By Mohammad Ayyad
The currency exchange rate will improve with restored confidence in Egypt’s economy after the presidential elections, according to Gamal Negm, Deputy Governor of the Central Bank.
Negm’s remarks came during the People and Banks Conference held on 11 June and 12 June in Cairo.
“The currency exchange rate will improve with the beginning of a restoration of confidence on part of the local and international financial and business community, which was impacted by the closeof presidential elections, the second step of the roadmap,” said Negm.
He added that stimulating the economy, working on bank performance, and keeping pace with international developments are top priorities for the Central Bank, which have had a positive effect on the Egyptian economy.
Negm said indicators of financial soundness in the banking sector, sufficient rates of capital, and assets and earnings quality demonstrated the sector’s strength in fighting crises. This was reflected in the economy’s ability to pull through from the global financial crisis to the 25 January Revolution and subsequent instability, he added.
According to Negm, the economy experienced two waves of development and banking reform. The first phase, from 2004-2008, included a package of measures aimed at developing public banks and addressing bad debt issues. The second phase included the issuance of rules for corporate governance, the implementation of the Basel Accords, and the provision of funding for small projects. He noted that the reform plans were supported by the strength of the banking sector and its ability to respond to crises.
Negm said banks need to move toward greater financial inclusion by making a larger number of retail banking services available for individuals. There was also a need for increased interest in financial protection for consumers and achieving a greater geographic reach through small branches and online banking services.
He continued: “The banks must attract new customer demographics through reducing the minimums required to open an account, as well as utilizing services to ensure credit risks and the Egyptian Credit Bureau.”
Implementing financial inclusion will clash with the lack of sufficient data on the demographics that interact with banks and the lack of awareness about their banking needs, said Negm. He added that there is a need to examine the gap between supply and demand in banking services available.
He added that financial inclusion is not the only role of the central bank, but it does require the cooperation of multiple actors and institutions within the state. The process must take place by developing general strategies for the economy in order for the idea of financial inclusion to be adopted within all institutions, he noted.
Negm called on banks to diversify their portfolios to ensure continued profitability, especially with the decline in interest rates on treasury bills and government bonds. They should also search for new sectors to add in order to maintain credit, he said.
Negm emphasised that the central bank is persistent in launching initiatives to stimulate Egypt’s economy, similar to the initiative to support real estate funding that helped banks overcome their problems in mortgage lending through long-term loans with fixed-rate financing.