ANALYSIS: Do Egyptian banks practice credit discrimination?

Daily News Egypt
4 Min Read

Egypt’s banking sector has been praised as a survivor of the global economic crisis. It is a fact that the sector was able to stand firm in the face of financial turmoil this past year, but many say bureaucracy and centralization have also survived.

This year, the sector has seen “the return of fat cats, people who have committed fraud in the past but have settled their debts with banks. Problem is these settlements do not bring back depositors rights or enough liquid assets in comparison with what was lost.

On the contrary, and even with officials’ calls for more support to small investors as well as small- and medium-enterprises (SMEs), some say Egypt’s banking policy is still relatively unfriendly.

It is also argued that the recent government’s project of establishing microcredit companies is merely a replica of an old project by the Agricultural Credit and Development Bank, whose high interest rates eventually landed a number of Egyptian farmers in prison due to defaults.

Part of this same system, judges, lawyers, policemen and journalists have less access to credit than other professions. Many banks have taken precautionary measures that impede access to credit for people working such professions. Rumor has it that there’s even an unofficial list of what insiders called “restricted professions.

However, heads of retail departments at private banks refuse to comment on this topic, and anonymously, some justify it by saying they’ve had bad experiences in the past with these clients.

One credit retail director said, “Any bank has the freedom to ban a certain group from credit based on delayed judicial procedures in case of payment [defaults].

Another said that a direct approval from branch managers is the only way these clients can have their loan applications approved.

Banks are currently keeping a watchful eye on applicants requesting car loans, mortgages or personal loans. The rejection usually comes with a diplomatic reason, and at times regardless of income credibility and despite the fact that these individuals are not blacklisted at the Central Bank of Egypt or I-Score, Egypt’s credit bureau.

Lawyer Mohamed Al-Sharawy said, “It is considered a discriminative action as it restricts credit services to particular social groups unequally, which is illegal.

Mohamed Kharaga, head of the economics committee at the Journalists’ Syndicate, is in negotiations with the CBE as well as the heads of several banks to remove journalism from this “list of professions.

Kharaga said, “The issue is in progress and we have submitted a request to the president of Al Ahly Bank, but there are no results until now.

Ahmed Qura, former president of the National Bank of Egypt, said no such policy or list exists. “Neither the CBE nor the government has given such instructions, Qura said, adding that such a practices would be illegal.

However, he recognized bankers’ concerns regarding this category of clients, describing it as “a fear of evils.

“Banks have the right to take precautionary steps as a fear of evils. Banks sometimes have difficulties executing court sentences against policemen, for example, especially when they change departments that in turn refuse to take responsibility.

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