Increased consumer confidence may drive more credit market

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In the minds of Egyptians, the anxiety of the global economic crisis is over. MasterCard's survey on Consumer Purchasing Priorities revealed that 86 percent of Egyptian consumers surveyed consider "dining and entertainment" their top spending priority.

Shaun Rashid, area business head for Egypt and the Levant for MasterCard Worldwide, said of the survey results, "Consumer confidence in Egypt has increased and consumers appear to be more optimistic about the future.

"Regarding purchasing priorities, it is interesting that in Egypt dining and entertainment, fashion and accessories, and buying property, emerged as some of the top spending categories for consumers."

Individuals displayed optimism about all five indicators: the economy, employment, quality of life, regular income and the stock market.

Magdy Hassan, MasterCard vice president and Egypt country manager, told Daily News Egypt that MasterCard is developing its card business in the country to help consumers fulfill their desires.

"We've made major improvement in the card business in Egypt, especially debit cards where MasterCard has a significant offering. From a product perspective, we customize products to suit a country's needs in order to target specific segments...For example, women's cards and sharia-compliant cards offer benefits that are meaningful to these customer segments," he said.

He admitted, "Concerning the credit market, there is huge potential."

Hassan also mentioned the role of banks in facilitating card penetration.

"On the acceptance side, the Egyptian consumers are demanding more payment options beyond cash.  These consumers want the added convenience and security that payment cards such as debit and credit cards offer. 

"We are working very closely with customer banks to expand acceptance of debit and credit cards in order to meet this growing consumer need," he explained.

Ashish Bhugra, senior vice president and country business manager of the Global Consumer Group for Citibank, explained how Citi and MasterCard are partnering to expand financial services to the millions of unbanked Egyptians.

"The bankable population in Egypt is poised for growth. There are almost 800,000 students graduating every year and entering the professional market. A large number of these individuals are within bankable population."

He continued, "An entry level product for a retail client is typically a savings account. Credit card is the next product in the chain. ...'Citibank at Work' is a key focus for the bank as they establish payroll accounts of employees."

He acknowledged that establishing a savings account can prove difficult for Egyptians without the LE 1,000 often required by banks as a minimum. "For Citibank at Work, the minimum deposit is set by the total number of accounts we receive [from the company]." 

Asked to articulate the process of transforming a cash-based economy to a card-savvy consumer group, Bhugra explained, "This is a process of evolution, something one bank cannot do individually. [The market] continues to grow, as the younger population getting into job market is more inclined to use cards."

"It is important that clients do not borrow beyond their means. We have an obligation to our customers to be sure that we offer responsible credit. Hence the bank is planning to add a financial literacy module on its website," he added.

He pointed out that the government has made financial education a priority and banks have followed suit.

"There is a collective effort by all banks to educate the market on the benefits of banks. Banks offer the level of security that money kept in a cupboard cannot. Banks give returns, which money kept in the house does not, the ability to generate interest [and to be] in a position to counter inflationary pressures," he clarified.

Bhugra spoke about one of Citi's latest initiatives to offer simplified financial services to benefit Egyptian customers.

"For any person who owns a vehicle, the vehicle registration card becomes a surrogate to what we believe would be the income. Based on ownership of the vehicle, Citi will be in a position to offer a further loan to the owner. Basically, the process of underwriting [the loan] is made simple. Under normal circumstances, extensive documentation is needed [to obtain a loan].As long as vehicle is less than five years old, the client is eligible for a loan."

Access to credit and loans remains a challenge in many markets, as the financial crisis continues to slow growth in western developed markets, while emerging markets often do not yet possess the credit infrastructure.

Acknowledging that many Egyptians have minimal experience with debt and credit instruments, he said, "We need to be sure we educate our clients... We have an obligation to our customers to be sure that we offer responsible credit."

Fortunately, the MasterCard survey revealed that Egyptians remain fairly conscientious about saving money, with 78 percent of those surveyed intending to save money. Of those, 27 percent of consumers intend to save significantly, keeping 11 to 20 percent of their total income for the next 6 months.

© Daily News Egypt 2010