Financial inclusion in Egypt: The road ahead

Hassouba, Taghreed Abdelaziz Article Financial inclusion in Egypt: Theroad ahead Review of Economics and Political Science (REPS) Provided in Cooperation with: Cairo University, Cairo Suggested Citation: Hassouba, Taghreed Abdelaziz (2025) : Financial inclusion in Egypt: Theroad ahead, Review of Economics and Political Science (REPS), ISSN 2631-3561, Emerald, Bingley, Vol. 10, Iss. 2, pp. 90-111, https://doi.org/10.1108/REPS-06-2022-0034 This Version is available at: https://hdl.handle.net/10419/316135 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. 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If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by/4.0/ Financial inclusion in Egypt: the road ahead Taghreed Abdelaziz Hassouba Faculty of Economics and Political Science, Cairo University, Giza, Egypt Abstract Purpose –The literature review stated that financial inclusion (FI) influences economic growth through different channels. Hence, this paper aims to investigate the underlying process of FI in Egypt theoretically, and to derive some policy implications for promoting the process and achieving more improvement in different financial and economic aspects, that is basically through discussing the opinions of FI’s main stockholders in Egypt. Design/methodology/approach –The analysis used secondary data from the Global Findex and FAS Database, namely, automated teller machines, outstanding deposits and loans with commercial banks, debit and credit cards ownership. The research particularly used scientific methods as method of deduction, methods of graphical and tabular representation of data, comparative analysis and synthesis of partial knowledge. The paper is also based on a descriptive approach in addition to in-depth interviews with the main stakeholders of the financial inclusion process in Egypt. Findings –The analyzed results of interviews revealed that new FI vision should have a deep understanding of the financial lives of the poor and low-income groups, including how they acquire, manage and use their money. However, the impact is becoming more prominent for the efficiency of the banking system and hence economic growth rather a regulatory and sound institutional framework enhances it. This finding supported the fact that Egypt can design an appropriate FI strategy, but the main challenge is how to implement it with the required speed and outreach capacity, especially in underprivileged communities. Research limitations/implications –The result of this study has interesting implications for Egypt’s ability to attain effective FI initiatives that promote sound financial choices and behavior which in turn help to stimulate financial and economic growth. Originality/value –The study contributes to the literature by assessing the FI level in Egypt, its implications and how it should be enhanced for better performance and results in the future. It addresses the deep fact of this process through inclusive surveys and interviews that help in determining the road ahead. Keywords Financial inclusion, Central bank of Egypt, CBE financial inclusion initiatives, Financial inclusion indicators, In-depth interviews Paper type Research paper 1. Introduction Financial inclusion “FI”denotes the process of making financial services attainable at reasonable costs to all entities, sectors as well as individuals; irrespective of wealth and size, respectively. FI strives to address solutions to the constraints that exclude people from participating in the financial sector. In order to provide financial services at low costs for individuals from different levels of income, the financial sector is always trying to provide new ways such as providing crowdfunding, digital payments and social lending. However, although the existence of those ways, there is still a low percentage of the population that remained unbanked. In fact, FI provides individuals with the possibility of having an appropriate way to save for the future and so can boost financial stability. If financial institutions do not exist or do not REPS 10,2 90 © Taghreed Abdelaziz Hassouba. Published in Review of Economics and Political Science. Published by Emerald Publishing Limited. This article is published under the Creative Commons Attribution (CC BY 4.0) licence. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this licence may be seen at http://creativecommons.org/licences/by/4.0/ legalcode The current issue and full text archive of this journal is available on Emerald Insight at: https://www.emerald.com/insight/2631-3561.htm Received 3 June 2022 Revised 7 June 2022 Accepted 7 June 2022 Review of Economics and Political Science Vol. 10 No. 2, 2025 pp. 90-111 Emerald Publishing Limited e-ISSN: 2631-3561 p-ISSN: 2356-9980 DOI 10.1108/REPS-06-2022-0034 function well, individuals, as well as firms, will suffer to gather savings, honor payments or secure loans for businesses, which could create deficiencies and obstacles to development and growth. Moreover, FI is widely used as a benchmark to track the achievement of the Sustainable Development Goals (SDGs) given its basic role in promoting inclusive development and achieving poor socio-economic benefits. That in turn gives more importance to deeply investigate the situation for FI in Egypt. Especially that, FI is considered as a top priority in Egypt’s national agenda as a milestone in Egypt’s 2030 Vision. Some recent studies investigate FI using the World Bank’s Global FinDex database in different countries. However, little works have so far focused on financial inclusion in Egypt. Therefore, this study aims to investigate