Highlights Highlights

Highlights of
of of
The The Bank
TheCentral
Central Central
Bank Bank
of of Egypt’s
Egypt’s
of Egypt’s
FinTech and Innovation
FinTechFinTech
Strategy Strategy Strategy
October 2019
December 2019
December 2019
Foreword
Over the past few years, FinTech has become a major force that is disrupting and transforming
financial services on a global scale. FinTech is technologically enabled financial innovation
that could result in new business models, applications, processes or products. An estimate
of US$160b was invested in the FinTech sector over the last five years and total revenue is
expected to reach US$265b in 2025.

In line with the country’s National Vision for 2030, The Central Bank of Egypt (hereinafter
‘CBE’) recognizes the importance of FinTech to support the modernization of Egypt’s financial
sector. CBE acknowledges that embracing innovation is critical to transforming Egypt’s banking
landscape, promoting financial inclusion and for further establishing the Egyptian financial
services sector as a leader in MENA and Africa.

For this purpose, CBE appointed a third party advisor to work closely with CBE representatives
(hereinafter ‘the team’), to design a strategy (hereinafter ‘Strategy’) for the development of the
FinTech sector in Egypt.

A considerable potential exists for FinTech in Egypt not just locally but also on a regional
scale. The growth of Egypt’s FinTech ecosystem hinges on the enablement of five critical
components in order for this potential to materialize. These components cover demand,
funding, regulation, talent and governance.

The Strategy, while focused on Egypt’s FinTech ecosystem, is anticipated to have an amplified
effect in providing new job opportunities and supporting the Egyptian youth to acquire
‘future-ready’ skills, focused on a combination of business and technology.

The purpose of this document is to provide an overview of the journey taken to develop the
Strategy and its key outcomes.
Contents
04
01 Fast Facts

02 FinTech Strategy Development Approach 06

03 Overview of Egypt’s FinTech Ecosystem 08

04 Drivers for Egyptian FinTech Ecosystem 10

05 Strategy Execution Roadmap 14

06 Appendix 15
Fast Facts

FinTech Strategy Development Approach

Five-pillar framework to conduct ecosystem assessment and define the Strategy

Demand Funding Regulation Talent Governance

10+
consumer focus groups in
30+
FinTech ecosystem
8+
FinTech ecosystem
Cairo and regions stakeholder interviews global benchmarks

The Drivers for Egyptian FinTech Ecosystem

Egypt represents

26% 67% 44% 93%

Egypt’s population mobile internet users mobile subscriptions
of the MENA population1 remains unbanked2 as a percentage of as a percentage of total
total population3 population3

27% 1.5B+ 3.1M 18+

accelerators and incubators
financial literacy4 EGP tech funds available from students enrolled in
focused on Tech and
domestic VCs5 universities6
FinTech start-ups5

Source: 1World Bank Data, 2Global Findex, 3Digital 2019 Egypt , 4Global Financial Literacy Survey, S&P Global, 5EY Local Market Research,
6
Central Agency for Public Mobilization and Statistics (CAPMAS)

4 | Highlights of the Central Bank of Egypt’s FinTech Strategy

Egypt’s FinTech Strategy and Implementation Roadmap

FinTech Vision for Egypt

is to be “a regionally recognized
FinTech hub in the Arab
world and Africa, home to
next generation financial
services, talent and innovation
development”
32 strategic initiatives
identified with critical initiatives
targeted for completion by the
EGP1b innovation fund first half of 2021
dedicated to fuel ecosystem
growth, encourage FinTech start-
ups, invest in youth talent and
fund the necessary infrastructure
to spur new FinTech trends
The implementation of FinTech in
Egypt will help pave the way for
a digital future and a prosperous
economy, as each one EGP FinTech and Innovation
invested in FinTech contributes Department established to
EGP1.6 to GDP and each job orchestrate all FinTech related
created in FinTech supports 5.6 activities across the market,
other jobs1
overlook Egypt’s FinTech
A FinTech and Innovation strategy and handle FinTech
Committee to ensure strategy initiatives
collaboration with the national
regulators and enable access
to a unified FinTech license
coordination

