Financial Inclusion in Egypt: Challengers and Recommendations

Abstract

Financial inclusion is receiving an increased attention for its potential beneficial financial and economic impacts. It can enhance financial stability, promote economic growth, reduce income inequality and alleviate poverty. Driven by the Egyptian authorities’ trust in the importance of the inclusion of all society segments into the formal financial system, they made several efforts and adopted different measures. Despite these efforts, challenges remain and necessitate further efforts to be undertaken to confront persistent modest levels of financial inclusion. This study aims to demonstrate the currently expanding Egyptian experience of financial inclusion, the governmental efforts to effectively boost it and the challenges that are still encountered. The study finds that Egypt suffers from high levels of financial exclusion, especially when compared to other countries groups. Analysis of the access, usage and quality of financial services used by individuals or enterprises clarified that many Egyptians are still excluded from the formal financial system in many aspects. Cost, lack of documentation and distance barriers play considerable roles in this financial exclusion. Women, low-income and young adults are over-represented among the unbanked. There is greater preference of cash transactions in receiving wages, sending or receiving domestic remittances and saving / borrowing informally. Mobile money accounts and digital transactions are recording low levels. Possibility of raising emergency funds is faint. Also, firms’ access to finance and usage indicators in Egypt didn’t improve significantly over the past years. To face these challenges, the study recommends actual steps to expand electronic banking and mobile money services, to revolutionize post offices, and to remove physical, bureaucratic, and financial barriers hindering financial inclusion. Interest rates and collateral requirements need to be revised to ameliorate firms' access to finance. A bank’s collateral regime, ready to accept a growing share of movable assets, is important. Finally, a financial inclusion strategy with specific targets need to be settled and adopted