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Analysis Reality and Potential Of Financial Inclusion in Egypt: Challenges and Ways of Confrontation

The Central Bank of Egypt played an important role in promoting and coordinating financial inclusion. as a strategic objective, financial inclusion is a national priority in accordance with Egypt’s Vision 2030. It contributes to reducing poverty, unemployment, tax evasion and financial crimes such as money laundering, as well as promoting financial stability and achieving sustainable development in all its dimensions.

The World Bank defined financial inclusion as “the percentage of people or companies that use banking services,” and the Arab Monetary Fund defined it as “the extent to which individuals or companies, including low-income individuals and small businesses, enjoy using bank accounts, and the ease of access to multiple financial services from savings.” Borrowing, payments, insurance, transfers, etc., with high quality and reasonable cost.

It is worth noting that it is not possible to understand the state of financial inclusion in a country without addressing the structure of the banking sector and the technological developments that have affected it. We note here that the structure of the Egyptian banking sector consists of 38 local and foreign banks, and the Central Bank supervises 81 exchange companies, one money transfer company, 19 representative offices of foreign banks, as well as 82 financial expertise houses, and the total number of bank branches reaches In Egypt to 4532 branches.

The new law of the Central Bank, which was adopted on September 15, 2020, related to payment systems and services and financial technology, came to keep pace with developments taking place worldwide with regard to increasing the efficiency and effectiveness of the financial system. One of the important points addressed by this Act is to regulate the activity of payment systems and to promote the use of state-of-the-art technological tools in the provision of banking and financial services.

In this context, the Strategic Forum publishes a research paper that monitors the indicators of financial inclusion in Egypt, and highlights the state’s procedures and policies to achieve it, in addition to the challenges of achieving financial inclusion and ways to address those challenges.

The paper reached the following most important results:

1- The assets of the banking sector represented 89.8% of the assets of the financial system in 2019/2020, and domestic credit represented 68.2% of of total banking sector assets in June 2021.

2- The value of the portfolios’ monthly transactions amounted to about 20 billion pounds in June 2021.

3- The loan portfolio amounted to about 2.2 trillion pounds at the end of the fiscal year 2019/2020 and the portfolio continued to grow to reach 2.9 trillion pounds in June 2021.

4–   The ratio of irregular loans to total loans decreased to 3.5% in June 2021 compared to 3.9% in June 2020.

5- The number of electronic payment cards increased in 2021 to 52 million cards.

6– Mobile phone accounts reached 23.17 million accounts at the end of June 2021, with an annual growth rate of 26% compared to June 2020.

First: Indicators of financial inclusion in Egypt

1-Bank Account Numbers Indicators

The ratio of the money supply to the gross domestic product (GDP) expresses the money in circulation within the banking system; It declined during the period (2005-2020), reaching 97.14% in 2005, while it reached 77.23% in 2019/2020; This indicates an increase in the volume of funds circulating outside the banking system in Egypt, despite the policies that stimulate financial inclusion and support the presence of the largest number of individuals within the banking system.

Figure No. (1) The volume of domestic credit in 2020/2021

Source: Central Bank of Egypt: Financial Stability Report 2020, Annual Report (Cairo: Central Bank of Egypt, 2021)

The previous figure shows that banking sector assets represent 89.8% of financial system assets in 2019/2020, and local credit represents 68.2% of total banking sector assets in June 2021.

By following the deposit indicators, it is possible to identify the development of the volume of economic activity in general, and the development of banking activity in particular. The following figure shows the development of the volume of funds deposited in banks and deposits in Egypt during the period (2005-2019).

Figure No. (2) Evolution of the volume of bank deposits in Egypt during the period (2005-2019)

Source: Ministry of Finance, monthly financial report, various issues

The previous figure shows the high volume of deposits in Egypt during the period (2019 – 2005); From Pound521.7 billion in 2005 to Pound3,176.5 billion in 2019, the average annual growth rate during this period was 31.8%.

2- Indicator of the number branches bank (banking concentration)

The number of bank branches is one of the important indicators that indicate the spread of financial services, and it is a positive thing, especially when these indicators spread in the countryside and remote areas. This indicator also indicates the extent to which banks and financial institutions operating within the banking sector are interested in providing their services to more individuals.