FinTech and Innovation

committee escalates to electronic
payments’ development CBE Regulatory Sandbox
committee of the National
to enable testing of innovative
Payments Council
solutions in a live but controlled
environment

FinTech Hub
to act as the flagbearer,
facilitating collaboration between
ecosystem participants

Source: 1EY Economic Impact Assessment

Highlights of the Central Bank of Egypt’s FinTech Strategy | 5

FinTech Strategy Development
Approach
The Strategy was developed over three stages: The ecosystem assessment also included an
Ecosystem Assessment, FinTech Vision & Strategy international benchmark analysis of the impact of
Development, and Implementation Roadmap Design. FinTech and lessons learned from eight countries.
The benchmark covered countries with a similar profile
Ecosystem Assessment included a local market review
to Egypt and mature ecosystems considered aspirational
and an international benchmark analysis across
FinTech hubs. Refer to Figure 3 for an overview of
five pillars: demand, funding, regulation, talent and
benchmarked countries.
governance. Refer to Figure 1 for a description of the
five-pillar framework. Based on the key outcomes of the ecosystem
assessment, the team developed the FinTech Vision and
The local market assessment consisted of primary
Strategy which was endorsed by the relevant authorities
research covering 10 consumer focus groups and 30+
in Egypt. Following the approval of the Strategy, the
detailed interviews to assess market needs, capture
team designed a detailed Implementation Roadmap,
stakeholder aspirations and current challenges.
comprising 32 strategic initiatives to execute the Strategy
Consumer focus groups covered unbanked individuals
and achieve the desired future state. Implementation of
and SMEs in Cairo and regions. Ecosystem stakeholder
the FinTech Strategy started in the second half of 2019
interviews covered 30+ interviews with critical ecosystem
with critical initiatives targeted for completion by the first
members including regulators, investors, banks, Financial
half of 2021.
Institutions, infrastructure providers, FinTechs and Labs,
as well as mobile network operators and distributors.
Refer to Figure 2 for a breakdown of stakeholder
interviews.

Figure 1: Description of the five pillar framework

Demand
Needs of consumers, SMEs, corporations and
financial institutions, and their digital readiness
and appetite to adopt FinTech solutions

Governance
Funding
Effective collaboration among
Availability and access to capital
ecosystem stakeholders; public
and private sector support for Five across all FinTech lifecycle
sustainable development of pillar stages; from pre-seed to scale
the sector framework up. Investment in digital financial
services infrastructure

Regulation
Talent Overall regulatory environment
covering presence of regulatory
Availability of talent with the right
sandboxes, FinTech-specific laws and
skill-set; development of talent
licensing as well as encouragement of
pipeline and conducive environment
FinTech solutions through policies
to attract and retain local and
international talent

6 | Highlights of the Central Bank of Egypt’s FinTech Strategy

Figure 2: MNOs and distributors

30+
interviews
conducted with key
ecosystem members

6 6 3 5 5 5
Investors Regulators & Infrastructure Banks/FIs MNOs, FinTechs
legal providers Distributors and labs

Figure 3: Overview of benchmarked countries

Global benchmark: eight countries have been reviewed

UK India Philippines
Mexico
Kenya
Brazil Singapore
China

Highlights of the Central Bank of Egypt’s FinTech Strategy | 7

Egypt’s FinTech Ecosystem

FinTech Vision for Egypt is to be “a regionally recognized FinTech hub in the Arab world and Africa, home to next
generation financial services, talent and innovation development”.

Focus on addressing Regional factory for Flagship for financial Magnet for foreign
needs of underserved FinTechs and test bed inclusion, SME financing FinTechs and
segments and solving scalable to MENA and and cross border investments in
national challenges beyond payments technology

The strategy is based on the aspirations of National vision, CBE and market participants. Refer to Figure 4 for an
overview of National, CBE, market and consumer aspirations.

