The Central Bank of Egypt (CBE) decided on Sunday to raise the percentage of loan instalments granted to individuals for consumer purposes up to 50% of their total monthly income, instead of 35%. The rise tackles personal loans, credit cards, and loans for the purpose of purchasing cars for personal use.
The CBE decided to keep the maximum for personal housing loans at 40% of the total monthly income.
In a letter from Governor Tarek Amer to Banks operating in Egypt, the amendment of these percentages comes in light of the improvement of economic indicators and the rise in the gross domestic product, in addition to the vigorous follow-up of indicators for financial banks.
The CBE said it will monitor the performance indicators of banks periodically and reconsider these ratios if necessary.
According to bank officials, this decision will increase the retail banking activity, especially as it comes with a reduction in interest rates, which will increase the demand for this type of loan significantly during the coming period.
In January 2016, the CBE said banks need to cap the total loan instalments for consumer purposes, such as credit cards, personal loans, and loans for private car purchase, at 35% of the total monthly income, after withholding taxes and social insurance.
The CBE allowed banks to increase that percentage to 40% in the case of granting real estate loans for personal housing, according to Law No. 148 of 2001, and this applies to what is granted from loans for consumer purposes as of issuing these decisions.
Bank loans to the retail sector achieved a growth rate of 7.6% during the third quarter of 2019, supported by a reduction in interest rates several times during 2019.
According to the data of the CBE, individual loans from banks increased by about EGP 25.5bn during the third quarter of 2019, compared to an increase of only EGP 5.3bn during the same period last year, and bank financing for individuals in local and foreign currencies amounted to EGP 359bn by the end of last September, against EGP 333.5bn at the end of June.