the situation as well as the main indicators of FI in Egypt given all potential challenges and barriers. In addition, to analyze the thoughts beliefs and experts of main FI’s stakeholders (CBE, Commercial Banks, and FRA), and hence trying to draw a roadmap in promoting FI for different targeted beneficiaries. Thereby, the research problem of the study is “To what extent did the FI policy succeed in expanding the financial services in Egypt given all potential barriers and challenges?”What are the main policy actions that should be undertaken to make the financial sector more inclusive to all society’s segments? Unlike most of the studies that tackled FI, this one aims at exploring and contributing to the growing knowledge about Egypt’s FI strategy in terms of its main stakeholders’opinions and experiences. The study applies a new approach that was not previously touched in discussing the case of FI in Egypt; that is in-depth interviews by holding one to one meeting, trying to draw recommendations for a future roadmap of FI in Egypt and how our financial system be better inclusive. Moreover, this study focuses on Egypt as an individual country performance rather than regional FI activities, where the latter is the main purpose of the existing literature. The rest of the study proceeds as follows: Section 2 focused on main concepts, definitions and indicators of FI as well as an overlook of FI in the international sphere. Furthermore, presenting a deep overview of the Egyptian FI which is illustrated in Section 3, data and methodology for in-depth interviews are discussed in Section 4. Finally, in Section 5, the study reveals the main results and highlights some policy implications. 2. Theoretical background 2.1 FI as a concept in international and regional sphere The concept of FI has become one of the most important and widespread financial concepts since the global financial crisis 2008, where the leaders of the Group of Twenty (G20) have promoted the initiatives adopted by the developing countries to expand the scope and spectrum of FI to have a sound, solid and healthy financial system. According to Demirguc-Kunt and Klapper (2013) FI mainly refers to “The process that ensures the ease of access, availability, and usage of formal financial services for all members of an economy at a reasonable cost and in a sustainable mode”. This definition ensures the absence of both price and nonprice barriers to financial services. Furthermore, FI has become a vital issue for economic policymakers, regulators, financial institutions and development agencies locally and globally. Since 2010 more than 55 countries have made commitments to FI, and more than 30 countries have either launched or are improving national strategies for FI (World Bank, 2018). Accordingly, the study tried to elaborate the different definitions for FI either from international or regional perspectives. On the international side, FI is defined, according to the World Bank “WB”, as: “FI means that individuals and businesses have access to useful and affordable financial products Financial inclusion in Egypt 91 and services that meet their needs, transactions, payments, savings, credit, and insurance which are delivered in a responsible and sustainable way”(World Bank, 2015;World bank Group, 2013). This definition is not far in meaning with that belonged to The United Nations where FI is “Access at a reasonable cost for all households to a full range of financial services, including savings, payment and transfer services to ensure continuity and certainty of investment and hence economic growth”. Finally, The OECD states that FI is “an affordable, easily accessible process including a wide range of regulated financial products and services”. On the regional side, there are quite similar definitions such as the definition of the African Development Bank (ADB) which defines FI as: “Having access to different services including making payments, mobilizing savings, allocating capital funds, monitoring users of funds and transforming risks”(ADB, 2013). In addition, The Banking Association South Africa defines FI as the access and usage of a wide range of affordable, high-quality financial services and products, with respectable consideration to client protection. Accessibility is accompanied by usage, which should be supported through the financial education of clients (The banking association South Africa, 2018). Despite the similarities between definitions, there are some differences, such as: (1) the scope of the definition, (2) the concepts the definition includes and (3) the explicit mention of a goal such as what the government/institution hopes to achieve with its FI policy (Zulkhibri and Ghazal, 2016). On other hand, the concept of financial exclusion generally refers to the nonaccessibility of financial services to those who have a low-income level. In this context, the study highlights the difference between voluntary exclusion versus involuntary exclusion. The WB defines voluntary exclusion as a condition where the segment of the population or firms choose not to use financial services either because they have no need for them or due to cultural or religious reasons. In contrast, involuntary exclusion arises from inadequate income and high-risk profile or due to market failures and distortions. Due to all these procedural hassles, people feel that it is easier to make money from informal credit sources, but it results in a compromised standard of living, higher physical and transaction costs and potential exposure to unethical and unregulated providers. Thus, FI does not typically mean the opening of saving bank account but signifies the creation of awareness about financial products, education and advice on money management and offering debt counseling, etc. by banks (Pearce, 2011). 