National CBE Market Consumer

Aspirations Aspirations Aspirations Aspirations
     

The Strategy was developed to support the target vision Thirty-two strategic initiatives across the five pillars
for FinTech in Egypt. Strategic choices were defined have been identified and prioritized to implement the
across the five-pillar framework mentioned; reflecting Strategy.
local challenges and international benchmark learnings.
CBE aims to be a catalyst for change; promoting
To enable execution, national coordination and development and testing of new solutions. CBE will
alignment, a FinTech and Innovation Committee follow a risk-based approach to ecosystem oversight.
is established escalating to electronic payments’
development committee of the National Payments
Council. A FinTech Hub Advisory Board will act as a
centralized forum for ecosystem key stakeholders
to discuss FinTech related market trends, risks, and
challenges.

8 | Highlights of the Central Bank of Egypt’s FinTech Strategy

Figure 4: Overview of National, CBE, market and consumer aspirations

National Aspirations
Become a FinTech hub which supports the
National vision 2030 through modernization
of the Financial Services sector, including
underserved segments, promoting FDI and
enhancing workforce skills and training

CBE Aspirations
Leverage FinTech to manage regulatory
evolution, advance financial inclusion,
improve SME access to banking and
financing, and support the transition to
a digital and a cashless economy

Market Aspirations
Transform financial institutions to be more digital
and strengthen the stability of the local financial
system; promote collaboration with FinTechs to
build solutions for social and financial challenges
that impact local communities

Consumer Aspirations

Access to innovative solutions and

compelling value propositions

Highlights of the Central Bank of Egypt’s FinTech Strategy | 9

Drivers for Egyptian FinTech Ecosystem

1. Demand for FinTech in Egypt is driven by the adoption and address identified barriers have been
needs of individual consumers, SMEs & corporates and defined as part of the Strategy.
financial institutions. As the largest market in the MENA SMEs can also benefit from FinTech focused on business
region, accounting for 26% of the MENA population, a to business solutions, payments, micro-lending, cash
large number of financial institutions coupled with its management, insurance and supply chain.
strategic geographic location, Egypt can grow into a
vibrant local FinTech ecosystem and a regional FinTech As for Banks, demand is wider reaching and ranges
leader. However, low financial literacy, trust in digital across the value chain of FinTech solutions such as
financial services and digital readiness barriers need to onboarding, payments, lending, personal financial
be addressed to improve FinTech adoption. management, investment management, data analytics,
infrastructure enablement, Anti-Money Laundering/
Based on the ecosystem assessment, FinTech can Combating the Financing of Terrorism (AML/CFT) etc.
play a critical role in solving population-wide and SME
challenges. For instance, Egypt has one of the highest In short, FinTech demand will be addressed in two
unbanked populations standing at 67%. FinTech, which waves starting with priority areas related to payments,
has been proven in markets similar to Egypt to enable micro-lending, insurance, and infrastructure enablement.
accelerated financial inclusion, will focus initially on As part of the Strategy, CBE will provide enablers and
solutions such as payments, micro lending, saving and incentives to spur FinTech innovation in the priority
remittance. areas and work with private and public stakeholders to
address adoption barriers.
Limited technology savviness, 44% mobile internet
users as a percentage of total population, low financial
literacy (27%) and limited trust in digital financial services
remain barriers to adoption. For this largely untapped
customer base to become material, Egypt will have
to invest extensively to improve financial literacy and
digital savviness. Some of the incentives to spur FinTech

26%
Egypt population1
~100m

67%
of Egypt’s population
is still unbanked2

74%
MENA population ~381m

Source: 1World Bank Data, 2Global Findex

10 | Highlights of the Central Bank of Egypt’s FinTech Strategy

2. Funding is available, but disbursements remain In addition to available funding in the market, CBE has
marginal. According to market research, there are committed EGP1b to support FinTech sector growth in
major funds representing a total of EGP1.5b. However, Egypt. The committed capital will be disbursed through
disbursements in FinTech remain marginal due to an innovation fund investment platform, following a
regulatory uncertainty and limited appetite to invest in fund of funds approach. Supervision will be done by
FinTech startups in the absence of policy enablement. a Fund Investment Committee with representation
Furthermore, there is a limited number of FinTech start- from key investors. CBE will be able to influence the
ups and scale-ups in the market. investment strategy of underlying venture capital funds
via mandates and steer market focus on priority areas
Unleashing this funding potential will require more clarity for FinTech identified as part of this Strategy.
on the legal environment, improved business certainty
and existence of a larger pipeline of early stage FinTechs
in the local market.

