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Egyptians overcome cash liquidity drop with credit cards Despite economic troubles and diminishing buying power, the number of purchases made by credit cards hasn't slowed - a good sign for both banks and consumers, say some
Visa, Mastercard and Egyptian banks have broadened their credit-granting activities in a bid to push up Egypt's diminished purchasing power, badly hit by prices hikes and low wages. Many banks believe current troubles give a good opportunity for a large scale introduction of credit cards to Egypt, as production diminishes and liquidity shrinks. Tareq Al-Husseiny, the general director of Visa in Egypt and North Africa, told a press conference on 2 May that more than 10 million Egyptians hold credit cards. Al-Husseiny also said that Visa would expand its activities in Egypt to accelerate the economic recovery. "Credit cards are a very significant technique to boost the purchasing power of consumers when the cash supply is low," said Ismael Hassan, former Central Bank governor and chairman of the Egypt-Iran bank. Hassan said that the drop in wages and downturn in industrial production in the wake of the January 25 revolution are the main reasons behind a substantial increase in personal credit and banking cards. "The less money we get, the more retail loans we have," Hassan said. Other banking figures agree. "Risk-free and very beneficial"-- that was how Hafez Al-Ghandour, former director of the National Egyptian Bank, described retail and credit cards to Ahram Online. Al-Ghandour said that banks and credit institutions avoid risk by the precondition of credit cover of the customer who wants to have these services. "A monthly interest rate of 1.5 per cent means banks make a lot of profits," he added. Profit-seeking banks hence raised their total credit facilities extended to families to LE 92.88 million in February from LE 92.82m in December 2010. The figures show it has been good for business. NSGB was the first listed Egyptian lender to show in detail how it fared through the revolt that ousted President Hosni Mubarak, sparked strikes across industry and caused a slump in tourism and investment. First-quarter net income of LE364m ($61m) exceeded the average forecast of LE327m in a Reuters poll of four analysts. NSGB reported good performances in retail and corporate loans and stable asset quality and said its non-performing loan ratio was 3.4 per cent in March, unchanged from last December. The last bulletin from the Central Bank of Egypt (CBE) showed the volume of family sector loans from banks kept the momentum during the month of the revolution, totaling LE92.4m in February 2011 against LE 92.3m in December 2010. As one credit card holder puts it, consumers felt more secure when the CBE imposed restrictions on fund transfers abroad, encouraging Egyptians to hold and use them. "Credit cards are far from doubts of any misuse," said Mahmoud Khattab.