2.2 FI in literature review The literature review is enriched with broad concepts, benefits as well as determinants of FI that will be presented in the following points: As a concept: Han and Melecky (2013) states that FI provides individuals with the appropriate and safe costless mode to save and so can enhance financial stability, as a high level of use of bank deposits contributes to a more stable deposit base for banks in troubled times. Then Atkinson and Messy (2013) argues that FI should be handled in light of a wide process of economic and social inclusion, given that financial education and financial awareness can perfectly foster it and help to achieve its main target of a sustainable financial system. In addition, FI is defined as the use of formal financial services that crucially determines economic development. Individuals who are not financially excluded are able to invest in education and launch businesses, and this contributes to poverty reduction and economic growth (Beck et al., 2007;Bruhn and Love, 2014). Awad and Eid (2018) define FI as a convenient and reasonable cost delivery process of financial services for low-income groups. Another specific definition of FI is introduced by REPS 10,2 92 Lenka and Barik (2018) that FI is a process that involves financial access to financially excluded groups in terms of financial services such as savings, payments, credit and Internet banking. Other strain of the literature has also highlighted the importance and benefits of FI: since the 90s, it is argued that access to finance is a fruitful factor that helps people to exit poverty by enhancing productivity concluding that the basic FI’s merits are being an important development tool (Banerjee and Newman, 1993). Since then and ever after, the FI phenomena have revived researchers’interest in investigating the relation between FI, poverty and socio-economic development. Aguera (2015) discussed that FI is often considered as an effective tool that can boost job creation, reduce vulnerability to shocks and increase investments in human capital. Hence, understanding the link between FI, poverty and income inequality at the country level will help policymakers to design and apply programs that will, in turn, widen access to financial services and lead to decreasing the extent of poverty. Furthermore, Tur egano and Herrero (2018) try to empirically assess whether FI contributes to reducing income inequality when controlling for other key factors such as economic development and fiscal policy. They concluded that FI is more attributable to a significant reduction in income inequality rather than the size of the financial and hence it implies that government targeting income equality should let FI at the forefront of its policies. Also Zins and Laurent (2016) state that “in the absence of inclusive financial systems, poverty traps can emerge and hamper economic development”. Moreover, many other benefits accompanied with FI (Demirguc-Kunt and Klapper, 2013) ensures that access to financial tools empowers women, entrepreneurs involved in smalland medium-sized enterprises (SMEs) and individuals involved in the informal sector, allowing them to invest in their education or financial projects and fully utilize their resources. Therefore, FI could work as cost reduction, efficient allocation, business facilitation, supporting capital as well as lower-income inequality. Based on the importance of FI, many studies in literature focused on the FI measurement process that is because a robust and comprehensive measure of FI is very helpful to efficiently guide the government actions and to perfectly monitor the progress of the policy initiatives undertaken to promote FI. Since then, many types of the research proposed FI index (FII) that captures information on several dimensions (availability, accessibility and usage) to measure FI either for a specific country or across a group of them. It was started by Sarma (2008) and followed by many others such as Goela and Sharma (2017),C amara and Deusto (2014) and Park and Mercado (2018). Most concluded that access to banking services benefits people to park their money in the formal financial institutions in turn it will result in high growth through multiplier effects and helps to achieve inclusive growth (Kim et al., 2018). Furthermore, other strands of reviews focused on FI in the Egyptian context that is for example Nasr (2017), which demonstrated that enhancing the financial sector and expanding access to financial services is the main tool to stimulate both economy and society. Nevertheless, financial indicators in Egypt still put the Egyptian financial sector at a moderate level and need a lot to achieve a higher level of FI. EMNES Studies (2018) the reported positive impact of FI on economic growth. Most MENA region countries; and Egypt is one of them, and will enjoy a high level of economic growth and lower poverty when more attention is given to the financial sector and FI process. Moreover, Awad and Eid (2018) stipulated an urgent need for governments to reach to more people from different levels of education and income, to increase their awareness and importance of FI. That will result in boosting economic growth and improving citizens’standards of living. Financial inclusion in Egypt 93 2.3 Main dimensions and indicators of FI Basically, financial inclusive system includes three main dimensions, each contains several expressive indicators. Table 1 summarizes the indicators that are expressing the dimensions of FI as the same as Sarma (2008) and Park and Mercado (2018). 