The growth and development of the modern Egyptian financial sector

Abstract

This thesis focuses on the Egyptian financial sector during the period between the Egyptian Revolution of 1952 and the late 1980's. This was a period during which the country's political leaders sought to administer the economy by a variety of different means, all of which had a marked impact on the manner in which the financial sector was able to operate. An attempt is made to assess the nature of the changes to which the sector was subject, the manner in which the changes shaped financial operations and the potential of the sector to contribute to the removal, or alleviation of some of the problems faced by Egypt today. The techniques employed in pursuit of these objectives are various, concentrating initially on an examination of the 'ideal' role of the 'ideal' financial sector, the path of sectoral development commonly charted within the developing world, and some of the problems faced typically by financial sectors in the wake of such historic developmental experience. The thesis then goes on to discuss Egypt in particular - the background of foreign commercial banking which characterised the sector before the Revolution, and the impact of Gamal Abd al-Nasser's reforms - Egyptianisation, sequestration, nationalisation and central planning. President Sadat's Open Door Economic Policy is also examined. This leads to an assessment of economic conditions today. The activities of the sector are then discussed along with the regulatory environment imposed by the Central Bank and the government. The main findings of this study, discussed in the penultimate chapter, suggest that whilst the financial sector has undoubtedly grown and developed, the general political, social and economic environment in which it has had to operate has prevented it from realising fully its potential. Liquidity stands in excess of 130%, and this in itself points to a lack of both confidence and perceived investment opportunities. Suggested areas of reform to enhance financial performance and improve confidence are described, reflecting the opinions of a range of financiers and others working in Egypt today.