The effects of digital transfers on Egypt's economy

Remittances are a crucial source of income and foreign currency in Egypt, often serving as the only financial safety net for low-income households. They provide a much-needed influx of cash to cover necessities such as food, housing, and healthcare.

Remittances, which represent billions of dollars, play a pivotal role in supporting the national economy at both the macroeconomic and microeconomic levels. They not only enable families to cover their basic needs such as healthcare and education, but also facilitate access to the real estate market and various investment opportunities. Moreover, remittances contribute to the balance of payments and help to boost foreign exchange reserves.

In tandem, transparency is an essential component of successful cross-border payments. The frictional pain point associated with payments, including exorbitant fees and disagreeable user experience, is now further exacerbated by the lack of openness in this sector.

Poor visibility into the costs and complexities of the payment process leads to a lack of understanding of the associated fees, resulting in higher costs and a less than satisfactory user experience. As such, it is critical that banks today strive to increase transparency in order to improve the overall state of cross-border payments.

This year’s International Day of Family Remittances marks a noteworthy milestone in recognizing the significant contributions of remittance families in Egypt and the world over. As a part of this observance, acknowledging to strengthen digital channels that speed up the value of remittances increases long-term financial resilience becomes imperative now more than ever.

How Egyptians Contribute to Their Home Country Through Remittances

The fact that Egypt has risen to the fifth-highest receiver status in the world for remittances comes as no surprise today. A considerable Egyptian diaspora exists as a result of the country’s wealth of talent and its history of shifting economic fortunes and political turmoil.

The majority of the remittances sent by this diaspora—half of which lives in close-by Gulf Cooperation Council nations such as Saudi Arabia—go back to Egypt. Due to this, the nation has been able to surpass both Nigeria and other higher-earning nations such as India, Mexico, China, and the Philippines. There is little doubt that the contributions from the diaspora have had a noticeable effect on the nation’s economy.

Moreover, Egypt has worked to develop relationships with its expatriates that are more robust and long-lasting in recent years. According to the Central Bank of Egypt (CBE) remittances from Egyptians working abroad saw a significant upturn from $29.6 billion in 2020 to $31.5 billion in 2021. The Egyptian economy as a whole, as well as the quality of life for its people, are anticipated to benefit from this inflow of foreign currency owing to the soaring rate of the nation’s foreign reserves, which are used to pay for imports. The remittance flow is expected to rise even further in the near future as Egypt keeps growing its foreign labor force.

While Egypt receives a sizable portion of its revenue from remittances, sending money home still remains far from smooth despite a few digital payment options. There may have been a considerable increase in both investment and innovation in the payments space in Egypt, but this industry is still in its infancy, hence tradtitonal money transfer companies control practically all cross-border payment flows outside of trade. With this comes long process and tactics, such as charging extra fees that complicates the money movement process.