2.4 FI as a demand and supply side FI is considered as the interaction between demand and supply side together with consumer protection, and these sides can be addressed as follows: Demand side: It is reported by the end-users of financial services. It includes financial literacy and awareness, knowledge and need of financial products and services, affordability, trust, religious/cultural factors, income level, language, consumer experiences and nature and scale of business (Singh, 2017). Financial exclusion from the demand side area is a result of lack of awareness, low income, poverty financial illiteracy, and mistrust in the financial system, bad experiences with the financial institutions, location in rural/remote areas and dependence mainly on informal sources of credit (€ Onc€ u, 2015). Dimension Dimension’s reflection Indicators per each dimension Source Availability The extent by which services of a financial system is easily available to its clients Automated teller machines (ATMs) (per 100,000 adults) FAS Commercial bank branches (per 100,000 adults) ATMs (per 1,000 Km 2 ) Commercial bank branches (per 1,000 Km 2 ) Access “Bank Penetration” The depth of outreach of financial services. (e.g. the penetration of bank branches or point of sale (POS) devices in rural areas, etc. ...) % of adults (age 15 yearsþ) Global Findex Survey Holding an account at a financial institution Having a credit card Owning a debit card Usage The actual usage of financial services in terms of frequency and length of time usedIt is related to the notion of “underbanked”or “marginally banked” people, as observed by Kempson and Atkinson (2004). They have noticed that “in some apparently very highly-banked countries, a number of people with a bank account are nonetheless making very little use of the services on offer ...” % of adults (age 15 yearsþ) who Global Findex SurveySaved at a financial institution Borrowed from a financial institution Made deposits in the past year Made withdrawals in the past year Used a debit or credit card to make a purchase in the past year Paid utility bills using a mobile phone Received wages into a financial institution account Made or received digital payments in the past year Source(s): Author development based on Sarma (2008),Sarma and Pais (2016) and Park and Mercado (2018) Table 1. Main dimensions and indicators of an inclusive financial system REPS 10,2 94 Supply side: It is reported by financial service providers. It includes distance from the bank branch, branch timings, required documentation and procedures, staff attitudes, financial markets, banks and services, appropriate design of products and services, lending criteria, the infrastructure of financial service providers, transaction cost, required commissions and fees, capital adequacy and the regulatory and legal framework. In this regard, financial exclusion from the supply side area is a result of long-distance to the branch, routine documentation and procedures, irrelevant products and lack of customized products, inappropriate staff attitudes, the lack of providers serving lowincome segments, the unwillingness of banks to lend in certain cases, high commissions and transaction cost, the inefficiency of the legal framework which protects creditor rights and helps in regulating business conduct (Tuesta, 2014). 2.5 Case studies about FI On the country level, several countries undertook different measures to enhance FI and provide better and diversified services. The following countries took successful steps in this respect. These experiences will help in drawing and conducting some learned lessons in the case of Egypt. Kenya and China are selected as examples for financial technology and financial infrastructure and regulatory improvement respectively, to achieve FI. Kenya is one of the most successful experiences where it undertook—in the early years of the Millennium—important reform agendas, which accompanied within the Economic Recovery Strategy for Wealth and Employment Creation (ERSWEC) of 2003 to 2007: This strategy was planned to compensate decades of slow economic growth that had adversely undermined the well-being of Kenyans. The vision was built on three pillars (economic, social and political) and aimed at empowering Kenyans and providing them with ‘a democratic political atmosphere that incentivizes all citizens to work hard and engage in productive activities to improve their standards of living’. In addition to Vision 2030 (2008–2030): that aimed at transforming Kenya into an industrialized, middle-income country providing a high quality of life to all its citizens by 2030 (Mugo and Kilonzo, 2017). Kenya’s Relevant Financial Reforms: Under Kenya’s strategic agenda, a number of reforms and initiatives were employed, resulting in dynamic innovations and transformations in the financial sector. These reforms included the evolution of digital financial services, agent banking, credit reference bureaus and treasury mobile direct (Amanja, 2015). As a result of the various laws, policies and tools, Kenya became a global leader in FI with 86%. According to the Washington-based think tank, M-PESA is estimated to have lifted 194,000 households, or 2% of Kenyan households, out of poverty. The impact is more significant in female-managed households and seems to be driven by changes in financial behavior such as increased financial resilience and saving. Between 60 and 73% of the population accessed bank and mobile money agents in 2015, respectively, compared to 53 and 69% in 2013, where lowering