Date of Submission to Coordination Unit:
A.
November 6, 2013
GENERAL INFORMATION
1. Activity Name
Promoting financial inclusion via mobile financial services in the Southern and Eastern Mediterranean
countries – activities in Egypt.
2. Requestor Information
Name: Eng. Mohamed Hammam
Title: Assistant of the Minister in charge of International
Regional and Arab Financing Institutions and
Organizations
Organization and Address: Ministry of International Cooperation, 8 Adly St., Cairo, Egypt
Telephone: +20 2 23912815
+20 2 23916214
3. Recipient Entity
Name: Mr. Hisham Ramez Abdel Hafez
Email: [email protected]
Title: Governor of The Central Bank of Egypt
Organization and Address: Central Bank of Egypt. 54 El-Gomhoreya Street. 11511, Cairo Egypt
Telephone: +202 27702770
Email:
4. ISASC Representative
Name: Timothy WINTERS
Title: Policy Officer
Organization and Address: European Investment Bank, 98 boulevard Konrad Adenauer, L-2950 Luxembourg
Telephone: +352 4379 88332
Email: [email protected]
5. Type of Execution (check the applicable box)
√
Type
Endorsements
Attach written endorsement
Country-Execution
from designated ISA
√ Joint Country/ISAAttach written endorsement
from designated ISA
Execution
Justification
Due to its regional dimension and approach,
which includes two other countries in addition
to Egypt, the need for an ISA to execute in
coordination with the national authorities is
essential. EIB will carry out procurement and
financial management. It will also help to
coordinate between the three targeted
countries to ensure sharing of progress and
Promoting Mobile financial services in Egypt under the Deauville MENA Transition Fund
Page 1
expertise. The country will be responsible for
local coordination and monitoring and
evaluation, through the project management
team within the Central Bank. The country
also directly executes the workshop
component. To ensure country ownership of
all components of the project, the ISA
execution will be closely coordinated with the
country activities.
ISA-Execution for Country
ISA-Execution for
Parliaments
Attach written endorsement
from designated ISA
Attach written endorsements
from designated Ministry and
ISA
Promoting Mobile financial services in Egypt under the Deauville MENA Transition Fund
Page 2
.
6. Geographic Focus
Individual country (name of country): Egypt
√
Regional or multiple countries (list countries):
This request focuses on Egypt.
This project has a Mediterranean scope in the Middle East and North Africa (MENA) region. The Transition
Fund is also being requested to finance related activities in Jordan and Morocco.
The regional aspect of this project is found particularly in the potential for information sharing and common
capacity building activities across the region. Although the countries are all at different stages in developing
responses to the challenges of promoting and regulating the provision of mobile financial services, the
needs-based approach taken in each country proposal provides ample scope for regional sharing of results
and best practices in different areas of the mobile finance field. More specifically, the studies to be carried
out under some of the proposals are likely to be of use for other countries, and could form the basis for
dissemination and collaboration events (workshops, conferences) as well as ad hoc sharing. It is expected
that one aspect of this regional sharing would be implemented in the context of an umbrella project for which
a request for a Union for the Mediterranean label is under consideration, and which would provide a
framework for future initiatives to promote other aspects of mobile financial services in the region.
7. Amount Requested (USD)
Amount Requested for direct Project Activities:
(of which Amount Requested for direct ISA-Executed Project Activities):
Amount Requested for ISA Indirect Costs:
Total Amount Requested:
835,000 USD
(800,000 USD)
56,000
891,000
8. Expected Project Start, Closing and Final Disbursement Dates
Start Date: January 1st, 2014
Closing
March 31st, 2015
End Disbursement
Date:
Date:
July 31st, 2015
9. Pillar(s) to which Activity Responds
Pillar
Investing in Sustainable
Growth. This could include
such topics as innovation and
technology policy, enhancing
the business environment
(including for small and
medium-sized enterprises as
well as for local and foreign
Primary
(One
only)
Secondary
(All that
apply)
√
Pillar
Primary
(One
only)
Enhancing
Economic
Governance.
