along with e-payment compa- innovative products to counter shrinking purchasing
nies such as Fawry,” Egyptian Agriculture Bank Chairman power, and normalizing interest rates to less cost-prohibitive
El-Sayed El-Kosayer told press in May during Egypt’s annual levels for borrowing.
Financial Services .25Finance (Chap.3)_Layout 1 7/10/17 4:54 PM Page 26
THE MARRIAGE OF FINANCE
AND TECHNOLOGY
F
ollowing the 2008 global financial crisis, policymakers concentrated their regulatory efforts on making fi-
nancial sectors less susceptible to economic crashes. Accordingly, banking systems were stuffed with capital,
and new compliance standards transformed what was once a back-office job into a C-suite one. Alongside
the emphasis on regulation, compliance and security, institutions shifted toward a more consumer-centric approach
to financial services, spurring innovations in fintech, the technology-based products and services that build on
traditional financial services. “[Fintech] is essentially a tool to improve the way individuals and companies bank,
or in Egypt’s case, provide an alternative means for the unbanked population to manage money,” says Menna Abd
El Rahman, general manager of Cairo Angels, an angel investment firm. Internet banking, mobile banking, ATMs,
point-of-sale (POS) terminals and drive-up banking are all fintech services that have been offered by banks over
the years. The industry has since expanded to embrace a wide array of non-banking fintech services. According
to a March 2017 report by the regional entrepreneurship network Wamda and the UAE-based e-payments provider
PayFort, the global fintech industry has evolved to include lending, capital raising and payment solutions services
as well as crowdfunding platforms, peer-to-peer lending networks, mobile money and many others.
26. AmCham Egypt Industry InsightFinance (Chap.3)_Layout 1 7/10/17 4:54 PM Page 28
Evolution of Global Fintech
Bank mainframe
computers
Banking data and Electronic banking
record-keeping
ATMs systems Mobile banking
1950s 1960s 1970s 1980s 1990s 2000s Today
Credit cards Electronic Internet Mobile wallets
stock trading
E-commerce Payment solutions
Online stock Online lending
brokerage websites platforms
Robo-advisors for
wealth and
retirement planning
Assorted media
In addition to developing faster, more efficient financial trans- Egyptian Agricultural Bank (EAB), told local media that finan-
action services, fintech is helping increase access to formal fi- cial inclusion’s role is to “ensure that all segments of society
nance, particularly in countries with low financial inclusion have adequate opportunities to manage their money and sav-
such as Egypt. Around 85% of the population is unbanked in ings in safe and secure channels [rather than] non-official
this largely cash-based, informal economy. The Central Bank means, which are [unregulated] and may be scams.” Fintech
of Egypt (CBE) defines financial inclusion as giving all citizens has stretched the term ‘formal channels’ to include much more
access to financial products—such as saving and current ac- than just banking products. As technology continues to im-
counts, insurance, credit and other services—through formal prove and the costs of connectivity continue to decrease, non-
channels at affordable prices, particularly for low-income banking fintech services can significantly contribute to
groups. In May 2017, El-Sayed El-Kosayer, chairman of the enhancing financial inclusion in Egypt.
Egypt’s Enabling Environment
Fintech’s growth, particularly in the past half-decade, has been by the Northwestern University in Qatar indicated that Egyp-
spurred by several trends. The transition to internet economies, tians aged 18 to 34 represent 74% of the country’s internet
social networks and e-commerce has been a primary growth users and 76% of smartphone holders. As such, tech-based
driver. Internet has increasingly become a household staple in financial services that are more user-friendly, cheaper and
Egypt: The average income for an Egyptian, according to the faster have gained momentum due to their popularity among
state statistics agency CAPMAS, is around EGP 3,700 per millennial consumers.
month, while the average internet plan costs approximately
Population eration Y
5% of a monthly income. Almost 40% of Egypt’s 93 million Gen
people use the internet and about 20% are e-commerce con-
sumers, and tech innovations have made it increasingly easier
to acquire and analyze data about these consumers.
