CAIRO: With prices through the roof, inflation spinning out of control and salary levels stuck somewhere in the distant past, professionals in Egypt are finding it increasingly difficult to meet their major consumer needs with cash alone.
For those looking to buy a car or a house, revamp the infrastructure of their business or just pay for their university education, taking out a loan is often the best option. Consumers in Egypt already have a long menu of loan options to choose from at major banks, and new plans are appearing apace with the country’s rapidly growing financial markets.
Despite the current market crisis gripping most of the world, Egypt’s lending sector has continued to expand at a healthy pace of about 15 percent per year. But what does this mean for consumers who are, increasingly, finding themselves low on cash to fund major investments?
These are some of the new trends in Egypt’s loan sector.
Driving up loans
Cairo’s sprawling city limits have turned personal vehicles into more of a necessity than a luxury in recent years, prompting a 30 percent spike in car sales over the past year. But cars in Egypt don’t come cheap, and many new buyers are turning to loans to finance their purchases.
Banks have responded to this new demand by creating specialized car loan programs for qualified customers. The Arab African International Bank (AAIB), for example, has teamed up with Abou Ghali Automotive to provide competitive auto loans with plenty of benefits.
Buyers can purchase their financed car from Abou Ghali Automotive under preferential terms, but financing is also available at higher interest rates for vehicles purchased at other dealerships.
The terms of the loan also stipulate a number of pre- and post-purchase benefits such as vehicle and life insurance, and are relatively easy to come by, with minimal documentation required to initiate the process.
“Our auto loans are helping people who need cars to buy them; they also provide business opportunities for people who drive for a living to purchase their own vehicle. Customers have been satisfied with the loans so far, said a customer service representative at the Arab African International Bank.
Funding education
For many Egyptian students, gone are the days when tuition could be covered as a matter of disposable income; education today, especially for those traveling abroad or entering private universities, is a hefty investment requiring a lot of money up front.
Luckily for students, the International Finance Corporation, an affiliate of the World Bank, is currently negotiating a student loan program worth $39 million.
This program, which will provide loans for Egyptian undergraduate and graduate students at private universities, will be administered through Crédit Agricole Egypt. Students will be eligible for loans up to eight years in length to be repaid after graduation.
For Nariman Gerges, a program like this would help her achieve her goal of attending graduate school in the United States.
“I want to do my masters abroad, but I don’t have enough money to pay for it by myself; I would not hesitate to take a loan to accomplish this – I think a loan program would help more students whose families can’t afford the best universities to take advantage of their potential, she said.
A similar program, launched this year in Jordan has, to date, been effective in providing loans for students from less privileged backgrounds to study at private universities, a development that bodes well for the implementation of a loan program in Egypt.
Housing hype
Though late in starting relative to comparable markets, Egypt’s mortgage industry has seen rapid growth over the past year with more expected over the short term: outstanding loans are expected to reach LE 4 billion by mid-2009.
Egypt’s mortgage market took off in 2007 in the face of rapidly rising costs that made short-term financing on real estate difficult for Egyptians from all walks of life. Previously, most homebuyers had financed purchases with cash or short-term cash loans, rarely making the foray into 10 or 20 year mortgage financing.
Today, however, an increasingly sophisticated mortgage lending market is making things easier. Egyptian mortgage lenders, like the Egyptian Housing Finance Company, along with new lending companies from the Gulf such as Amlak and Tamweel as well as an increasing number of banks are providing tailored mortgage plans to consumers from a variety of economic backgrounds.
“The mortgage market is exploding, and will continue to grow down the road as prices rise and more firms enter the market, said Hala Bassiouni, the Managing Director of Egyptian Finance Housing Company.
For potential borrowers, the proliferation of mortgage lending companies will provide for lower interest rates, better security and higher quality service in the coming years. For many, the expansion of mortgage lending means that homeownership will once again be within reach.
President Anwar Sadat’s infamous proclamation that all Egyptians should be able to own a car and a villa may still be a stretch in a country with serious income equality issues and rampant poverty, but advances in lending may be the key for more hardworking professionals hoping to achieve the “Egyptian Dream in coming years.
To read the other stories in our monthly special focus on Egypt s banking sector, click here:
http://thedailynewsegypt.com/article.aspx?ArticleID=17447
http://thedailynewsegypt.com/article.aspx?ArticleID=17446