This
could
include
areas
such
as
transparency, anti-corruption
and accountability policies,
asset recovery, public financial
management and oversight,
public
sector
audit
and
Promoting Mobile financial services in Egypt under the Deauville MENA Transition Fund
Secondary
(All that
apply)
√
Page 3
investment
promotion),
competition policy, private
sector
development
strategies, access to finance,
building
the
required
infrastructure,
addressing
urban congestion and energy
intensity.
evaluation,
integrity,
procurement
reform,
regulatory
quality
and
administrative
simplification,
investor
and
consumer
protection, access to economic
data
and
information,
management of environmental
and social impacts, capacity
building for local government
and decentralization, support
for the Open Government
Partnership, creation of new
and innovative government
agencies related to new
transitional reforms, reform of
public service delivery in the
social
and
infrastructure
sectors, and sound banking
systems.
Inclusive Development and
Job Creation.
This could
include support of policies for
integrating lagging regions,
skills and labor market
policies, increasing youth
employability,
enhancing
female
labor
force
participation,
integrating
people
with
disabilities,
vocational training, pension
reform,
improving
job
conditions and regulations,
financial inclusion, promoting
equitable fiscal policies and
social safety net reform.
Competitiveness
and
Integration.
This could
include
such
topics
as
logistics,
behind-the-border
regulatory convergence, trade
strategy and negotiations,
enhancing the competitiveness
conditions of the market,
planning and facilitation of
cross-border
infrastructure,
and promoting and facilitating
infrastructure
projects,
particularly in the areas of
urban infrastructure, transport,
trade facilitation and private
sector development.
√
√
B. STRATEGIC CONTEXT
10. Country and Sector Issues
Macroeconomic overview and access to finance
Egypt’s economy is still suffering from a severe downturn and the government faces numerous challenges as to
how to restore growth, and boost market and investor confidence. One of the greatest challenges, and also
among the largest opportunities, facing Egypt today is the need to create adequate conditions for increased
private investment and improved competitiveness. This would help deliver the sustainable growth needed to
create employment and to reduce poverty. With the government increasingly financially constrained, there are
high expectations that SMEs and micro-enterprises can contribute more to private sector job creation in Egypt
Promoting Mobile financial services in Egypt under the Deauville MENA Transition Fund
Page 4
and the whole region.
The World Bank’s 2011 financial sector flagship report showed that access to finance is a key constraint in areas
and income levels underserved by conventional banks, such as the informal sector. The World Bank estimates
than in Egypt in 2011 only 9.7% of the population older than 15 had an account at a formal financial institution.
Figures from the Egyptian authorities give a more promising view (over 22m accounts opened in the Egypt Post,
over 16m cards issued and over 5m persons engaged with microfinance institutions, for a total population of
83m). In any case, use of financial services does not match the figure of mobile-cellular subscriptions which
amounted to over 76 million, translating into a penetration rate of 96.6% (as of 2011). Meanwhile, financial and
economic research undertaken by the EIB as well as by institutions including the UNCDF, GSMA (MMU), WB,
CGAP and the Gates Foundation shows that business models based on prepaid electronic payments systems,
the use of agents and cellular technology (i.e. mobile financial services) can help address the problem of lack of
access to financial services. This is based on the principle that the lack of access is a supply based problem,
which can be solved by the development of alternative financial service distribution models at low costs in order
for providers to be able to serve low income segments profitably. The combination of high mobile penetration and
low access to financial services means that there is a potentially great opportunity for mobile financial services in
Egypt (as in most other countries of the region).
Payments
The retail payments market in Egypt has huge room for development, where interoperability among different
systems including cards, mobiles, direct credits and direct debits is not fully achieved. There is no payment
service providers (PSPs) regulatory framework, although all PSPs serving banks are monitored by the CBE in
their capacity as service providers to banking institutions. Despite significant growth in recent years, the number
of cards issued remains low compared to other countries with similar social and economic circumstances.
According to the Central Bank of Egypt in 2012 there are approximately 2 million credit cards, 12 million debit
cards, and 2 million pre-paid cards in use, 1 million of which are used to pay the salaries of civil servants and 2.5
million pensions, through a card issued by banks and run by the Egyptian Banking Corporation (controlled by the
Egyptian State with 54% of the shares and the rest owned by private banks).
