With the interest rates on bank certificates and deposits heading south, scores of Egyptian investors have been scrambling to find the best alternatives for their savings.

In the few years following the devaluation of the pound in 2016, bank certificates of deposit were a safe haven for savers, with a handful of banks, topped by Banque Misr and the National Bank of Egypt, offering one-year certificates with rates of up to 17 per cent. These were replaced by 15 per cent-yield certificates two years ago.

The subsequent decline in inflation rates and the need to give the economy a push made the Central Bank of Egypt (CBE) then decide to lower interest rates by almost six per cent over the past couple of years. This was translated into reducing the interest rates paid on one-year certificates of deposit to only six per cent.    

As there has been relative stability in the price of the US dollar, gold has been for a long time many people’s favourite means of investment. However, the current fluctuation in its prices has been leaving individual and small investors uncertain about whether to put their money in gold.

Over the past two decades, many investors in gold have been generously rewarded. The price of gold hiked in early 2020 with the outbreak of the Covid-19 pandemic.

Mohamed Abu Basha, a macroeconomic analyst at investment bank EFG Hermes, said that with the recovery of the US economy and the reopening of commercial activities the world over, along with the increasing number of people receiving the coronavirus vaccine, gold is likely to see relative stability.

Hani Tawfik, chair of the Egyptian Direct Investment Association, said that individuals could have between 10 and 20 per cent of their savings in gold, since its value increases over time. Experts recommend that gold investments be in the form of alloy to decrease any losses when sold.

Investing in bank certificates, according to Mahmoud Gad, an analyst with the Arab African Company for Investment and Development, is suitable for people who want to avoid risk or want a fixed source of income.

Sara Saada, a macroeconomic analyst with HC Securities and Investment, an investment bank, agreed, saying that individuals could put their money in mutual funds with a fixed return or investment certificates issued by banks.

According to Saada, current yields from bank certificates are high in the light of the currently low inflation rate. Egypt’s inflation rate declined to 4.1 per cent in April, its lowest in seven months, compared to 4.5 per cent in March.

Abu Basha said that certificate holders wishing to earn a monthly income would do better to invest their money in the three-year certificates offered by the National Bank of Egypt and Banque Misr that offer interest rates of 11.25 per cent.

Investing in the real-estate market requires large sums of money, and investments cannot be liquidated fast, Gad said, warning that investors who decide to sell their properties at times of recession will either offer them at reduced prices or else have to put off sales.

Gad advised people wishing to invest in real estate to diversify their investment between residential and commercial units and to choose different locations, aiming for areas where a better rent can be sealed or a higher return on sale achieved.

Real-estate company advertisements and instalment plans of up to 10 years are indicative of the slowdown in the real-estate sector, said Tawfik, advising against looking in this direction for people who want short-term investments.

Instead, the real-estate market is more suitable for investors who will not need their savings in the short and medium terms, he said.

Comparing investments in the real-estate market and bank certificates, Abu Basha said 11 per cent yields on three-year certificates of LE1 million would bring in more than buying a residential unit for the same amount and leasing it for three years.

The Monetary Policy Committee of the CBE reduced the bank’s overnight deposit rate, overnight lending rate, and the rate of main operations to 8.25 per cent, 9.25 per cent, and 8.75 per cent, respectively, last year, maintaining the same rates during its last two meetings.

Investing in the stock exchange is a favourite for individuals who do not mind taking risks and chasing after long-term returns, opined Gad, but advised investors in the bourse not to put all their eggs in one basket, but rather to diversify between different funds.

These funds employ experienced directors with more knowledge in the field than individual small investors.

Tawfik also warned against taking the plunge into the stock exchange for individuals with no or little experience of the financial performance of stocks and who are not avid followers of the market.

*A version of this article appears in print in the 27 May, 2021 edition of Al-Ahram Weekly