The volume of bank deposits in September 2017 jumped from EGP 51.908bn to EGP 3.176tn, compared to EGP 3.124tn by the end of August 2017, according to the Central Bank of Egypt (CBE).
In its monthly report, which monitors the performance of the banking sector and the Egyptian economy, the CBE showed that government deposits with banks declined by EGP 4.591bn in September 2017 to reach EGP 524.811bn, compared with EGP 529.402bn by the end of August 2017.
On the other hand, non-governmental bank deposits increased by EGP 56.4989bn to reach EGP 2.651tn in September, compared to about EGP 2.564tn in August.
According to the CBE, the volume of non-government deposits in local currency increased by about EGP 55.627bn to reach EGP 1.978tn in September, compared with EGP1.923tn in August. Non-governmental deposits increased by EGP 872m reaching about EGP 672.693bn, compared to about EGP 671.821bn.
In another context, the CBE pointed out that the volume of credit facilities granted by banks to their customers increased by EGP 12.709bn by the end of September 2017 to reach EGP 1.423tn, compared with about EGP 1.410tn by the end of August 2017.
Credit facilities are loans granted by banks to their customers, along with documentary credits and letters of guarantee that they establish to cover import operations.
According to the CBE, the private business sector received 61.9% of the total credit facilities granted by banks to non-governmental economic sectors.
The volume of facilities received by the government amounted to about EGP 356.414bn by the end of September, compared to about EGP 350.001bn by the end of August, an increase of EGP 6.413bn.
Non-government credit facilities reached EGP 1.066tn at the end of September 2017, compared to EGP 1.06tn at the end of August, an increase of EGP 6.296bn.
The most prominent economic activity receiving credit facilitations from banks was the industrial sector, ranking first among other sectors, as it receives about 35.6% of the total of these facilitations.
The services sector came second, within which tourism is considered the most prominent activity, receiving 29.7% of the facilitations, while the share of the commercial sector reached 9.6%, and the share of the agricultural sector accounted for only 1%.
According to the CBE, other sectors’ share of credit facilitation was estimated to be 24.15%.
The family sector is one of the most prominent sectors which the CBE has not mentioned in detail. The sector’s share is estimated to be nearly 17% of total facilitations.
According to banking expert Hany Aboul Fotouh, banks’ figures show that the government is the largest borrowing sector from banks, as the credit facilitations provided by banks to the government represent 38.1% of the total facilitations provided by banks to clients. On the other hand, the private sector’s share of credit facilitations provided by banks is 61.9%.
Aboul Fotouh noted that the size of credit facilities provided to each sector is less than the credit facilitations provided to the government alone, as the industrial sector’s percentage of facilitations is 35.6%, the services sector’s facilitations represent 29.7%, while the trade sector receives 9.6% of these facilitations, and undistributed sectors were 24.1%.
“The government as well as public and service agencies still acquire a lion’s share of the banking sector funds, especially that they only invest on a smaller scale compared to the rest of the economic sectors,” Aboul Fotouh said.
He added that the government is competing with the rest of the economic sectors in terms of receiving money from banks, as banks consider the government a low-risk sector, because the loans are guaranteed by the state, hence, banks prefer it as a borrowing sector compared to sectors that require funding and support, such as the agricultural sector which receives a small share of credit facilitations.
Aboul Forouh pointed out that the government mainly borrows to fill the budget deficit, but that is not the case with other borrowing sectors which borrow to fund projects and investments, which eventually creates jobs and reduces poverty, leading to a healthier economy and better living conditions.
Aboul Fotouh believes that it is necessary to reconsider bank expansions in terms of lending the government at the expense of other sectors in order to avoid harming other sectors with lack of funding.
Regarding the increase in the size of deposits, Aboul Fotouh said, is a good indicator of the CBE’s success in using the monetary policy tools that have proved to be successful in attracting liquidity from the market, thus leading to a more controlled inflation.