The Egyptian government is planning to increase financial inclusion of the informal sector into the formal economy, in addition to the plan to gradually transform into cashless society, with the electronification of government disbursements like payroll, pension, and food and bread subsidies. To understand how the government goals can be achieved and their impact on the economy, Daily News Egypt interviewed Tarek Elhousseiny, general manager of Visa in North Africa and the Levant.
What is your outlook for the Egyptian economy?
We are seeing encouraging progress by the Egyptian government in its work to speed up financial inclusion, which will in turn impact the economy positively by increasing the transparency of the financial system and the efficiency of services provided to citizens.
In particular, the government is making significant headway in key areas, such as the electronification of government disbursements like payroll, pension, and food and bread subsidies. Visa is currently working with the government to facilitate the implementation of these projects. Once they are activated and become operational, the payment landscape in Egypt will change for the better as more people benefit from the formal banking sector and the acceptance footprint for electronic payments is expanded as more merchants come onboard.
In March 2016, Visa released a study conducted with Moody’s Analytics that analyzed the impact of electronic payments on economic growth across 70 countries between 2011 and 2015. The study found that increased use of electronic payment products, including credit, debit, and prepaid cards, added $296 billion to gross domestic product (GDP), while raising household consumption of goods and services by an average of 0.18 percent per year. In addition, Moody’s economists estimate that the equivalent of 2.6 million new jobs were created on average, annually, over the five-year period as a result of increased use of electronic payments. The 70 countries in the study make up almost 95 percent of global GDP. In Egypt, increased electronic payment usage added $10 million to the country’s GDP from 2011 to 2015 and created the equivalent of an average of 2,300 jobs in Egypt per year in the same period.
What are the current strengths of the Egyptian economy?
From a payments standpoint, the financial system in Egypt is solid, and there is a clear government impetus towards increasing levels of financial inclusion. Additionally, we believe there is much the payment industry can do to support the SME sector in Egypt, which plays an essential role in stimulating the economy, generating jobs, and increasing exports. This is why Visa is cooperating with stakeholders like the Ministry of Communications and Information Technology and the Federation of Chambers of Commerce to assist the sector by creating a comprehensive online marketplace through which the government can procure goods and services from Egyptian SMEs. The e-marketplace will also enable SMEs to benefit from service providers like mobile network operators, banks, and Egypt Post, to name just a few. It will also provide an opportunity for SMEs to increase their exports, develop their businesses, and hire more people, by linking with other cloudBuy e-marketplaces, which in turn will help the country to generate foreign exchange reserves.
We are also working with SMEs to help them streamline their expenses by using business cards. This is an easy way for SMEs to separate company and personal expenses, manage business and travel spending, and simplify bookkeeping. Managing outgoings on a business card allows them greater control of their business spending, as they can track expenses by category, issue cards to key employees, set spending limits, and better manage their company’s cash flow. Fuelling growth for their business by transitioning from business cheques to business cards not only comes through faster, more cost-effective ways to pay, but also as purchasing flexibility through online purchasing and business travel bookings. Automating payments and leveraging the internet as a tool for business makes business easier to do.
Access to funds whenever and wherever an SME needs it gives businesses more malleability to scale up and increase revenue and cost efficiency. Other benefits that offer savings in cost and time with business cards include offers for business travel and accommodation through to business support services and products.
What is required to push the Egyptian economy forward and enable growth?
As the Moody’s study commissioned by Visa demonstrated, building a culture of electronic payments across society has a very direct impact on the wider economy. Electronic payments, for instance, require more stringent identification documentation, making it difficult for ghost recipients to remain undetected, which improves traceability and increases transparency in the financial system. Moving to electronic payments can also lead to significant cost savings over the long term, particularly in relation to large-scale government-to-public payments, such as social transfers. Additionally, electronic payments are often the first entry point into the formal financial system for individuals, and a step towards providing accounts, either traditional bank accounts or e-wallets, to unbanked people.
What activities or projects can assist with helping the Egyptian economy to grow?
Visa’s network continues to grow as more consumers and businesses are drawn to the convenience of digital payments. We connect more than 3 billion Visa cards and millions of merchant locations in 200 countries and territories. Each transaction is enabled by a global network of 16,300 financial institution partners and VisaNet, one of the world’s most secure, reliable, and interoperable global payment networks. Today, VisaNet processes more than 160 billion transactions a year. Importantly, every Visa transaction on our network is secured by the industry’s most advanced analytics and fraud detection technology to ensure consumers and businesses can transact with trust and confidence.
We believe that projects aimed at driving financial inclusion can help the Egyptian economy to grow. Financial inclusion brings many benefits, the most significant of which is the potential to transform a person’s life by enabling them to save, send, receive, and borrow money securely, conveniently, and reliably, which is essential to breaking the cycle of poverty.