Figure No. (3): Evolution of the number of bank branches per 100,000 person

World Bank Database

The previous figure shows the high number of commercial bank branches in Egypt per 100 thousand inhabitants, The ratio increased from 3.81 branches per 100,000 population in 2005 to 6.64 branches per 100,000 population in 2019; This is due to the wide spread of banking services in Egypt, especially in regions and remote areas

3-Indicators of individuals borrowing from financial institutions

Indicators of individual borrowing from financial institutions can be considered among the most important indicators of financial inclusion because financial inclusion is not limited to individuals having bank accounts, but the lesson for individuals to use these accounts through dealing with banks, whether in borrowing or various investment and savings vessels.

Figure No. (4) The total volume of loans (trillion pounds)

Central Bank of Egypt: Financial Stability Report 2020, Annual Report (Cairo: Central Bank of Egypt, 2021)

The previous figure shows that banks are exposed to credit risks through the loan portfolio, which results from the potential discontinuation of customers. The loan portfolio was about 2.2 trillion pounds at the end of the 2019/2020 financial year compared to about 1.9 trillion pounds a year earlier, and the portfolio continued to grow to 2.9 trillion pounds in June 2021.

4-indicator of ATMs Number

The number of ATMs is an important indicator of the extent of financial services, and the possibility for individuals to withdraw or deposit their money at any time without obligation to go to a bank branch.

Figure (5) Evolution of the number of ATMs per 100,000 population

Source: World Bank Database

The previous figure shows the high number of ATMs in Egypt per 100 thousand of the population; This was 20.07 machines per 100 thousand of the population in 2019 compared to 3.34 machines per 100 thousand of the population in 2005; This is due to the proliferation of Egyptian services and the increased presence of banks in Egypt, as well as the Central Bank’s plan to increase the number of ATMs.

Figure 6. Evolution of electronic payment card numbers (in million)

Central Bank of Egypt: Financial Stability Report 2020, Annual Report (Cairo: Central Bank of Egypt, 2021)

The previous figure shows that the numbers of electronic payment cards in 2021 increases to 52 million.

Second: Egypt’s procedures and policies to achieve financial inclusion

1-Establishment of the National Payments Council

The approval of the establishment of a National Payments Council in 2016 is an important step to achieve financial inclusion in Egypt and the gradual transition to a non-monetary economy. The main objectives of the Council are to ensure access to financial services for all citizens, especially women and youth, through a set of measures: Reducing Using banknotes outside the banking system, stimulating electronic payments, modernizing national payment systems.

The Council works to ensure that the process of financial inclusion is successfully implemented first by the government, and then by citizens. The Council recommends that government transactions exceeding 20,000 Egyptian pounds should be carried out by bank checks, in addition to the need to issue a national payment card that enables citizens to their use; To pay government service fees.

2 – Development of the legislative framework

Law No. 18 of 2019, regulating the use of non-cash payment methods, has been issued. This law is distinguished by the fact that it has taken into account the principle of gradual application, as well as the ease of its application on the ground, and it is binding on both the public and private sectors.

3- Mobile Payment Service:

The Central Bank of Egypt issued the new version of the rules regulating the provision of mobile payment services, and mobile payment services are considered one of the most important payment systems that significantly affect the achievement of financial inclusion.

Third: Financial inclusion initiatives in Egypt

The Central Bank of Egypt was interested in supporting and establishing the concept of financial inclusion by launching a number of initiatives that support financial inclusion, and these initiatives can be presented as follows:

1-Account initiative for every citizen:

The main objective of this initiative is to include the largest number of bank accounts in the financial system, by encouraging individuals to open bank accounts without a minimum account opening, and with the necessity of the presence of banks in remote areas and regions, clubs, and NGOs To raise citizens’ awareness of participation in the initiative..

2-The electronic payment initiative

The initiative aims to increase the means of electronic acceptance available, and each of the merchants or companies who do not have electronic points of sale are the beneficiaries of this initiative, and the Central Bank stipulated in this initiative the necessity of having a set of standard specifications for electronic points of sale, which support contactless transactions.

3- The initiative to deploy ATMs in all governorates of the Republic:

The Central Bank of Egypt launched an initiative to deploy 6,500 new ATMs, in addition to the existing 13,500; Until their number reaches 20,000, as a first step towards spreading Egyptian services on a large scale, no later than December 2021.

 Fourth: The challenges of achieving financial inclusion in Egypt

Egypt has taken a number of important steps towards achieving financial inclusion, but there are a number of challenges and obstacles facing the Egyptian banking sector. These challenges can be addressed as follows:

1-Weakness of the banking density index

The banking density can be measured by means of the ratios of the number of bank branches per 100 thousand of the population. The data indicate the weakness of the banking density indicator in Egypt; where the number of branches per 100,000 population in Egypt is 6.64, and this ratio should reach 10 branches per 100,000 population; Until it becomes the normal ratio.

