A deep dive into the state of fintech in Egypt: Egypt’s burgeoning fintech scene could spur growth by helping bring more people and businesses into the formal economy, writes Yasmeen Nabil in Wamda. Earlier this year, the government set up a EGP 1 bn (USD 57 mn) fund via the Central Bank of Egypt (CBE) and the International Finance Corporation launched a two-year program for fintech startups. Incubators including Algebra and Flat6Labs consciously target the fintech sector, and EFGEV — a dedicated fintech investment incubator run by EFG Hermes and Egypt Ventures — plans to invest in more than 30 fintech-focused startups in the coming five years. The CBE is also reportedly working on a three-year strategy that includes connecting investors with entrepreneurs and establishing a regulatory sandbox to test the environment for regulations, in alignment with regional best practice.

Driven by need and opportunity: Financial inclusion helps to reduce poverty and spurs growth, but according to the World Bank Global Findex database, only 14% of adults in the Middle East had a bank account as of 2014. The mobile penetration rate in Egypt, however, is an estimated 102% and the country has some 28 mn smartphone users, not to mention a population of 100 mn (and growing). The IMF has estimated that boosting financial inclusion could add 1% to GDP in the MENA region, with fintech offering the most significant growth avenue.

But the young sector faces challenges: Fintech Middle East has identified around 40 players working in the sector in Egypt, including 16 startups, 10 of which they regard as highly promising. But while e-payment provider Fawry has some 20 mn customers, other fintech startups continue to struggle. Challenges include the high transaction fees imposed on e-payments by banks and payment gateways, regulatory and infrastructure problems (including poor network coverage), and a lack of fintech awareness on the part of both SMEs and individuals. Some of these challenges are being addressed: the CBE issued new regulations for cashless payments using smartphones in 2016 to enable customers to transfer money and pay bills, and in 2017 a National Payment Council was established to encourage the move to cashless payments. However, it has been suggested that a clearer and more accessible regulatory structure is needed to encourage widespread adoption. Raising awareness of fintech is also critical to counter the cultural preference for cash payments.