The implementation of FinTech in Egypt will help pave the way for a digital future and
a prosperous economy,

as each one EGP and each job

invested in created in
FinTech contributes
FinTech supports

1.6
EGP to GDP1
5.6
other jobs1

In summary, funding is available but there is a need to create an enabling and conducive environment to encourage
disbursement and accelerate local FinTech sector growth.

EGP
Availability of tech funding from local VCs2
1.5b+

availability of FinTech and innovation funding from the Central EGP

Bank of Egypt3 1b

Source: 1EY Economic Impact Assessment, 2EY Local Market Research, 3Central Bank of Egypt

Highlights of the Central Bank of Egypt’s FinTech Strategy | 11

3. Regulation is being strengthened as
demonstrated by new mobile wallet rules such as Figure 5: Overview of the CBE Sandbox
introduction of e-KYC, increasing limits, digital lending
and spending and new payment regulations such as The sandbox will enable better understanding and
digital authentication. However, important regulatory management of risks associated with new and
challenges for FinTechs continue to exist and need to be disruptive technologies before products hit the
addressed. Most significant hurdles include the lack of mass market. The Sandbox will help in driving more
a clear FinTech licensing framework and overall unclear effective competition in Egypt’s financial services
guidelines on an applicable and uniform regulatory market by carefully monitoring and integrating
regime amongst the main regulators. FinTechs in wider ecosystem.
Regulation is an important focus plan for the roadmap,
covering but not limited to FinTech licensing, regulatory
sandbox (refer to Figure 5), and review of relevant
legal, labor and fiscal laws to improve ease of doing CBE Sandbox
business for FinTechs. Clearer regulations on enabling
infrastructure such as open APIs, cloud and data
sharing are to be developed; encouraging emergence Support FinTech Innovation
of FinTechs and investment in the sector. Furthermore,
CBE established a FinTech and Innovation Unit within
the bank to address regulatory and governance matters, Effective Control
facilitate regulatory updates, publish thought leadership
and represent CBE at local and international FinTech
events.   Better Collaboration
Creating cross-border regulatory bridges is also one
of the key initiatives of the Strategy. CBE has already
signed Memorandum of Understanding (hereinafter Consumer Protection
‘MoU’) with some foreign regulators and FinTech hubs.
CBE will continue to expand its international cooperation
agreements with regulators and relevant stakeholders to Develop Trust for Investors
enable joint work and knowledge sharing.

12 | Highlights of the Central Bank of Egypt’s FinTech Strategy

4. Talent reservoir of 3.1 million students exists, and FinTech entrepreneurs in accessing the right resources
several enablers are already in place to support FinTech to launch and grow their business.
entrepreneurs.

These enablers include 11 incubators, 8 accelerators and

12 funds investing across sectors.

To move forward, there is a need to develop proper

curricula combining tech and business to equip Egyptian

10+ 8+
youth with ‘future-ready’ skills. This is often achieved
through partnerships with academia, the private sector,
and other hubs to train talent for FinTech related
careers. incubators1 accelerators1
However, talent development alone is not sufficient.
Limited enablers and employment opportunities for the
youth often result in a large brain drain where Egyptians
look for employment opportunities or to set-up their
start-ups abroad. As part of the Strategy, CBE will

12+
collaborate with relevant stakeholders to develop fiscal
and non-fiscal incentives to attract and retain talent to
the local FinTech ecosystem.

In addition, access to professional services support (e.g., investors1

legal, accounting, support with navigating regulatory
requirements) for start-ups should be enhanced. As
such, a FinTech hub will be established to support

5. Governance around FinTech regulatory related

matters is not clearly defined and communicated
today. For example, FinTech solutions are subject to
one or more of the major regulators, CBE, Financial
Regulatory Authority (hereinafter ‘FRA’), National
Telecommunications Regulatory Authority (hereinafter
‘NTRA’) and Money Laundering Combatting Unit
(hereinafter “MLCU”).