2-The high degree of banking and geographical concentration of banks

Several large banks have acquired more than 50% of this banking market and most of the bank’s branches and banking units are concentrated in the higher-income regions and neighborhoods, and the degree of their presence is less within neighborhoods and poor areas, and this represents an obstacle and a challenge to financial inclusion; As this leads to a lack of penetration of banking services, which is the first dimension of financial inclusion.

3- Weakness individual incomes levels

The developing countries in general, and Egypt in particular, suffer from a relatively low GDP. This is due to low productivity and weak exports, and at the same time there is a high growth rate population; This makes the average per capita GDP in Egypt relatively low.

4- High rates of inflation

Inflation refers to the increase in the prices of most goods and services within the community, which are used by the population on a daily basis, and the inflation rate is an indicator of the decrease in the currency’s purchasing power within the economy.

Fifth: Ways to face  the challenges of financial inclusion in Egypt

Egypt’s financial inclusion challenges can be addressed through a package of actions and policies as the Egyptian government has  already begun to adopt and implement many of them, especially with regard to the policies that were explicitly stipulated in the Egypt 2030 plan, as follows:

1-Wider deployment of banking services

The lack of banking density is one of the important problems that impede the spread of financial services in society. Hence, it impedes achieving a high degree of financial inclusion. The problem of the non-proliferation of bank branches and ATMs in Egypt can be overcome through:

The Central Bank of Egypt shall do the following:

A- Requiring banks, according to the size and activity of each bank in each governorate, to provide a specific number of branches, as well as specific ATM machines.

B- Making a map of the areas where bank branches and ATMs are spread, as well as areas where bank branches and ATMs are not spread, then present this map to the different banks.

C-Providing incentives to banks; In order to spread their banking services across the country.

2- Increase financial awareness

The degree of financial inclusion in a society cannot be increased without its members enjoying considerable financial awareness of the financial products and services provided by financial and banking institutions within that community. It is therefore necessary, Raising citizens’ awareness of the role of banks and financial institutions in the process of economic development, also    the difference between savings and investment, how to differentiate between savings and investment vessels, and how to choose appropriate alternatives for each individual.

3- Raising individual income levels

According to the Egypt 2030 plan, the Egyptian government is scheduled to follow a set of procedures and policies for employment, whether in the short or long term, and these procedures are As follows:

A- Short-term policies

Effective labor market policies: The Ministry of Manpower and Immigration in cooperation with the International Labor Organization formulates programs suitable for the effective labor market and is linked to training, education, rehabilitation and the establishment of small and medium enterprises; In order to provide more job opportunities, and reduce the gap between the demand for workers and the supply of them.

B- Long-term policies:

These policies depend on reviewing labor laws and insurances in a way that achieves a balance between workers and employers, supporting the overall economy that helps provide job opportunities for young people in the private sector, and reforming the training and education system in a way that increases the productivity of the Egyptian worker; And then increase his income.

4- Facing inflationary pressures

Egypt is trying to follow a set of policies and procedures to confront any inflationary pressures. Among these policies are those related to monetary policies, and others not related to monetary policies. These procedures can be clarified as follows:

A- Maintaining price stability and reducing inflation rates through a monetary policy that primarily contains inflationary pressures as a tool for macroeconomic stability.

B- Taking into account the impact of inflation control on different socio-economic groups to avoid the negative effects of raising interest rates on the most affected groups, such as women who are already suffering from a scarcity of assets, as well as small and medium enterprises.

5-Integration of the informal sector into the economy

The integration of the informal sector into the Egyptian economy is one of the important issues leading to financial inclusion. Given its importance, the Egypt 2030 Plan has proposed a range of ways to address this problem as follows:

A- Developing an institutional and legislative strategy and definition for the informal sector as a first step towards the transformation of the formal economy.

B-Encouraging non-formal sector enterprises through a package of tax incentives, land facilities, training and technical services.

C. Providing loans to microenterprises when they integrate their activity into the formal sector.


the positive developments undertaken by the Egyptian government towards achieving financial inclusion are still insufficient to achieve the required level of financial inclusion, especially since achieving more financial inclusion is in the interest of increasing the activities of financial and monetary policies.








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