Foreign remittances from Egyptians abroad surged to $20.8 billion during the first nine months of 2024, reflecting a 42.6% increase compared to the $14.6 billion recorded during the same period in 2023. The rise in remittance flows shows the critical role of expatriates in bolstering Egypt’s foreign currency reserves amid persistent economic challenges. However, despite this inflow, local fintech companies have struggled to carve out a share in the remittance market, hindered by systemic obstacles and regulatory bottlenecks.

The significant increase in remittances was fueled by several factors, including Egypt’s economic reform measures and the growing Egyptian diaspora. In September 2024 alone, remittances reached $2.7 billion, more than doubling the $1.3 billion recorded in September 2023. The first quarter of Egypt’s fiscal year 2024/25 (July–September) witnessed an 84.4% jump in remittances to $8.3 billion from $4.5 billion in the same period last year.

With 14 million Egyptians living abroad, up from 2.7 million a decade ago, remittances now play an indispensable role in Egypt’s economy, providing a vital cushion against foreign exchange shortages. Initiatives like the government’s exemption of Egyptians abroad from car customs duties have aimed to encourage foreign currency inflows, albeit with limited success. For instance, the car import initiative, launched in late 2022, raised only $450 million, far short of its $2.5 billion target.

Traditional Players Dominate

Despite the boom, Egypt’s remittance market remains dominated by established international players like Western Union, MoneyGram, and Ria Money Transfer. Western Union, long regarded as the most reliable albeit expensive service, remains the primary choice for Egyptian expatriates. Other options, such as MoneyGram and Wise, also cater to Egyptians seeking speed and convenience.

In Saudi Arabia, home to the largest Egyptian diaspora, services like Bank Al Jazira’s FAWRI Money Transfer have grown popular, leveraging partnerships to simplify remittance processes. However, the recent collapse of UK-based Small World, another key player, has created disruptions in certain corridors, exposing the vulnerabilities of reliance on foreign operators.

In a move to tap into the booming remittance market, the Central Bank of Egypt (CBE) has announced plans to integrate international transfers into the national instant payment system, “InstaPay,” by late 2024. Ihab Nasr, the CBE’s Assistant Deputy Governor for Payment Systems and Services, revealed that banks will facilitate transfers directly into Egyptian pound accounts, with transfer fees varying based on the origin and currency.

While the initiative is intended to enhance accessibility and reduce reliance on international operators, it leaves little room for local fintechs to innovate or compete. Egypt’s banks will remain gatekeepers, and commissions on remittance transfers are expected to be priced at the discretion of financial institutions, potentially limiting affordability.

Local Fintechs Face Barriers

Egypt’s fintech landscape, despite its potential, has been stifled by regulatory and structural hurdles. According to the CBE’s 2023 FinTech Landscape Report, payments and remittances make up 36% of the sector, followed by lending and alternative finance (11%) and B2B marketplaces (10%). Yet, local players have struggled to establish themselves in the lucrative remittance space.

The exclusion of local fintechs is exacerbated by government-imposed currency restrictions, which have curtailed their ability to innovate and scale. For instance, limits on foreign currency withdrawals and spending via credit cards have strained liquidity. Additionally, a temporary ban on Egyptian pound debit card use abroad in late 2023, though later reversed, highlighted the regulatory volatility fintechs must navigate.

The Egyptian government has implemented various measures to preserve foreign currency reserves, including restrictions on corporate payments abroad and caps on individual foreign currency withdrawals. These policies, while aimed at stabilizing the economy, have created bottlenecks for businesses and individuals, including fintech operators.

The Road Ahead

While the remittance markets continue to provide a lifeline for Egypt’s economy, the exclusion of local fintechs from this growing market raises questions about missed opportunities for innovation and economic inclusion. The government’s focus on integrating remittances through the InstaPay system may streamline the process for banks, but without meaningful support for fintechs, Egypt risks leaving a critical sector underdeveloped.

For local fintechs to thrive, policymakers must address systemic barriers and create a level playing field. This includes revisiting restrictive currency policies, fostering competition, and incentivizing partnerships between banks and fintech startups. Only then can Egypt fully leverage the transformative potential of its remittance economy.

The table below shows the key players in the Saudi Arabia–Egypt remittance corridor, with data adapted from the World Bank.

Averages

• Total Average Second Quarter: 5.15%
• Total Average First Quarter: 4.85%
• Total Average Fee: 38.66
• Total Average Exchange Rate Margin: 30.69
• Total Average Total Cost (%): 1.06