The sheer size of Egypt’s population is another major con-
92.9 million 33.7 million
tributor. The population grows by an average of 2.5% per
year and is forecasted to hit the 100 million mark by 2020— rn et Penetra
tio bile Penetrat
io
nte Mo
giving Egypt the largest consumer base in the Middle East
n
I
n
and North Africa (MENA). As with many other emerging
economies, Egypt’s population is characterized by a youth
bulge, a demographic advantage for demand and consump-
tion. Egypt’s millennials (the 15-to-35 age bracket also known 39.2% 109.7%
as Generation Y) make up about 40% of the population, and
ng Dens d Consum
this generation is known for their fast-paced, technologically nki it nke er
Ba Ba
y
s
conscious lifestyles as well as high consumption patterns.
According to a report by the global market research company
Nielsen, millennials as a consumer group have growing
spending power and demand “convenience, connectivity
23.4% 14%
and options that allow them to be in control.” A 2016 report
CAPMAS, MCIT, CBE
28. AmCham Egypt Industry InsightFinance (Chap.3)_Layout 1 7/10/17 4:54 PM Page 29
Marriage of Finance and Technology
Fintech in Egypt
Egypt is one of MENA’s most-advanced fintech hubs, host- digital banking, personal finance management, funding, busi-
ing 16% of the region’s fintech companies. This makes the ness intelligence, online payments and payment solutions.
country the second largest hub after the United Arab Emi- However, the predominant fintech services in Egypt are mainly
rates (UAE) and putting it ahead of Jordan, Lebanon and digital and mobile banking, payment solutions and mobile
Morocco. “The technology infrastructure supporting fin- money,” explains Cairo Angels’ Abd El Rahman.
tech in Egypt is far ahead of regional peers such as Mo- In Egypt, non-banking fintech services operate in partnership
rocco, Tunisia and the UAE,” says Islam Shawky, CEO and with local banks, meaning that transactions flow through the
co-founder of Paymob, an Egyptian payment solutions banking system, even if the end-user of the service does not
provider in the market since 2015. have an account with the bank backing the service. Non-bank-
While the fintech industry at large offers a wide range of serv- ing fintech services such as mobile money and payment solu-
ices to facilitate financial transactions, Egyptians are not yet tions offer a promising opportunity for banks to tap into the
taking advantage of the full spectrum. “The primary buckets in financially excluded population due to the lower costs asso-
fintech services worldwide are consumer credit, payment so- ciated with service distribution and wider reach into rural and
lutions, crypto currencies (such as bitcoin), money transfers, other underserved areas of the country.
Mobilizing Money
“In developing countries like Egypt, Kenya, Brazil and “The reason why M-Pesa’s usage is very high partially goes
Pakistan, financial technology mechanisms work really back to Kenya’s social context at the time of its launch,”
well with financially illiterate populations. This is because Shawky says. “There was a civil war, and people were afraid
financial illiteracy can be overcome by financial technol- to hold cash. The population is also substantially dispersed
ogy tools such as mobile money,” explains Nadir Shaikh, across the country with no roads and infrastructure, which cre-
managing director of Citibank Egypt, referring to the use of ated a big gap for M-Pesa to fill. People needed an easy mech-
a mobile phone to transfer, withdraw or deposit funds, pay anism to transfer money to friends and family in such difficult
bills, make purchases and other transactions. Kenya’s M- social circumstances, which is why people quickly jumped on
Pesa is the world’s leading mobile money system and is the M-Pesa boat. Egypt’s population, on the other hand, is con-
used by more than two thirds of the country’s population. densed within 7% of the country’s entire land, and despite the
It was launched in 2007 by the mobile network operator political events over the past five years, the majority of the tur-
(MNO) Safaricom, and now around 25% of Kenya’s gross bulence was happening in urban areas.”
national product flows through M-Pesa. “M-Pesa is nearly Until recently, the biggest obstacle for mobile money in Egypt
a nationwide financial tool the Kenyan population uses for was government regulation: It was only in December 2016
managing money,” says Shaikh. “And the reason for this is that the CBE issued new rules allowing for the interoperability
that when mobile technology is adopted in a country’s fi- of MNO mobile money platforms, which went live in May
nancial sector, financial inclusion substantially improves.” 2017. The rules also allow customers to receive cross-border
Mobile money has been in Egypt since 2013 through the family remittances into their respective mobile accounts,
country’s three MNOs—Orange (formerly Mobinil), Vodafone which can then be disbursed through mobile-money distribu-
and Etisalat—each operating in collaboration with a bank. The tion networks across the country. Particularly promising for res-
service has not gained much momentum since its inception, idents of rural cities, the CBE’s measures are a positive step
however, with only 7 million subscribers compared to more towards expanding mobile payment services in Egypt and im-
than 17 million subscribers in Kenya. The problem is not one proving access to financial services. In early 2017, Khalid El-
of technology, for Egypt has a more advanced mobile money gibali, division president of Mastercard MENA, told Oxford
infrastructure than Kenya. Paymob’s Shawky explains that Business Group (OBG), “With more than 85% of the country’s
Kenya’s M-Pesa works on a closed-loop basis, meaning users population lacking access to formal banking products and a
of different networks cannot transfer funds to each other. mobile penetration rate exceeding 100%, processing pay-
Egypt’s infrastructure, however, has always used an open loop, ments can be the first entry point for the unbanked to engage
allowing transfers between different mobile money platforms. with the banking system.”
