Ahmed Morsy - Ahram
Moves to increase the ceiling on foreign currency transactions on Egyptian credit cards have been hailed by individuals and startups.
Mohamed Hatem was on a trip abroad with his family a month ago. Due to limits on credit card withdrawals and purchases in foreign currency, the family had a hard time paying for their excursions and shopping.
“We had to pool our credit cards,” Hatem told Al-Ahram Weekly. “We shared our credit cards issued by different banks with different ceilings on transactions abroad to cover our daily expenses.”
Before 6 March, when the pound was floated and interest rates were raised by six per cent, cardholders were subject to monthly caps of $50 for online purchases in Egypt with slight variations based on card type.
There was a ceiling equivalent to nearly double the limits imposed locally on transactions abroad.
But on 7 March, the Central Bank of Egypt (CBE) directed the banks to ease limits on foreign currency transactions, both domestically and abroad, following months of tight limits that had given travellers and subscribers to tech and streaming services a hard time.
Small businesses and startups were hard hit as tech tools and ads need to be paid in dollars.
“I wanted to launch a digital marketing campaign for my company, but unfortunately I couldn’t proceed. The campaign had to be halted due to the maximum monthly credit card limit of $50 for online transactions in Egypt,” Yasser Seddiq, manager of the EgyPerfect translation agency, told the Weekly.
Hala Wahba, founder and CEO of the For Impact Group (FIG) for digital media and marketing, said that during the recent dollar crunch small companies and startups faced significant challenges regarding dollar payments for marketing operations on social media platforms.
Reductions in monthly transaction limits and difficulties in obtaining dollars have hindered their ability to meet financial obligations, impeding some company activities and the ability to plan for the future, Wahba said.
“To deal with the restrictions, some companies [including ours] resorted to foreign intermediaries, which incurred additional fees for services. This added a substantial financial burden, compounding the typical challenges faced by startups amidst the current economic pressures,” she added.
Before the limit increase, the lowest card segment of National Bank of Egypt (NBE) credit cards, which offers the lowest limit on foreign currency spending, had a monthly ceiling of LE1,500 (almost $50) when the dollar exchange rate was LE30.9 for local online shopping.
Meanwhile, the majority of Egyptian banks have raised the limits on foreign currency transactions made with credit cards, both domestically and internationally. However, clients of several banks informed the Weekly that although banks raised the limits, they did not return to their levels prior to the implementation of restrictions last October.
NBE has raised the limit for local transactions in the lowest-tier card segment to LE5,000 (approximately $100) and LE6,000 ($125) for transactions abroad.
It has also established the purchase limit for its top-tier card segment at LE160,000 (approximately $3,345) for international transactions and LE20,000 (around $418) for local transactions per month, based on the current dollar exchange rate of LE47.8.
For dollar cash withdrawals, NBE's highest limit is equivalent to LE7,500 ($156) per month.
The Commercial International Bank (CIB) of Egypt has set varying monthly international purchase limits within Egypt, ranging from LE3,500 ($73) to LE25,000 ($522) depending on the card. Locally, the limits range from LE12,500 ($261) to LE175,000 ($3,659).
For dollar cash withdrawals abroad, CIB's limits range from LE2,000 ($41) to LE6,500 ($135), depending on the card segment.
Moreover, the Arab African International Bank (AAIB) has set its highest monthly dollar cash withdrawal limit abroad at LE25,000 ($522), with the lowest at LE10,000 ($209), depending on the card segment.
For local purchases in dollars, AAIB has a fixed monthly limit of $1,000 for all cardholders. Abroad, AAIB clients can withdraw up to LE150,000 ($3,136) or as low as LE50,000 ($1,045), depending on their card segment.
If the client holds multiple credit cards with different segments from the same bank, the bank will apply only one limit, which will be the highest among them.
Before the CBE's decision on March 6, some cardholders exploited the widening gap between the official and black market rates, which ranged from LE30 to LE35 on certain days, to generate profits. They used to travel abroad, particularly to the UAE, and use their cards to purchase gold or mobile phones based on the official bank rate of LE30.9.
They would then sell their purchases on their return at the black market rate of LE45 to LE60, realizing a profit. While Wahba said that things have now started to improve, people are still worried about the current situation.
In recent years, Egypt has witnessed a notable increase in e-commerce usage, a trend experts attribute to the coronavirus pandemic and the enforcement of social-distancing measures.
The total number of issued payment cards in Egypt reached 57.4 million in 2022, up from 36.9 million in 2019, as reported by the CBE.
Between 2019 and 2022, the country saw a staggering 77.9 per cent increase in mobile Internet subscriptions, surging from 39 million to 69.4 million, according to the Ministry of Communications and Information Technology.