barriers to entry and transacting in the banking sector to enhance access increased formal saving to 30% and formal borrowing to 15% in 2016 (http:// bworldonline.com/philippines-tops-asia-financial-inclusion-list/). China: To reduce China’s poverty rate and become an advanced country, some reforms have been made in the financial sector trying to achieve FI and thus efficiency as well as comprehensive growth (Fungacova and Weill, 2014). These reforms are listed by Reaching the Last Mile: The Chinese government has invested substantially in expanding and improving China’s financial infrastructure, particularly the retail payment systems. In addition, the People’s Bank of China has encouraged and facilitated the establishment of one of the widest point-of-sale (POS) that significantly increasing the number of physical access points for rural and underserved Financial inclusion in Egypt 95 populations in villages across China. Moreover, several developments have contributed to strengthening the scope and quality of China’s credit infrastructure, including a core legal framework and registry system for secured transactions that was established in the mid-2000s, credit reporting regulation and guidelines issued since 2000, the 2006 Enterprise Bankruptcy Law and the 2007 Property Law. China has also made significant progress toward the development of a comprehensive and robust national payment system infrastructure. These efforts contributed to the significant expansion and diversification of physical access points throughout China, including commercial bank branches, sub-branches, agents and new-type rural financial service provider branches. The underlying payment systems infrastructure has also enabled the large-scale shift of government-to-person (G2P) payments to electronic instruments, bringing millions of Chinese adults into the formal financial system. Furthermore,policymakers in China have now moved from the “wait and see”approach toward establishing a more comprehensive regulatory framework for new providers and products to ensure the long-term integrity and stability of the financial system and adequate protections for consumers (Fung a cov a and Weill, 2015). As a result of all that, most of the previously mentioned indicators are significantly improved such as a number of adults have accounts in financial institutions, the number of formal savings and formal borrowing, etc. China’s experience demonstrates the important value of a regulatory approach that promotes innovation, while also highlighting the need to actively monitor and promptly address risks. It is pivotal to learn from China’s experience that continuous efforts of evolving are vital to keep pace with financial deepening and innovation (World Bank, 2018). 3. An overview of the Egyptian context As per Egypt, The Central Bank of Egypt (CBE) is leading the country’s FI policy process. It joined the Alliance for Financial Inclusion (AFI) in mid-2013 and the network’s working groups on data and on financial inclusion strategies ever since. It is agreed that FI has been broadly recognized as a critical tool in reducing poverty and achieving inclusive economic growth. It is evident that greater access to financial services enables the marginalized groups to lift poverty and reduce inequality in society. It is defined as “the access of individuals and businesses, to the products and services such as payments, savings, credit, and insurance at a reasonable cost and in a sustainable form”. (Alex Bank report on FI, 2017). However, it is worth noting that –due to the latest figures released by the WB in 2014 –FI performance in Egypt lags the world and the other lower–middle-income countries averages, but it converges with Middle East countries averages, which means that Egypt suffers from high levels of financial exclusion, given that low financial penetration is significantly associated with the presence of a sizable informal sector and the high poverty and unemployment rates. 3.1 Salient features for FI in Egypt To analyze the main features, indicators and dimensions of FI in Egypt, it is quite essential to note that the problem in Egypt is not only about the availability of ATM and bank branches, but it also includes the lower access of small depositors to banking services especially in poor and rural areas. Banks become reluctant to accept dealing with small depositors or borrowers; that is the same reason for the small depositors to prefer holding their savings in the post offices, and for the borrowers to seek informal finance. REPS 10,2 96 Relating to Egypt’s total population, banks have few outlets for basic banking services. Moreover, the number of banks’branches and ATMs per capita is relatively less than countries with similar per-capita income. However, the situation is improved by time. In general, banks tend to concentrate on the urban population, given that state-owned banks have the most balanced branch networks. However, their existence is still greater in urban rather than rural areas. Privateand joint-venture banks have much less rural coverage, while foreign banks have little physical presence in either urban or rural areas (Allen et al., 2012;Alshabrawe, 2016). Furthermore, In Egypt, incentives for small firms and households to use deposits and other financial products are not such strong enough. Minimum required deposit amounts are high enough to hinder the poor from involving in the banking system. Although state-owned banks have a comparative advantage in attracting small depositors with their huge branch network in different governorates and villages, and they have instead preferred to focus on large