Banking the Unbanked in Egypt: Make Way for Fintech

By Yara El Abd, Director of Communications & IR at paynas

For anyone with any sort of finance or economics background, “financial inclusion” is a well-worn phrase. For almost everyone else, at some point during the past couple of decades, many will have most likely been exposed to one or more of its by-products, which in this case are literal products and services now offered on neon-lit billboards across Cairo. Many of us have heard some version of this before: “financial inclusion is a pillar of economic growth” “financial inclusion is the key to poverty reduction”, and on and on… It’s likely we’ll keep hearing it for the foreseeable future. While some might disregard these phrases as one of this century’s new abstract mantras, the fact of the matter—and by fact I do actually mean supported by hard evidence—is that exclusion from financial systems is a major impediment to development.

Let’s take a step back and think of the hypothetical personal ramifications of being excluded from the financial system, keeping in mind that this doesn’t just mean not having that rectangular, magic piece of plastic in your wallet. It overwhelmingly revolves around no systematic way to save, transfer funds, earn interest, or take out a loan. Scary, isn’t it? Well the sad reality is that a whopping 2.5 billion people on the planet don’t have access to banking systems. They solely rely on cash for day-to-day transactions and wage earnings, they can only borrow from friends and family and they are, for the most part, ineligible for most types of insurance.

In Egypt, that number amounts to over 50 million people.  84% of the private sector workers still earn cash wages, and largely for that reason, less than 2.5 % of Egyptians have access to private health insurance. It’s worthy to note that this goes beyond the individual level, all the way to the enterprise level too. SMEs, the backbone of Egypt’s economy, are chronically underserved by the formal financial system, limiting their capacity to grow and compete. This leads to a vicious cycle that keeps businesses and employees financially excluded and underserved.

Nevertheless, there’s a bright light shining at the end of the tunnel, as Fintech is making big waves in the Egyptian economy. Using innovative technology to bridge financial inclusion gaps, effectively hauling the masses into the formal system, which entails more financial security and access to key services & facilities that can lead to a marked improvement in economic performance and standards of living. Fintech startups like paynas are creating new access channels, providing solutions that are catered to the needs and characteristics of the region.

If you’re a person who’s been keeping up with the local ecosystem, you will doubtlessly have noticed the massive surge the Fintech industry has been experiencing. If you were among the thousands of visitors to Hall 1 at the 2019 Cairo ICT Exhibition this week, where paynas was showcased as a Fintech success story in the Innovation Arena, you would have witnessed the enormous and sheer magnitude of innovative and groundbreaking tech companies now operating in the market. It is noteworthy that a number of factors have contributed to this. Egypt is home to a large and growing youthful population making up 41% of the total population. Internet penetration in the country, at 50%, is almost at par with global averages. These two statistics alone have led to a significant shift in consumer behavior and expectations. This means that the development of the Fintech space is in part due to a young (and large) population who are more open to a new way of doing things, and leading the demand for new modes of financial access and services.

It doesn’t stop there, the industry enjoys major support at the policy-making level, with regulators no longer scrambling to keep up, but spearheading major initiatives and actively propelling the ecosystem forwards. This more ‘conducive’ environment that they are creating is also attracting significant interest in the funding space, which has increased the participation of local and international venture capitalists and other investors, who are racing to get an early piece of Egypt’s Fintech pie.

While a complete ‘brick-and-mortar’-free banking future might still be a little down the line, Fintech is quickly, and surely, changing the rules of the game. It’s safe to say that in real terms, ‘banking the unbanked’ is now a foreseeable reality.