In the push toward financial inclusion, entrepreneurs and businesses can benefit


Most Egyptians are excluded from the formal banking system — they do not have bank accounts and do not get access to bank services such as credit/debit cards, savings accounts, loans or bank transfers.

As a result, most Egyptians conduct all of their transactions using cash, even when buying a house or a car. They keep most of their savings in cash, or sometimes in real estate or gold. If they run a small business, they are often part of the informal economy.

A context in which this kind of exclusion exists is not good for individuals, the government or the broader economy; hence, the recent drive for more financial inclusion.

Can banks drive a new wave of financial inclusion? The answer is no.

Banks in Egypt have less than 10 million bank accounts, covering less than 10 percent of the population. Moreover, they are not that keen on dramatically increasing their customer base because the cost of gaining new customers — who do not have significant savings or transactions — are higher than the revenues they will provide.

Banks, therefore, are quite selective and prefer to grow their customer base slowly and carefully. These factors add up to a dynamic where financial exclusion is a persistent issue.

Over the past decade, Kenya had a pioneering experiment in using mobile wallets to expand the reach of financial services. M-PESA is a mobile wallet network launched in 2007 to help customers of microfinance loans pay their installments in a fast, easy and cheap way. It has since grown to be a pervasive tool. Out of Kenya’s 47 million-strong population, more than 80 percent have mobile phone service. Out of those, more than 70 percent have a mobile wallet.

The way the wallet works is simple: Your mobile operator issues you a virtual wallet, which is attached to your phone number. Your phone does not need to be a smartphone – old feature phones also work. You go to thousands of outlets across the country (kiosks, retail stores, etc.) to add money to your wallet, which you can then use to pay bills, transfer money to others or pay your microloans.

Today, we are at a point of inflection in the payment revolution that may change the way we buy, save, borrow, pay, get paid or transfer money in Egypt.

The Central Bank of Egypt (CBE) has allowed mobile wallets for several years, with Vodafone Cash, Etisalat Felous and Orange Money launching their services and attracting more than 5 million users; however, with limited usage. Over the past year, the CBE made a big push toward a greater expansion of the mobile wallet program, adding nine banks to the service and requiring that all mobile wallets in Egypt be interoperable, meaning they can transfer to each other.

Why is the government pushing for more mobile wallet penetration? Mobile wallets have proven to be the fastest and cheapest tool to expand the footprint of access to finance and financial inclusion, which now tops the government’s agenda. Last year, the government created the Payments Council, headed by the president, and included all relevant stakeholders, with the objective of rapidly growing the digital payment footprint in Egypt.

There are several reasons behind this drive from a policy perspective. First of all, conducting financial transactions digitally is much more efficient for the government as the cost of issuing and managing cash is high.

Secondly, it supports equitable economic growth by allowing more microcredit to flow to underserved segments of the population. This is critical for poverty alleviation and job creation.

Thirdly, moving more transactions to the digital system gets them out of the informal economy, which is usually less efficient and avoids taxation. This also allows for greater security and control over money laundry.

And finally, digital transactions allow people to build credit histories and enables new credit scoring tools, which provides broader access to finance, both for personal and business purposes.

So how do we increase the penetration of mobile wallets?

Government policies that allow all government bills and services to be paid for using wallets can help promote their usage. Additionally, we need to expand the scope of applications for these wallets. For example, today, you can use a mobile wallet to transfer money to a family member or pay your bills. Soon, most of the microfinance providers will also be able to disburse and receive payments for their microloans through mobile wallets as well as being able to pay for purchases at retail stores using mobile wallets.

Expansions like this mean that a larger variety of services are coming, like payroll services, food ordering services, e-commerce, among others — and accompanying applications will drive broader use of mobile wallets.

If you are a merchant, e-commerce business or an entrepreneur, how do you benefit from this transformation?

Firstly, you should be able to accept payments in mobile wallets, along with cash and credit cards; thus, decreasing your dependency on a single method of payment. You may also want to consider adding features to your business that build on these new technologies.

As an entrepreneur, you should also consider business models that were not feasible a year or two ago due to the limitations of the payment platforms. These businesses may be viable and attractive now.

Today, we are at a point of inflection in the payment revolution that may change the way we buy, save, borrow, pay, get paid or transfer money in Egypt.

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