depositors. Moreover, the financial sector plays a limited role in financing new investments. On average, only 7% of new investments and working capital in Egypt financed through the banking sector, compared to more than 13% in the MENA region, and 18% in the rest of the world by the year 2107. Besides, banks often prefer to extend credit to large corporate clients and connected individuals that are considered less risky, while start-up companies remain financially constrained. As a result, formal financing plays a limited role in financing enterprises, especially SMEs. Only 13% have access to finance, as opposed to 36% for large firms. (EMNES Studies, 2018). Table 2 summarizes the FI’s indicators and dimensions for 2014 and 2017. Indicators’ values appear to eventually be improved between both periods. Furthermore, indicators per dimension have a few close values especially for access and usage but it is different for availability. The indicators of ATM and bank branches per 100,000 adults have higher weights than the same indicators per km 2 .ThisisconsistentwithC amara and Deusto (2014), who argues that the ratios associated with the population contain more information than those associated with the location. In addition, the percentage of ATM is significantly larger than that of branches per km 2 and per adult population for the availability dimension. It seems that –either for 2014 or 2017 –availability seems to have the greatest importance in explaining financial inclusion in Egypt, followed by access and usage. This reveals that availability is the most important dimension for explaining the degree of financial inclusion, Moreover, the lack of ATMs or branches of commercial banks might be considered as the first reason that generates financial exclusion. However, it is evident that FI’s performance in Egypt lags the world and the other lowermiddle-income countries averages, but it converges with Middle East countries averages. Low financial penetration is significantly linked with the existence of a sizable informal sector and the high poverty and unemployment rates (World Bank, 2018). The following Figures 1–3represent the evolution –in Egypt –of some selected indicators per each of the three dimensions. Figure 1 highlighted the increase over time in ATMs and the Number of commercial banks per 100,000 adults, which assures the previous result that the availability dimension is the main for constructing an inclusive financial system in Egypt. Moreover, Figure 2 sheds light on the percentage of debit and credit cards’ownership as an example of access dimension, it is noted that both credit and debit cards’ownerships have increased and improved by the time, where the increase of debit cards is greater than credit cards. That might be explained due to a higher level of savings throughout the period, in addition, to make most of the wages and salaries cashless through an individual’s account directly. Financial inclusion in Egypt 97 4.5 FI challenges Interviews have mentioned some of the constraints that are considered as basic challenges on the road of FI in Egypt such as the informal sector, society culture which is still very traditional in dealing with financial transactions, and lack of accurate measurement of FI levels which leads to the disability of providing suitable products and services for individuals and enterprises; in addition to some of the technological infrastructure laws. On the other side, all surveyed institutions agreed on the importance of financial education to promote FI. That is due to their belief that financial products could not be used efficiently without financial literacy and the required change in the Egyptian society culture. 4.6 Regulatory framework of FI FRA’s opinion is that FI is already regulated enough, and the Egyptian economy should go ahead faster in the process of FI. CBE, NBE and Banque Misr agreed on that FI should be regulated more strictly and hence CBE proposes the establishment of a supreme committee for FI at a national level while NBE proposes legislative, administrative and technological reforms. However, all of the surveyed institutions’representatives agreed that there is no need for universal financial services law because every country has its own characteristics and circumstances. 4.7 The role of international organization All of the surveyed institutions agreed on the important role of the international financial organizations such as WB, IFC, EBRD and EIB as well as the unique role of the European Union. Regarding the helpful factors of international organizations that might affect the FI process, the interviews concluded that FRA and Banque Misr believe in “sharing of best practices”as an important vehicle, while CBE and NBE think that all of the suggested choices “promotion of projects on FI, international platforms for capacity building, sharing of best practices”are equally important. 