Since the Arab Spring and the fall of former president Hosni Mobarak, the Egyptian economy has been in a constant state of volatility. Although being categorized as an emerging market, the republic’s fragile economic situation remains a deterrent to potential investors. Nevertheless, according to a country report by Ernst & Young, Egypt will still be able to sustain its economy through the retail banking sector.
Statistics show that only 10% of adults have banking accounts at formal institutions. Many Egyptians, in fear of devaluation, have converted their savings into more stable currencies such as the pound sterling and the US dollar. A majority of industrial players are expecting their personal savings and deposit products to increase in the coming year. They are, however, wary of the challenge of maintaining current levels of return on equity as well as strengthening credit risk assessment. Banks are looking at ways to reach new customers in terms of developing new channels, products and services in the view that when the economy stabilizes, they will already have an established customer base. Egyptian banks are also focused on fee-based products to increase their revenues.
In spite of the economic challenges, strategic long-term opportunities are still present in the region. As the economy stabilizes, the demand for deposit, savings and credit products will increase. Once economic stability returns to the republic, institutions that foresee the long term potential of the market will be able to position themselves for easy mobilization through strategic investments and partnerships with local banks. — NA