Interview: Hisham Ezz Al Arab
How would you evaluate the capacity of Egypt’s banks to lead the country’s post-Covid-19 recovery?
HISHAM EZZ AL ARAB: Egyptian banks are among the largest on the continent in terms of revenue, number of branches and scale of operations. Although the way in which the banking sector interacted with customers changed during Covid-19 in light of calls to stay at home, due to the industry’s well-capitalised and agile nature, it will continue to provide important financing to companies of all sizes in these times of macroeconomic uncertainty. Egypt’s fundamentals – namely a large, growing population with many unbanked or underbanked individuals; youth driving demand for digital banking; and numerous, attractive investment opportunities – mean that the sector will continue to play a crucial role in the country’s economy long after the pandemic has passed.
In what ways can banks design products and services that enhance accessibility and penetration?
EZZ AL ARAB: The vast majority of Egyptian adults are unbanked, but if we tap distribution avenues such as the national post office and the Agricultural Bank of Egypt, these numbers would show significant improvement. Bringing the unbanked population into the formal economy is a priority of Egypt’s Vision 2030.
Financial inclusion efforts include several initiatives in coordination with public and private banks. One of these initiatives aims to provide the entire adult population with debit and prepaid cards so they can receive their salaries or pensions, pay for governmental services and make purchases. Under the umbrella of this effort, the Meeza card is a prepaid debit card that allows customers to withdraw cash from ATMs, conduct purchases and perform e-commerce transactions in Egypt. The ongoing development of payment services through its mobile app has the potential to help both the banked and unbanked segments of the population, allowing people to pay bills, make purchases using QR codes and send money to other wallet holders in Egypt with relatively low fees. However, the most significant impact on financial inclusion will come from regulatory changes, as the current rules limit complete digital onboarding for financial services.
In which ways are banks adopting financial technology (fintech) solutions, and to what extent is infrastructure in place to facilitate their use?
EZZ AL ARAB: Technology is continuously evolving and it is necessary to embrace the alphabet of the future: ABCD, or artificial intelligence, blockchain, cloud services and data. Fintech firms have emerged from Egypt’s vibrant entrepreneurial ecosystem, and by organising workshops and offering mentorship to provide fintech firms with guidance and support, it is possible for banks and fintech companies to collaborate to their mutual benefit. Successful banks will continue to watch for new collaborations and support start-ups through loans and venture capital investments.
Banks also have a responsibility to support the entrepreneurial ecosystem beyond simply meeting targets for lending to small and medium-sized enterprises. These smaller companies often bring innovative solutions and agility to challenges in the market, while banks have an abundance of expertise and the stability necessary to reach a broad base of consumers and bring these innovative ideas to fruition.
What impact will lower interest rates have on borrowing, particularly for funding growth?
EZZ AL ARAB: There is no debate that domestic and international investors believe there is room to significantly ease the pace of cycle cuts, as economic indicators such as inflation necessitate a more conservative approach. However, we expect that the interest rate cuts in 2019 and 2020 will lead to increased corporate lending in the latter half of 2020. This will give private companies a boost and further stimulate the economy.
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