6 - 12 September 2001
Issue No.550
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Al-Ahram Weekly Online 6 - 12 September 2001 Issue No.550 |
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Necessary plastic surgery
Banque Misr's recent decision to launch a campaign intended to encourage its current account holders to make use of free credit facilities (orchestrated in collaboration with Visa International) represents a positive step in the ongoing struggle to introduce credit card facilities to a broader range of Egyptian banking customers. If effective, it may also have the added benefit of off-setting some at least of the negative impacts of the consumer downtown.
The step, it has been announced, is to be part of a wider-ranging general intitiative, on the part of the banking sector, to promote greater use of credit transactions. Egypt has great potential for credit transactions yet remains, primarily, a cash economy. And an increase in credit transactions could help spur economic activity across a range of sectors, the most obvious being tourism where more widespread use of credit cards could act to facilitate foreigners' transactions inside the country, an important consideration if Egypt is to attract the 10 million tourists targetted annually.
While the potential of credit transactions within the local market has long been recognised there remain a number of structural hurdles that will have to be overcome before any significant increase is likely to occur. The limited spread of credit transactions is -- in part -- a result of the seeming inability of banks to promote the use of credit cards. That Egyptian banks have traditionally demanded that card- holders also retain a deposit account with the bank before they will issue a credit card, rather than basing the decision exclusively on clients' ability to meet repayment schedules, has certainly acted to hinder the expansion of credit card use. And the lack of what one may call a "credit card culture" in the Egyptian market, on the part of both consumers or traders, still remains to be tackled.
Increasing credit transactions, which could, usefully, go hand in hand with the introduction of direct debit cards, would have a number of positive impacts on the banking sector, not least by bringing more people within the banking net. Increased numbers of clients dealing regularly with banks brings the potential for increased savings and greater fee income for the banks themselves. The banking sector, after all, remains the obvious arena to activate if one seeks to increase levels of national savings.
Yet for any of this to take place requires that a far wider section of the public becomes acquainted with the services offered by the banking sector. The percentage of the population regularly using banking facilities is still too small, a situation that is unlikely to be remedied until the banks themselves begin to market themselves more aggresively. Opening branches in rural areas and in popular districts is one obvious strategy.
There are, of course, other factors that have impeded the spread of credit transactions. Average per capita income, according to the latest statistics, is $1400 per annum, though until very recently it barely reached $1000. A whole class of civil servants -- some 5 million bureacrats (the top echelons excluded) -- exists on incomes so limited that they are forced to take on extra jobs simply to meet weekly expenses. Yet even such limited income groups could benefit from access to credit facilities, and many would undoubtedly welcome the opportunity to spend now and then repay within 45 days.
To expand the base of credit card holders from its current level of around a million to five million would be no mean achievement. And one obvious first step on that road would be to make it easier for customers to apply for cards by not demanding that clients hold a deposit account with the issuing bank. Egypt should realign its policy with that followed in the rest of the world, basing eligibility on the capacity to meet repayments.
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