Egyptian bankers say that more citizens should take advantage of the banking system to obtain loans and financing, especially for purchasing retail items such as cars.
The comments from banking industry figures were made during a session on insurance and financing within the second annual Egypt Automotive Summit, held by Business News on Tuesday.
The session was moderated by managing director of Drive Company, Ahmed Kamal, and was attended by Alaa Farouk, head of retail at the National Bank of Egypt; Ahmed Abo El-Dahab, director of retail banking at the Society Arab International Bank (SAIB); and Ibrahim Labib, chairman of the Automotive Committee of Insurance.
Kamal said that the purchase of vehicles increasingly depends on securing financing, whether in cash or in instalments, bearing in mind the rising prices of cars and the falling purchasing power of Egyptians.
“Banks play a major role in financing purchases by individuals, along with financing corporations and major projects. This works to increase the demand for goods, thereby increasing production, which is reflected on the national economy as a whole,” said Alaa Farouk.
He added that increasing loans for cars and other items requires more citizens to join the banking system first.
He explained that there are currently only 15 million people in the Egyptian banking system, but this figure could be expanded to 40 to 50 million people.
“We need to include about 15 to 20 million people first, so that they can borrow money from banks later,” he added.
According to Farouk, including the invisible economy within the state economy is very important to increase the banks’ customer base.
“Young people should be made aware of the banking services, attracting them to join through simple retail products, so that they will qualify to obtain loans later,” he said.
Farouk pointed out that the National Bank has signed an agreement with Cairo University, launching an initiative to automate the payment of tuition fees. It has also launched a Mobile Payment application that has already attracted some 500,000 new customers.
According to Ahmed Abo El-Dahab, SAIB Bank has been working to encourage customers to buy Egyptian products, noting that the bank offers loans at reduced interest for cars manufactured in Egypt.
Abo El-Dahab agreed with other bankers present at the summit, saying that loans can only be granted to customers with a banking history.
He praised the government for automating the payment of civil service pensions and salaries using credit cards.
However, he added that financial inclusion should include all transactions of citizens, noting that Egyptian banks have the infrastructure needed to shift towards a more cashless society if they join forces.
He explained that 10% of all electronic transactions add 1% to the national economy.
“There are about 6.5m cars in the Egyptian market,” stated Labib, signalling the need to improve insurance services.
“Insurance and finance are the engine of growth of various economic activities, especially the automotive industry,” Labib said.
He added that half of premiums collected by the insurance sector are repaid in compensation for damage to vehicles under the compulsory insurance protocol.
He explained that the value of compulsory insurance premiums on cars is about EGP 800m, while the supplementary insurance premiums amount to EGP 1.4bn.
Labib called on automotive financing companies to sign a co-operation protocol with the Automotive Committee of Insurance, along the lines of the bank insurance protocols signed with the Central Bank of Egypt and other banks.
Labib also praised the decision of the Egyptian Financial Supervisory Authority to launch electronic compulsory insurance services, making insurance available over the Internet.