5. Conclusion and policy implications Using in-depth interviews, this paper investigated the case of FI in Egypt. The participants’ findings show that Egypt’s plan for financial inclusion seemed feasible and attainable, but with the still challenging steps. The movements toward greater rates of FI are sequential, whereas their impact is fairly substantial but still slow and beyond what is required. This could be attributed to the low level of financial literacy, social embeddedness that hinders the use of innovative technology; in addition to the incomplete legal and regulatory framework that helps the FI’s pitfalls avoidance. Furthermore, the barriers to gradually transforming the economy to a cashless one and gender inequality access to financial services are expected to weaken the improvement process of FI. That is why the study tried to demonstrate some measures to promote FI in the Egyptian context, given that until now there is no survey or roadmap representing the actual or potential needs and desires of end-users. Nevertheless, given the meager available data and literature, this study acknowledges the Egyptian FI gap with respect to other countries. Moreover, working on answer how FI’s gap could be narrowed down? And what are the main policy actions and recommendations to expand the FI Umbrella? To answer that, it is worth mentioning that The Center for Financial Inclusion has a track record of promoting dialog among decision-makers and developing a shared vision, with an eye toward turning vision into action. REPS 10,2 104 Based on the FI 2020 perspective –that builds a shared roadmap for action, working in partnership with other specialized organizations –that is beside the results of in-depth interviews held to investigate Egypt’s FI level, the study recommends the following policy actions to be tackled by the main stakeholders to enhance FI in Egypt. 5.1 Government’s required policy actions (1) The government is required to lead the way and enhance the development and growth of electronic payments as what happened in the case of Kenya. It should support the role of technology and innovation in promoting FI initiatives, given that technical progress should be accompanied by a regulatory environment to secure technology users in financial services, besides regulators must proactively seek to understand emerging innovations, potential risks and how to regulate them. (2) Legislating laws or devising tools that can address social barriers to women, the poor income groups’FI, and all citizens. In addition, it should develop the necessary financial infrastructure that encourages private sector innovation, as well as the creation of collateral registries and credit bureaus. (3) Specific broadband infrastructure projects in rural areas, with full stakeholder participation. (4) Poverty is a multifaceted challenge that needs a multiplicity of solutions to combat it. Innovative and inclusive finance is not a magic hand to get people out of poverty. However, more efforts by the government should be done through creating employment, additional income along with savings buffers, all can help FI process to play its role in reducing poverty as well as boosting wellbeing. At that time, the impact of FI can be touched by more unbanked and marginal individuals integrated into the formal financial sector (Ravallion, 2004). (5) Realizing inclusive finance requires proactive leadership, coordination and sustained effort from governments, the private sector, development partners and even consumers as working together achieves helps in achieving better results. (6) Motivating formal institutions that enhance faster implementation of FI by providing access to new types of formal financial services such as payroll, pay bills, deposit or withdraw cash from ATMs, transfer money to any other e-wallet and access several government services without the need to having a bank account. That is in turn will enable easy and quick transfer of funds efficiently, which accelerates sales in SMEs businesses, improves the efficiency of the marketplace and removes barriers to growth. 5.2 CBE’s leading role CBE is committed to the implementation of training, educational and financing programs that provide more opportunities for Egyptian women and investing in education and financial education programs for women. It established the national steering committee on financial education, which is led by the (EBI) –the CBE’s training arm –to develop the National Strategy for Financial Literacy, especially for the poor and women. In the light of that CBE needs to: (1) Shift the paradigm from financial education as knowledge transfer to financial capability as promoting sound financial choices and behavior. Financial inclusion in Egypt 105 (2) Approve the opening of less costly “electronic”bank branches in rural areas which allow the remote and poor customers to have more access to financial services. It needs also to establish banks whose main objective is to provide financial services to low-income people who find it difficult to obtain the services provided by other banks, as South Africa did through the establishment of the “MZANSI”bank in 2004. (3) Increase and innovate in microfinance products including Islamic microfinance services. (4) Establish microfinance banks whose main objective is providing loans for SMEs not only to allocate banks part of their funds for these projects. (5) Increase the number of Islamic banks and their branches to cover all individuals who refuse to deal with commercial banks that do not follow Islamic Sharia. 5.3 Commercial banks’role (1) Move from pure financial literacy to building the financial capability of unbanked and underbanked customers by embedding financial capability elements in product design and delivery. (2) Use technology to empower customers with more account management tools to make the costs of banking services low. (3) Undertake public awareness campaigns as well as dialog on client protection policies that increase customer comfort with new services without creating undue burdens on banks and customers, in addition, to enhance on-line work and reduce paperwork requirements to make the services quicker. (4) Improve financial protection for the consumer to support trust in the banking and financial sector. 