CAIRO: Commercial International Bank (CIB), winner of “Best Bank in Egypt 2009 awarded by Euromoney, sat down with Daily News Egypt to discuss 2009’s success and 2010, a year that looks to see extensive evolution of the Egyptian banking sector.
Asked whether the possibility that needed foreign investment might remain scarce, they optimistically replied, “Where else would foreign investors go, if not Egypt?
Officials questioned the premise of Islamic banking, and assured that Egypt will never engage in the risky behaviors that led to the 2008 financial crisis.
Daily News Egypt: Why did CIB win “Best Bank in Egypt in 2009?
CIB: We have shifted our mindset from product-driven to customer-driven. We are a local bank, and we know the market, we know where the risk is, our branch network and branch managers know where the money is, we know the country well.
What differentiates us from other Egyptian banks is our culture .We never surprise the market with good or bad news, and are always in-line with expectations.
What challenges did CIB face following the financial crisis?
Of course we would have been better without 2008. We achieved significant success relative to what happened; we increased our loan book by 4 percent while our target market decreased by 1 or 2 percent. But if the crisis hadn’t happened, we would see an expansion of the companies working in Egypt, loan growth, Suez Canal receipts, trade. Still, we are lucky to be in an economy growing at 5 percent in 2009, which is a high rate given what is happening all over the world.
How does CIB plan to achieve success in 2010?
2007 was a year for huge growth in corporate lending. 2010 will witness solid growth in private corporations. Many companies are currently feeling suspicious about expansion plans, and so use a wait-and-see strategy for where the market will end up. But Egypt is in the best position to implement expansion. The local consumption base is huge and targeted by many companies; the demographics are marvelous compared to the region.
Additionally, at the latest board meeting we agreed to appropriate 1 percent of each year’s net profit for a foundation dedicated to health and child nutrition. We’ll also raise funds from customers, staff and shareholders, though it’s not open to the public. We believe we owe it to this country, which is in deep need of such a project.
Is CIB concerned that foreign investment in Egypt will not return to pre-crisis levels?
What else would investors do with their funds if they did not invest in Egypt? Where else would they invest? The sources of money may differ, however. Through our CI Capital affiliate, we are going to Asia, to Hong Kong and Singapore; this is where the money is.
The government does this well, marketing Egypt as an investment destination. Asia is not like the US and Europe, their interests and strategies are different. Still Egypt is not really on the Asian radar screen. You get their attention by presenting CIB within the context of Egyptian industry and the greater context of Egypt’s potential. For example, we will be representing Egypt at the Euromoney Conference in Hong Kong this week.
If the banking sector had been more evolved, would the financial crisis have hit Egypt harder?
No, the banking law issued in 2003 carries stringent requirements for banking practices. Banks are not allowed to engage in risky behaviors like derivatives trading. The regulator has a strong hand on the market. Banks used to complain that the restrictions were overly conservative, but after what we saw in the crisis in the US and Europe. we learned from others’ mistakes. Right after the crisis a lot of money poured in from foreign banks, due to customers’ opting for CIB’s security.
Currently only about 10 percent of Egyptians have a bank account; does CIB hope to expand Egypt’s banked population?
The Federation of Egyptian Banks, a consortium for all banks in Egypt, is working on an awareness campaign for the entire population, explaining from scratch what banking is all about. The problem is ignorance: people just don’t understand the concept, why they should bank, what returns they could get out of banks. We still have a very long way to go on the consumer side, but there’s a lot of potential and room for banks, also for foreign banks that operate in the Egyptian market.
What does CIB predict for the future of Egyptian finance?
Transitioning away from a purely cash-based system. The total number of plastic cards is only 1.5 million, [which shows] the degree to which the economy is cash-based. There is huge potential for future growth. The government has made the transition to cards a priority so the payrolls for government staff are card based, in order to introduce a plastic ideology.
Also, patterns of consumption will change. Domestic consumption is huge, but very concentrated on the upper and extreme lower classes. For example, in the confectionary business, the sales value for the whole population is maybe 60 percent of A-class and 30 percent for D-class. So profit comes from top imported chocolates as well as from the cheapest quality sweets. This indicates that the middle class is under-served, this is the bankable population to be targeted.
Does CIB plan to offer mobile banking services?
It is not yet approved by the Central Bank of Egypt, but if we think it’s lucrative, we’ll engage in it.
Do you consider Islamic finance products an unmet financial need of the Egyptian population?
Islamic banking is an issue but not a significant one that concerns a very small segment of the population. The reason Egyptians tend not to join banks is not that they’re not Islamic. It’s all about the trust factor, people believe in keeping money in the house so that it’s safe and it’s there. Honestly, in my personal opinion, “Islamic banking is just terminology.
Banks are smart, when the customer needs an Islamic product they make an Islamic product. CIB is not involved in offering Islamic products. For some special customers, we have one Sharia-compliant mutual fund with Faisal Islamic Bank. But we don’t think there’s a mass demand for such products.