CAIRO: With less than 10 percent of the Egyptian population being banked, there are plenty of opportunities for domestic and foreign banking institutions to penetrate the market and increase access to finance. "This offers an opportunity in the market. Egypt has long been a cash economy . and now foreign banks are attracted to Egypt because of this low penetration rate, said Nada Shousha, country officer at the International Finance Corporation (IFC) - the private sector arm of the World Bank. "This is where the potential exists: in a country with a large population and a growing economy. One way banking institutions can reach the population is to develop new retail products such as credit loans and car loans. "Go into the housing market, too, she pointed out, adding that Egypt's mortgage market was still underdeveloped. "Access is not easy and mortgage ratio to GDP is low. "The recent mortgage law will hopefully stimulate housing loans and streamline [the process] to remove impediments to increasing housing finance, she added. Shousha is optimistic about the reform program the government has embarked on since 2004, which, she said, has removed a number of barriers to economic growth. "Institutional reforms in both capital and financial markets as well as the privatization program has [boosted] investor confidence, she said. "One of the things this policy has brought is an increase in private and foreign direct investments, which have doubled in volume in 2007. Coupled with investor confidence, the government's reform agenda has reflected positively on IFC's program in Egypt. During the fiscal year ending June 2007, IFC invested $300 million in several projects - three times the total amount invested last year. The Central Bank of Egypt, Shousha explained, has been pursuing a consolidation strategy, strengthening regulatory supervision as well as increasing the minimum paid-in capital requirement. "Government ownership in joint venture banks has been divested, she added. "The outlook on the financial sector is very positive. We see further economic growth and the private sector has potential to expand. According to Shousha, recent mergers and acquisitions dominating the banking and financial scene spurred a more competitive, more innovative sector. "When you have larger banks [acquiring smaller ones], you increase competition and product offering, leading to a deeper penetration of the banking sector in the population. Shousha sees room for even more development and reform in the country's banking and financial sector. "In the past, the private banking sector focused on corporate banking and gave very small emphasis to retail banking and small- and medium-sized enterprise (SME) financing. She underlined the fact that a big bulk of SMEs contributed to private sector growth, helped reduce poverty, and provided jobs for people. However, they depended on banks for financing and gaining access to investment. "Basically, banks need to set up a much wider range [of products] for retail and SME financing, she explained. "They should provide access to SME lending, sustainability products and micro-financing. She sees a further need to improve the business environment in Egypt, which can mainly be done through financing SMEs. One way to boost credit and lending operations in banks and financial institutions across the country is through the much-anticipated Credit Bureau, which is not fully operational yet. "The Credit Bureau is very much needed to downscale by providing proper credit information especially when looking at retail products and housing loans, she explained. "Currently, there is no access to the Central Bank's credit information database for financial institutions - such as mortgage finance companies and leasing companies - so the Credit Bureau will help [financial institutions] make credit decisions and encourage them to go into sectors where they've never been before. IFC provided advisory assistance to help start-up iScore, the first private Credit Bureau in Egypt. IFC initially helped iScore conduct a market assessment and develop a business plan to ensure a sustainable revenue model. Moreover, IFC assisted iScore in selecting an international partner to provide the technological platform that facilitates the gathering, processing, and distribution of credit information to banks and other financial institutions. "Overall, the sector is improving and there is genuine reform, however, you can't change things overnight, Shousha said. "One of the indictors that the sector is improving is the increasing investment climate in Egypt, [particularly] foreign direct investments.