Financial Services .29Finance (Chap.3)_Layout 1 7/10/17 4:54 PM Page 30
Egypt’s Mobile Money Market
Platform Partners Services
- Recharge mobile credit and bill payment
- Deposit into Vodafone wallet with a maximum of
EGP 3,000/day or EGP 5,000/month
- Money transfer
- ATM service for deposits and withdrawals
- Deposit, transfer and withdraw money to other
Etisalat Flous accounts
- Online payment transactions from Etisalat Flous
wallet
- Virtual Card Number (VCN) Plug-in to secure online
shopping
- Recharge mobile credit and bill payment
- Deposit, transfer and withdraw money to other
Orange Money accounts
- Money transfer to non-Orange Money members
- Money donations to certified charity organizations
MNO websites
Expediting Payment Solutions
When it launched in 2007, Fawry was the first non-banking one customer orders items from multiple retailers through a
payment solution providers in Egypt; Bee Smart Payments So- single website, with each source sending its own courier to
lutions quickly followed in 2009. Both companies provide collect payment.
consumers with alternative channels through which to pay Paymob’s Shawky notes that courier services are costly in
bills and make purchases—services that have proved very terms of money and time: “This slows down company oper-
handy especially among those without bank accounts. Fawry ations and actually limits its growth.” Paymob’s solution was
and Bee’s services include secured online payments, payment to team up with banks and online retailers to provide mobile
on delivery, and retail points to mediate financial transactions. POS terminals to couriers and allow customers to use their
For example, a person without a credit card could book a credit cards to pay for their entire order at one time, regardless
flight with a travel agent and then pay for the tickets at a of how many sources are involved. Paymob’s mobile POS ter-
nearby Fawry-certified kiosk, which transfers the money to minal system is now used by seven banks and several major
the travel agency through a partner bank. In July 2017, Fawry online businesses including the Egyptian e-commerce website
announced plans to partner with seven more banks and invest Jumia, the global shopping website Edfa3ly.com, and the on-
EGP 400 million to expand its services. line event booking portal E7gezly.com.
“Money transfer is a great opportunity in Egypt because of Other players in the Egyptian market include PayFort,
our banking system’s centralization. The introduction of Fawry which launched in the UAE in 2013 and was recently fully
was a brilliant step towards the decentralizing and mobilizing acquired by Seattle-based Amazon. PayFort provides secured
money transfers in Egypt, and it successfully managed to ex- online payment gateways for businesses, governments and
tend its reach across the country,” notes Cairo Angel’s Abd El SMEs operating in the Middle East to target banked and un-
Rahman. The market has since grown to include many pay- banked customers. In late 2016, amid rising inflation, the
ment solutions providers working with banks, businesses and company partnered with the private bank CIB to offer in-
customers to make fast and more secure payments possible. stallment plans for Egyptian consumers buying from Pay-
“Currently, Egypt remains a cash-based society, with 98% Fort’s partner websites.
of payments in the country taking place through cash,” said The heavy reliance on cash in Egypt is one of the reasons
MasterCard’s Elgibali. “Security is a big concern for con- the informal economy, estimated at about 70% of the coun-
sumers: lack of trust is often cited as the main factor discour- try’s GDP, has yet to be reined in. New payment technologies
aging consumers from shopping online or embracing make financial transactions more mobile and widely acces-
e-payment methods.” In response, most online retailers offer sible from the remotest of areas, which can potentially shift
cash-on-delivery services. This can get cumbersome when more of Egypt’s gray economy into the formal one.
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