Greater financial inclusion would have deprived the world from enjoying Shakespeare’s play “The Merchant of Venice,” as Antonio would have had access to a financial institution instead of borrowing money from Shylock and could have negotiated a far better deal, one that did not stipulate paying a pound of flesh for missing a payment deadline.

Financial inclusion could have empowered him and transformed his life, while at the same time preventing us from encountering a timeless literary masterpiece. The essence of financial inclusion is to enhance individuals’ access to financial services, help urban and rural communities to thrive, and provide everyone, especially marginalised groups and women, with the means to save, invest, apply for loans, and pay for products and services. It is not just about payment cards or points of sale at merchant locations.

Measuring the success of financial inclusion in any society depends on that country’s ability to avail itself of the different types of financial services listed above. There are some developed countries like the US and Britain where the rate of using electronic payments against cash may reach more than 85 per cent, but this cannot be considered as evidence of achieving the same rate of financial inclusion.

In the US, there are six million unbanked households that live excluded from the banking system, including African Americans, Hispanic Americans, and members of other groups. There are also about 19 million US households whose members enjoy only one form of banking service per annum, whether withdrawing a salary, cashing a cheque, or another simple service. On the other hand, there are about 108 million fully banked US households whose members enjoy full access to different types of financial services. Despite a drop from 31 million in 2017, around 13 million Europeans remain unbanked with no access to financial services.

According to the most recent UN Financial Inclusion Index, Africa and the Middle East remain among the least financially inclusive regions in the world. The significant strides in global financial inclusion over the past two years were largely fuelled by the Covid-19 pandemic, which prompted millions to join the financial system, embrace digital payments, and depend on e-commerce and other forms of technology-based solutions to minimise human interactions.

Nevertheless, there are still many financially excluded individuals and businesses in Egypt. Egyptians have a come a long way in adopting electronic payments and embracing a digital culture, which has impacted large segments of society to different extents. According to data from the Central Bank of Egypt (CBE), the overall percentage of people using banks and payment cards in Egypt now aligns with international rates. However, it is important to note that the adoption of electronic payments and cards is just one indicator of financial inclusion. At the business level, the situation is completely different, especially in the informal economy, where the rate is estimated at about 50 per cent.

It is also important to highlight the significant strides the country has made in digitisation, epitomised by the launch of the real-time payment application InstaPay. By November 2023, this had 6.2 million users conducting around 300 million transactions. According to the CBE, the percentage of financially included Egyptians had also reached more than 70 per cent, which is a great achievement. The figures revealed that more than 20 million Egyptian women out of a total of 32 million are financially included, and about 18.8 million young people out of a total of 36.6 million are now also within the boundaries of the banking system.

The number of prepaid cards, which require the cards to be loaded in advance, in use in Egypt has reached more than 32 million, while debit cards that are linked to an account have reached more than 25 million. The number of credit cards has reached more than 5.5 million. The number of e-wallets in use in Egypt reached more than 36 million in November 2023.

While these figures are encouraging, they highlight the need for more details to be known before an accurate picture of financial inclusion in Egypt can be drawn, particularly for individuals and families. For instance, it is vital that details of the use of prepaid and debit cards by the beneficiaries of social-protection programmes like Takaful and Karama, which now support some 5.2 million families (around 21 million people), are known.

Data should also be collected on the number of cards issued to government employees and pensioners, some 16.7 million people, who receive their salaries and pensions through payment cards. This data should cover the size and percentage of cash withdrawals made by these categories of the population using these cards versus their use for digital purchases. They should also include the size of their savings and the number of times they use their accounts, along with their access to loans and insurance.

The magnitude of the informal economy remains the most important factor affecting financial inclusion in Egypt. The lack of formal documentation of millions of small shops and businesses poses a major challenge to tax collection as well as dealings with financial institutions. The banks cannot provide financial services to businesses without the proper paperwork, and they do not have the capacity to deal with millions of businesses requiring customised products and services.

However, in the wake of the efforts made by the CBE to encourage digital banking, the Egyptian banks should widen their scope and engage new customer segments, providing new products and services to match their financial needs. It is also crucial to improve the banking infrastructure by deploying more ATMs, especially in rural areas. The banks should enter into more partnerships with fintech companies to reach a wider base of customers with a differentiated set of services. The state must also incentivise citizens to use payment cards for their daily needs and utility bills, a trend that is picking up gradually.

While there have been notable efforts to integrate the informal economy into the formal one, there is still a need to tackle a culture that shies away from dealing with banks, target specific segments of the population, and devise an overarching plan for financial institutions to attract different business categories that have traditionally been unbanked.

The writer is a corporate and strategic communications professional.

* A version of this article appears in print in the 24 October, 2024 edition of Al-Ahram Weekly