Hisham Ezz Al Arab has quarterbacked CIB since 2002, during which time he has led the bank’s transformation from a wholesale lender into the nation’s leading private sector bank. The corporate banking powerhouse’s stock has for years now been treated as a proxy for the Egyptian economy by many foreign investors. A veteran of the banking industry in London and New York, Ezz Al Arab was managing director at JP Morgan and Deutsche Bank before joining CIB in 2001 as a board member and deputy MD. In discussions over the past year, Ezz Al Arab keeps circling back to the force he sees reshaping the industry: Technology will drive innovation and financial inclusion in the sector, helping reshape the national economy in the process. Edited excerpts from our conversation:

2017 will be the year of change across all sectors of the economy as the structural reform program continues and the reforms start to take effect.

The biggest challenge for the economy will be the impact of the structural reforms and the pains that are naturally associated with it. That having been said: The measures are exactly what the economy needs and will place us on a much better footing in the medium and long term. But the interim period is going to be painful for many.

Egypt needs to find its economic mainstream. We need to set a target for what we want the economy to be and formalize that in the nation’s economic DNA. Are we an exporting nation? If so, where are our natural strengths? What are our natural markets? What do we import today that can be substituted for by domestic products? What is the role of the private sector, and where and when does the government step in to direct stimulus?

The biggest challenge for our industry will be helping our clients cope with the challenges arising from the reform program while also managing our costs. It’s not just staff costs — the cost of everything from electrical power to what it takes to open new branches will all rise given we’re in a high-inflation environment. The hope, of course, is that the inflationary hit right now is a one-off related to devaluation. But in all of this, we’re no different than any other Egyptian corporation — we need to manage costs so we can still deliver a strong bottom line for our shareholders.

Our market remains fundamentally underpenetrated, and that remains the biggest opportunity for our industry. It’s clear that the Central Bank of Egypt and the government are prioritizing financial inclusion going forward, and this will have a significant knock-on effect — not just for our industry. The more companies and individuals that enter the formal banking system, the more significant will be the economic growth. Movement in the banking sector mirrors that in the wider economy. We see significant room to widen our customer base beyond corporates to include retail and SME clients, and that sets off a virtuous cycle of deposits and loans that stimulate spending and economic growth.

I do expect to see further consolidation in the banking and finance sectors with the ongoing structural reform program. I would expect this to be particularly pronounced in the non-bank financial services sector, where we’ll see smaller players joining forces to create larger entities or being bought out by larger institutions. Smaller brokerage houses will come under pressure to merge. This will be more apparent in the non-bank financial services sector in 2017 than it will in the banking industry.

Export-driven industries will be the best performers of the year, hands down. The worst-performing sectors will be those reliant on imports. One of the keys will be how traditional exporters and those with newly competitive exports treat the domestic market. Will they continue to earmark their best product only for foreign markets? Or will we see an improvement in what’s available domestically, from furniture to food? With 90 mn citizens suddenly finding imports are rather expensive, the question is how cost-competitive manufacturers can make their goods so they make their margins, but local consumers can save what would normally be factored into a price for logistics, customs, et cetera.

If I were to start a new business today, it would be in microfinance lending. The opportunity is simply massive — demand is huge, and the sector is still very much underpenetrated. The industry is profitable, well-regulated, and very appealing.

On the regulatory and legislative front, I think we need to keep an eye on opportunities to deregulate. Our industry is very well-regulated, but we’re going to need to look at how this changes as we push for better financial inclusion and the first steps on a multi-year journey to becoming a less cash-based economy. We need to make it easier for retail clients to open accounts, to communicate with their banks electronically. Look at blockchain: In its simplest form, three people approve your application for a bank account, and that’s confirmation enough of who you are — there could be a day when you can open an account without ever stepping foot into a bank branch. From electronic approvals to a shift to electronic record keeping, we need to help banks become more creative about using technology to bring people into the banking system, manage risks, innovate on products, and save on overheads.
There is so much being done now in technology that can increase penetration and prompt more competition in the marketplace, resulting in more financial inclusion, better products and better service.

We need to be asking ourselves today, “How will we benchmark success at the end of 2017?” In any institution, at any private sector company, you have tangible goals that you need to achieve before you can say, “I was successful, I deserve a promotion, a raise, whatever.” I think we would benefit from a national discussion about what kinds of measurable targets will mean success.