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Why did Egypt launch savings certificates with unprecedented returns?

Experts and analysts believe that the high-yield US dollar savings certificates offered by the National Bank of Egypt and Banque Misr are a new attempt by the banking sector to attract the remittances of Egyptian expatriates, according to Al Shorouk newspaper.

According to analysts, the certificates aim to collect the largest amount of foreign currency, although it would not provide dollar liquidity in the expected size.

This type of certificate will be more useful for citizens who save dollars at home to preserve the value of their money and for investors within the banking sector, they added.

Offering dollar savings certificates is an expected step from the state’s banking system to attract more foreign currency to provide for the obligations required to be paid, the head of the research department at Arabeya Online Mustafa Shafie, said.

“But I do not think that it will attract a large number of the expatriate workers,” he said, expecting the black market to also be activated and exchange rates to rise on the black market to seize the dollar, making it more attractive to the remittances of expatriates.

Shafie believes that certificates can be attractive to a small part of foreign currency holders who own small amounts, but the largest part of those who own dollars in large quantities are merchants.

“And I do not think that they would go to banks, especially since the return is not commensurate with the increase in inflation rates and prices,” he said.

The certificates have a problem represented by holding the original purchase amount for three years, and therefore it will not attract investors nor expatriate workers who transfer their money to Egypt for the purpose of investment.

They will not put their money in a three-year certificate, and therefore the black market will remain more attractive, he explained.

The director of investment funds at ODIN Inv, Mohamed Hassan, believes that the new certificates will be good for investors within the banking sector who have certificates, deposits, or interest-free dollar accounts, but added, “I do not think that it will attract new investors from outside the sector, or provide the expected dollar liquidity.”

Hassan explained that these certificates will not attract investors from the black market, especially since the investor on the black market achieves a higher and quicker return instead of having their money held in banks for three years.

“It can possibly attract part of the Egyptian expatriates, especially since the idea of ​​obtaining a loan with the guarantee of the certificate is allowed.”


NBE issues certificates

The National Bank of Egypt on Wednesday began issuing two new certificates of deposit (CDs) in US dollars for a period of three years, amid a hard currency scarcity.

It offers a return of seven and nine percent over a period of three years.

Customers can redeem the certificate after six months of issuance.

It is permissible to borrow, with the guarantee of the certificate, up to 50 percent of its value in Egyptian pounds, at a maximum amount of LE10 million, and with a return of 2.25 percent less than the Central Bank’s lending rate.

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