In addition, the FinTech ecosystem lacks a dedicated Expectation for a single

flagbearer. In line with the Strategy, the FinTech Hub will FinTech gateway
act as the flagbearer; facilitating collaboration between
ecosystem participants and promoting the ecosystem
locally and internationally.

To ensure alignment and the highest possible traction

when executing the Strategy, the National Payments
Council (hereinafter ‘NPC’), which operates successfully
FinTech and Innovation Committee,
as a multi-regulator committee, will be leveraged for
established to ensure effective collaboration
FinTech executive level escalations as well as putting
among national regulators, escalates
expectations for a single FinTech gateway to orchestrate
to electronic payments’ development
governance across the ecosystem.
committee of the National Payments Council

Source: 1EY Local Market Research

Highlights of the Central Bank of Egypt’s FinTech Strategy | 13

Strategy Implementation Roadmap

Based on the ecosystem assessment, 32 key initiatives have been identified and prioritized to implement the FinTech
Strategy in Egypt. Several initiatives were started in 2019, under each of the five pillars, as follows:

• Definition of priority segments for FinTech in Egypt

• Development of financial institutions engagement
Demand model
• Development of alternative credit scoring
mechanism(s)

• Set-up of an Innovation Fund (fund of funds) with

mandate to focus on FinTechs operating in priority Funding
segments

• Updating mobile wallet rules and payment

regulations
Regulation • Launch of a regulatory sandbox; first cohort
focused on e-KYC to onboard mobile wallet
customers

• Launch of a FinTech portal as a virtual platform

with a social media presence and a network of
FinTech ambassadors
• Development of FinTechpreneur Guidebook Talent
• Organization of FinTech competitions and
hackathons

• Set-up of FinTech & Innovation unit within CBE to

provide regulatory support
• Set-up of FinTech hub to facilitate collaboration
and promote ecosystem growth
• Establishment of memorandum of understanding
Governance between CBE and local regulators (Financial
Regulatory Authority, National Telecommunications
Regulatory Authority, Money Laundering
Combatting Unit) to endorse the Egyptian FinTech
market
• Promotion of the Egyptian FinTech ecosystem at
local and international events

14 | Highlights of the Central Bank of Egypt’s FinTech Strategy

APPENDIX

Highlights of the Central Bank of Egypt’s FinTech Strategy | 15

Glossary
Financial Institution: establishment that conducts FinTech & Innovation Unit: a department created
financial transactions such as deposits, loans and within CBE to support FinTechs with all regulatory related
investments; includes banks, microfinance, and matters.
insurance companies.
Fund of funds: pooled investment fund that invests in
FinTech: technologically-enabled financial innovation other types of funds. CBE Innovation fund structure is
that could results in new business models, applications, based on a fund of funds approach.
processes, or products with associated material effect
Memorandum of Understanding (MoU): a formal
on financial markets, institutions and the provision of
agreement between two or more parties to establish
services.
official partnerships. MoUs are not legally binding but
FinTech start-up: companies, usually of a small size and they carry a degree of seriousness and mutual respect,
enjoying fast growth, that are leveraging technology to stronger than a gentlemen’s agreement.
produce, deliver or enable financial services.
National Payments Council (NPC): created to promote
FinTech ecosystem: made up of consumers, financial digital payments and reduce the share of informal
institutions, FinTech start-ups, investors, regulators financial transactions. Amongst those included in the
and educational institutions among others. Healthy NPC are the Prime Minister, Governor of the Central
development of such an ecosystem will result in Bank, Ministers of Defence, Planning, Administrative
mutually beneficial cooperation among stakeholders, Reform, Interior, Communication, Justice and Finance,
and eventually, help financial services be delivered at General Intelligence Directorate and Administrative
lower cost, higher speed and at better quality to more Control Authority.
consumers.
SME: small-to-medium enterprise.
FinTech Hub: platform with physical and virtual
presence to act as a flagbearer and one-stop-shop
for all FinTech related matters; facilitating ecosystem
collaboration and talent development.

16 | Highlights of the Central Bank of Egypt’s FinTech Strategy

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Highlights of the Central Bank of Egypt’s FinTech Strategy | 19
Highlights
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FinTech Strategy
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prohibited © 2019 Central Bank of Egypt. All rights reserved.

October 2019