Halla S. Sakr, Managing Director, Attijariwafa Bank Egypt

On major developments to the banking landscape

How has the currency flotation affected Egypt’s economy?

SAKR: I would like to clarify that this was not a sudden devaluation; it was expected and widely regarded as an essential move in the reform process. In many ways the pre-float status was affecting our abilities by slowing trade activities, causing a shortage in foreign currency and leaving banks unable to meet their clients’ currency needs. A number of factors worsened the situation, including the proliferation of the black market and a slowdown in foreign exchange (forex) inflows from tourism. There was also a lack of confidence in the economy, which deterred foreign direct investment. It was a vicious cycle that went back to 2011 and reached its peak at the beginning of 2016, leading to a very challenging situation. We were, however, able to meet the minimum required demand with respect to essential products, such as food and medicine, which prevented things from coming to a complete halt.

After the flotation, forex liquidity significantly improved as the market was flooded with much needed foreign currency. Remittances were a significant part of our forex resources, but they had dropped before the flotation as transactions moved to the parallel market, which has since disappeared completely. By then we were able to meet almost all the requirements of our customers, particularly in terms of import needs, and we also covered any backlogs as well as the repatriation of major multinationals’ profits. 

What role will the banking sector play in achieving greater financial inclusion?

SAKR: There is a major focus on financial inclusion at the national level, not only with regard to small and medium-sized enterprises (SMEs), but also individuals. A significant proportion of Egypt’s population is unbanked, and until recently only 10% of the population had a formal bank account. At present, the figure stands between 10% and 15%, although this rises to 33% when we include individual savings at post offices. Postal deposits are perceived to be the most secure destination for savings for a large part of the population, with most of the lower- and middle-income segments keeping their money there. 

The Central Bank of Egypt (CBE) has provided major incentives and initiatives to support SME lending. Private banks are now targeting 20% of their portfolios to be made up of SME loans by 2020. There are also several programmes sponsored by the CBE to provide financial incentives to SME owners as well as financial literacy training in conjunction with local universities. Banks in Egypt used to shy away from SMEs, focusing their attention on multinationals, but this trend has started shifting, albeit only in recent years. The same applies to the retail sector. Value propositions were not present in the sector, and banks had to review their risk-management programmes. We are now realising the full potential within Egypt’s vast retail sector, and banks are heavily invested in preparing their infrastructure to support the required changes and participate in this opportunity.

To what extent does the adaptation of new technologies present opportunities for Egypt’s banking sector?

SAKR: The banking system is moving towards the adoption of financial technology (fintech) solutions and working on enhancing the customer experience. Until very recently, branches were the preferred choice of customer engagement for banks despite their high costs and difficulty reaching rural areas, which only public banks were able to do. There was a misconception that Egyptians would not migrate to electronic channels, which is surprising given that, for example, mobile penetration in Egypt exceeds 100%. The past years have demonstrated how inaccurate that idea was, and now everyone sees the potential of fintech solutions.