5.4 International organizations International organizations have provided continuous support to the Egyptian financial institutions over the years and are offering technical expertise in the area of FI. They need to continue their support to help Egypt make the reforms related to improve FI and to act according to the commitment to implement the G20 principles for innovative FI under a shared vision of universal access. To sum up, Effective implementation of FI in Egypt would enhance economic growth and facilitate individuals’smooth bridging to financial services, but some of the challenges remain. Therefore, it is mandatory to have a clear strategic vision, targets and policies, based on the country’s perspective of social and economic development and growth goals. The vision should consider the roles and needs of all stakeholders (supply and demand sides) within the financial space. It is necessary, that any new FI vision should have a deep understanding of the financial decisions of the poor and low-income groups, including how they acquire, manage and use their money; therefore, financial education and awareness become a must toward full implementation of FI in Egypt. Finally, Egypt can design an appropriate FI strategy, but the main challenge is how to implement it with the required speed and outreach capacity, especially in underprivileged communities. Further research studies are recommended to survey the main needs of poor and unbanked segments of the society that might help the sound and targeted implementation of REPS 10,2 106 FI in Egypt. In addition to tackling the correct measurement FII for the Egyptian context to better guide the policymakers for more fruitful FI strategy. List of abbreviations and acronyms ADI The Asian Development Bank AFI Alliance for Financial Inclusion ATM Automatic Teller Machine CBE Central Bank of Egypt CIB Commercial International Bank EBI Egyptian Banking Institute ERSWEC Economic Recovery Strategy for Wealth and Employment Creation FEPS Faculty of Economics and Political Sciences FI Financial Inclusion FRA Financial Regulatory Authority G20 The Group of Twenty GPFI The Global Partnership for Financial Inclusion MFBs Microfinance Banks MFS Mobile-phone Financial Services MoU memorandum of understanding NBE National bank of Egypt POS point of sale SMEs Small and Medium Enterprises Note 1. It was essential to keep the confidentiality and anonymity of the interviewees guaranteed to the maximum possible level. 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(2015), “Financial inclusion and its determinants: the case of Argentina”,BBVA Research, Working Paper no 15/03 (Submitted for publication). Financial inclusion in Egypt 109 World Bank (2013), “Leveraging financial inclusion to promote economic development in Egypt”, available at: http://blogs.worldbank.org/arabvoices/leveraging-financial-inclusion-promoteeconomic-development-Egypt Appendix In-depth interviews: financial inclusion in Egypt Personal data of the Interviewer: AName B Institution C Position D Contacts Office Phone: Mobile Phone: E-Mail: Questionnaire: Group of Questions Question Answer 1.Definition: 1. What definition do you give to financial inclusion? Access, use, availability, other… 1. 2. What is the source of the definition? 2. 2.Measuring FI: 3. How do you measure financial inclusion? 3. 4. Do you have updated statistics? 4. Yes □ No □ 5. If YES, What frequency? 5.Monthly □ Quarterly □ Annually □ 6. How does your institution measure the success of financial inclusion and its impact on the economy and “real life”? 6. 3.Initiatives: 7. What are the most recent initiatives undertaken to promote financial inclusion? 7. 8. How do these initiatives help in promoting financial inclusion? 8. 9. What are the most important targeted groups? 9. Male □ Female □ Start-up □ Young □ Disadvantaged □ Poor □ 10. Are there any financial inclusion initiatives addressed to MSME’s? 10. Yes □ No □ 11. If Yes, which ones? 11. 12. Is there any new offer of innovative products and services over the last year? 12. Yes □ No □ (continued) REPS 10,2 110 Corresponding author Taghreed Abdelaziz Hassouba can be contacted at: [email protected] For instructions on how to order reprints of this article, please visit our website: www.emeraldgrouppublishing.com/licensing/reprints.htm Or contact us for further details: [email protected] 13. Who promoted these initiatives? 13. 14. Are there any financial inclusion initiatives to encourage entrepreneurship? 14. Yes □ No □ 15. If Yes, Which ones? 15. 16. In your opinion do you see a role for the financial sector to promote financial inclusion initiatives? 16. 4.The road ahead: 17.In your opinion what should be done further? 17. 18.How do you intend to contribute to financial inclusion in the future? 18. 5.FI Challenges 19.What are in your opinion the constraints to financial inclusion? 19. 20.Do you think financial education is an important factor to promote financial inclusion? 20.Yes □ No □ 21. If Yes OR No: state Why? 21. 6.Regulatory framework of FI: 22. Do you think financial inclusion should be regulated? 22.Yes □ No □ 23.If Yes, State How? 23. 24.Should there be a universal financial services law to ensure universal access to finance to all? 24. Yes □ No □ 25.If Yes, State Why? 25. 7.International Organization and FI: 26. Do you see any role for the international finance organizations? 26.Yes □ No □ 27. If Yes, Which one? 27. WB □ IFC□ EBRD □ EIB □ Others □ 28. Do you see a role for the European Union? 28. Yes □ No□ 29. If Yes, in your opinion which of these are the most important? 29. promotion of projects on financial inclusion□ International platforms for capacity building □ sharing of best practices□ Others □ Financial inclusion in Egypt 111