Choosing “Cold Hard Cash” over Card Money in Egypt

By: Michelle Michael

Produced & edited by: Jacob Solether 

In American culture, where parents and grandparents eagerly open savings accounts for a newborn baby and train the growing child to save money for the future, going an entire lifetime without ever opening a bank account may sound impossible.

However, if you live in Egypt, there’s nothing unusual about not having access to a formal bank account. In this heavily cash-based economy, Western traditional banking system is replaced by cash and gold stored at home and gam’iyats—organized pools in small familiar circles.

According to MasterCard, in 2015, only about 35% out of the 82 million Egyptians had access to a bank account. This means that almost two-thirds of Egyptians are unbanked, a striking contrast compared to the mere 7% of the unbanked U.S. population.

Cash preferred in Egypt 

Egyptians rely heavily on cash transactions. Although cards are used in high-end brand stores and big supermarket chains, general day-to-day operations do not require a bank account to function.

“This is mainly due to the lack of trust in the banking system in general. People don't trust electronic money as they trust actual money,” says Rasha El-Ibiary, Assistant Professor of Communication at the German University in Cairo.

She continued to say that the high level of poverty also plays a central role in Egypt’s prevalent cash culture. “40 percent of [Egypt’s] population live below the poverty line, earning less than $2 per day. I believe this figure might have soared since the devaluation of our currency last November. [This] and the continuously increasing prices of basic commodities make it harder for people to save any money.”

The complex requirements attached to opening a bank account also veers off the masses from the banking systems. “Banks sometimes require a deposit of 10,000 EPG to open a bank account and other documents that people find hard to make available,” says El-Ibiary.

Similar sentiments were also expressed by Mohanad El-Sangary, a freelance journalist based in Cairo. “The idea of taking a loan from a bank is stressful. The high interest rates, fluctuating economy, and the unstable jobs make borrowing from banks a burden.”

According to World Bank data, Egypt’s lending interest rate for 2016 was 13.6% which was almost four times that of the U.S rate, 3.5%.

To some Egyptians, like Mohammed Ali Alqalibi, the small business owner who runs a silk and curtains factory in Tanta, banking transactions are considered haram (forbidden by Islamic law). He believes that borrowing from banks for interest is a sin against Allah and therefore refuses to deal with the banking system.

So then how do Egyptians function without the use of banks?

 Savings are made at home in cash or gold. “Since the value of currency is being constantly evaluated these days, people believe that gold is more stable,” said El-Sangary.

Borrowing, on the other hand, is done in small familiar circles. Gam’iyat systems are a common means of interest-free borrowing that is popular among the lower and middle classes. Gam’iyats are small organized credit unions that operate within known friend or family circles.

Homa Hoodfar, a Canadian-Iranian sociocultural anthropologist who studied the livelihood of families in Cairo for more than a decade, describes gam’iyats in her book Between Marriage and the Market: the root of the word “gam’iyat” literally means "association" and often refers to a savings club or rotating credit association.

Gam’iyats depend heavily on trust. A group of people (mostly neighbors or friends) come together and contribute a certain amount of money to the pool every month over a certain period of time. Each month, the collected money goes to one of the members depending on how urgent a persons need is or how it is determined at the beginning of the period.

According to Hoodfar, they are usually run by an elderly woman in the neighborhood who is trusted by everyone and has a strong personality to ensure the timely collection of money.

“It is very much like taking a loan; but with no interest,” says Laila Otefy, a 29 year-old school teacher who has participated in many gam’iyats herself. “If I am the last one to receive the pool of money, then it is not different to saving money by myself over several months. But if I receive the money at the beginning, then it is beneficial and is similar to interest-free borrowing.”

Otefy says that many of her friends have participated in gam’iyats to make purchases that they can’t afford to pay at once. However, she later continued to say that this cash-heavy culture is changing with the younger generation.

Many employees of major corporations and government organizations are required to have bank accounts. The school for which Otefy works has started opening bank accounts for its employees and is transitioning from paying by cash to direct deposits. Such changes confirm the new shift from the popular cash culture.

Similar opinion was echoed by El-Sangary: “This [cash-based economy] is a cultural difference. The concept of card transactions didn’t take off in Egypt as well as it did in the West. However, the IT infrastructure improvements in the late 90s and 2000s and the increasing internet purchases are boosting credit cards.”

Photo credit: Wikimedia Commons

Magda Mohammed, a banker at the National Bank of Egypt, said that they are trying to promote banking services to the general public through above-the-line marketing strategies using mass media and the internet. She also said that many bank branches are opening throughout the country to make them more accessible to the masses. 

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