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Cash and Payments in Egypt during the Covid-19 Pandemic

Categories : Cash and Crises, Cash generates security, Cash is a contingency and fall-back solution, Cash is the first step of financial inclusion
December 8, 2021
Tags : Africa, Cash and Crises, Covid-19, Egypt, Financial inclusion
Cash in circulation grew 20% in Egypt during the Covid-19 pandemic. According to the World Bank, three-quarters of Egyptians have not made a single digital payment.
Manuel A. Bautista-González

Ph.D. in U.S. History, Columbia University in the City of New York

Post-Doctoral Researcher in Global Correspondent Banking, 1870-2000 – Mexico and South America, University of Oxford

This post is also available in: Spanish

Currency in Circulation Grew Nearly 20% between March 2019 and March 2020

At the onset of the Covid-19 pandemic, the Central Bank of Egypt (CBE) sought to reduce cash transactions and promote electronic payment methods. From March 2020 onwards, the CBE cancelled fees and commissions in points of sales and digital wallets (through September 2020). It also set up a daily cash withdrawal/deposit limit at 50,000 Egyptian pounds (EGP) or USD3,179 from bank tellers for individuals and 20,000 (USD1,271.84) for ATM withdrawals for a limited period.

Despite the CBE policies and the acceleration in digital payments, currency in circulation outside the CBE grew 4.37% between February 2020 and March 2020, going from EGP558.11 billion (USD35.49 billion) to EGP582.43 billion (USD37.04 billion), as can be seen on Graph 1. The following month, currency in circulation grew 5.33%. Year on year, currency in circulation outside the CBE grew 19.8% between March 2019 and March 2020, when the World Health Organization (WHO) declared Covid-19 a global pandemic. Egypt joined most countries worldwide where the cautionary demand of cash as a store of value amid a crisis more than compensated for the fall in the transactional demand of cash as a payment instrument.

Graph 1. Egypt: Currency in Circulation, July 2019-March 2021

Source: CashEssentials, based on CBE Statistics (2021), Domestic Liquidity and Counterparts and Currency in Circulation Outside CBE series.

A Growing ATM Network

The cash infrastructure expanded in 2020, reflecting the sustained growth in cash usage during the pandemic. Despite its policies to reduce cash usage, the CBE provided banks with 6,500 additional ATMs to “reduce the burdens placed on citizens and branches of banks operating in Egypt.” According to the World Bank’s World Development Indicators, ATMs per 100,000 Egyptians grew from 20.1 in 2019 to 22.1 in 2020.

Growth Across Banknotes of High and Small Denominations

Amid higher denomination notes, the amount of EGP100 notes (USD6.36) grew 5.57% in March 2020. The volume of EGP200 banknotes (USD12.72) increased 3.2% in March 2020 and accelerated even further to 5.5% in April 2020.

Regarding smaller denomination notes, the volume of EGP5 (USD0.32) and EGP10 (USD0.64) banknotes increased 4.8% and 11.7% in April 2020, respectively. The level of EGP20 notes (USD1.27) grew 7.04% in March 2020 and 11.71% in April 2020 (Graph 2). The volume of EGP50 notes (USD3.18) rose 14.7% in March 2020.

The average value per note grew from EGP63.58 (USD4.04) to EGP65.18 (USD4.14) between February and April 2020. By March 2021, it had fallen to EGP64.53 (USD4.10).

Graph 2. Egypt: Banknotes by Denomination, July 2019-June 2020

Source: CashEssentials, based on CBE Statistics (2021), Domestic Liquidity and Counterparts and Currency in Circulation Outside CBE series.

CBE Launches Polymer Banknotes

The CBE recently relocated its printing house to Egypt’s new administrative capital. In August 2021, the CBE announced it would launch its first polymer banknotes in early November, starting with the 10- and 20-pound notes.

The CBE’s first version of the plastic 20-pound banknote caused controversy in social media as a watermark of the newly-built Great Mosque of Muhammad Ali appeared rainbow-coloured in the released images. The rainbow is a well-known emblem of the LGBTQ+ community.

Regulators Push for Digital Payments and Fintech Solutions

In September 2020, the Egyptian government authorised the CBE to grant banking licenses to fintech firms. This and other changes in the regulatory framework would most likely bring a “big bang in fintech,” according to Mohamed Essam, a fintech specialist at the law office of Matouk, Bassiouny and Hennawy.

In July 2021, Mohamed Omran, chair of the Egyptian Financial Regulatory Authority (FRA), announced that the FRA would prioritise digital payments and fintech solutions to stimulate economic growth and broaden financial inclusion. The government’s Vision 2030 seeks to make Egypt the primary market for digital investments in the Middle East and North Africa region.

In September 2021, the CBE approved contactless payments through mobile phones. In November 2021, the CBE approved regulations to allow users to make instant electronic payments between bank accounts using mobile phones.

World Bank: 77% of Egyptians Have Not Made a Digital Payment

“Egypt is expected to surpass the limitations of a cash society to become the leading power in the world of digital payments within the MENA region, with the fintech industry complementing Egypt’s overall aim to secure financial inclusion,” wrote Mohamed El-Feky, CEO of Sympl, a consumer loans platform.

For fintech firms to meet this goal, they need to overcome significant challenges in the country of 102.3 million inhabitants. According to the latest data (2017) from the World Bank’s Global Findex Database, only

According to the World Bank’s World Development Indicators, in 2020,

This post is also available in: Spanish