What is financial inclusion and how is it developing in Egypt?
“FinTech” has been rising as a faster way to include more people in financial institutions. This article looks at the ways in which Egypt is acting to develop this as well as the importance of creating this sector at all.
For years, Egypt has struggled with low rates of financial inclusion across its population, with only 14% of Egyptian adults having an account at a formal financial institutions (banks). Financial inclusion, simply put, refers to the access of individuals and businesses, to products and services of formal financial institutions such as transactions, payments, savings, credit and insurance sustainably and at a reasonable cost.
Inclusion and technology
Financial inclusion is used to define the availability oof financial services to the greater population. It is of key importance as, with greater access to financial services, marginalized groups are able to access more and more financial services, leading them to more readily get out of poverty. By making financing available to the populations who don’t usually access it, adapting financial technology and other financially inclusive measures will help in reducing income inequality in and contributing towards inclusive economic growth. Because Egypt has a mobile penetration rate (number of SIM cards/phones in a country) of 102 percent and over 28 million smartphone users, implanting features of financial technology (or Fintech) on both the public and private spheres will be extremely helpful in tackling this issue.
Financial technology and implementation
In the private sector, financial technology can be implemented through the use of mobile and instant payments. These simplify transactions and lessen the need for cash or cards on hand. Many Egyptian readers will be familiar with Fawry, a provider of e-payments over 100,000 locations. This tech unicorn (a company that just recently hit $1B market cap) has 20 million customers and processes 2.1 million daily transactions. Other companies and startups include MoneyFellows, a phone application that helps with online banking transactions, and “Netsahem”, a crowdfunding platform similar to the American GoFundMe, on the lending plane. Meanwhile, “7aweshly”, an application created to help people save towards their goals, “Khazna” for personal finance, and “dopay” for HR and Payroll.
Meanwhile, the public sector has taken strides in developing Fintech solutions as well. With the emergence of the COVID-19 pandemic, the Egyptian government has recently been taking a variety of initiatives to encourage the growth of the Fintech scene in the nation, with the greater goal of promoting financial inclusion. The nation’s Central Bank has initiated an online Fintech portal dubbed Fintech Egypt with the aim of linking and promoting startups, investors, mentors, and financial corporations in the FinTech ecosystem in Egypt, with the goal of “promoting financial inclusion and making banking services available for all Egyptians”. It has also debuted a new e-payment systems provider for domestic transactions within Egypt, regulated by the Egyptian Central Bank and the national Egyptian Banks Company. Even the nation’s regulatory environment is working to develop e-payment and Fintech in the nation, as the executive regulations of law number 18 for the year 2019 regulating e-payment services has just recently been released, that of which provides positive incentives to pay using e-payments through reducing the transaction costs and establishing rewards systems that are financial/ in-kind in nature.
While Egypt has one of the lowest levels of financial inclusion in the MENA region due to the small number of Egyptians dealing with banks, the country is currently taking decisive, palpable measures to tackle and develop inclusive economic growth through its noticeable efforts towards capitalizing on rich opportunities for Fintech among its population. The future of payment looks digital, and it looks bright.
Citations and sources for further reading:
FINANCIAL INCLUSION IN EGYPT. Dec. 2017, www.alexbank.com/document/documents/ALEX/Retail/Research/Flash-Note/AR/Financial-Inclusion_Dec17.pdf.
“Banking for the Unbanked: The Growth of Fintech in Egypt.” Wamda, www.wamda.com/2019/05/banking-unbanked-growth-fintech-egypt.
“FinTech Egypt.” FinTech Egypt Homepage, fintech-egypt.com/.
Mahmoud, Hosam. “Egyptian Fintech Landscape in 2020: A Quick Guide.” MENAbytes, 2 Apr. 2020, www.menabytes.com/egypt-fintech-landscape-2020/.