Egypt had approximately 6,000 ATMs and above 42,000 POS terminals, at the end of 2012. The country does not
have a national point of sale (POS) infrastructure, and all POS networks switch through VISA and MasterCard
abroad. In terms of ATM infrastructure, the Egyptian Banking Corporation operates as a central switch for local
cards (branded ‘123’) and MasterCard used in Egypt’s ATMs.
Physical access to bank services in Egypt, with above 3,600 bank branches all over Egypt, is very low, both
compared to developed nations and also in regional terms, a rate of one branch to every 23,000 of population. IN
addition to the banking sector, Egypt Post has a network of 3,800 branches, 60% of which offer financial services.
The recently passed regulations on mobile payments will allow banks to use agents, and when fully implemented
should help resolve these problems of lack of physical access to financial services. Agents could include low cost
distribution networks, such as payment services providers, with more than 20,000 points of sale; the microfinance
sector’s network, with approximately 280 branches; and Mobile Network Operators’ (MNOs) networks, with 3,000
storefronts, distribution partners (mostly payment service providers) and airtime resellers.
Mobile payments
The Central Bank of Egypt (CBE) and the NTRA are both involved in licensing mobile financial services. CBE
licenses banks while the National Telecoms Regulatory Authority (NTRA) licenses mobile operators. In Feb 2010,
CBE released regulations allowing banks to deliver mobile financial services subject to licensing by CBE. At the
time of writing this proposal, CBE had approved three bank applications to provide mobile payments: BNP
Promoting Mobile financial services in Egypt under the Deauville MENA Transition Fund
Page 5
Paribas, the Housing and Development Bank and recently the National Bank of Egypt (in partnership with EBC,
see below). The board of the telecoms regulatory, the NTRA, also approved these initiatives (through their mobile
operator partners), although NTRA’s approval was delayed for almost two years due to the concerns related to
the security of the registration process including performing the know your customer (KYC) process through
agents networks. Two out of the three initiatives are currently being launched.
The Central Bank of Egypt (CBE) supervises all banking activities, including all new financial activities and
services such as mobile financial services requiring CBE approval. CBE currently provides e-money licenses to
banks; supervises the national payments system and supports the development of central switching solution for
retail payments through EBC, a company in which the Egyptian State has a majority share (54%).
CBE’s regulations on mobile payments and transfers issued in 2010 give the right to issue electronic money units
only to banks. As a result bank centric business models are encouraged, since non-banks must have a bank
partner. Each mobile phone number can be connected to only one mobile money account. Regulations allow only
domestic payments and transfers at this stage, although CBE says that this restriction is for the pilot phase only. If
there are no problems, they are open to allowing other services such as international remittances in the future.
The regulations on mobile payments and transfers (2010) impose limits on the maximum daily withdrawal limit
(3,000 EGP- approximately 380 EUR); maximum account balance (5,000 EGP approximately 631 EUR) and the
amount of e-money that the bank can issue (limiting it to no more than 5% of the bank’s issued capital or 6.2
million EUR, whichever is less). Capital limitations for issuing banks are likely to become restrictive as volumes
grow. For this reason, the regulations state that “The CBE Governor may modify this threshold on a case by case
basis”; i.e. without referring to the CBE Board of Directors.
CBE wants to ensure interoperability between mobile money solutions. Interoperability will be based on
specifications that CBE will develop. The Egyptian Banking Corporation (EBC) should provide switching, clearing,
and settlement services between e-money accounts. Interoperability is one of the priorities of CBE, since it
permits a greater reach and allows for more innovative services to spread faster.
CBE will supervise the bank issuing mobile financial services after approving the provision of the service, since
the issuing bank is responsible for the mobile services offering. The issuing bank’s main responsibilities are:
liquidity of the system; KYC and Anti Money Laundering (AML) requirements, risk management, accounts settling,
customer protection and data security.
The MNO’s role is supposed to be limited to providing the technology and telecommunications infrastructures.
However in the emerging initiatives already approved by CBE, the operator’s role goes beyond providing the
technology and telecommunications infrastructures. Indeed, mobile operators are the leaders of these initiatives
implementing partnership closer to an operator led business model more than as a bank led. This provides some
challenges, which the CBE will attempt to address as part of this project, including how to ensure that the services
provided by the operators meet the financial inclusion goals of the central bank.
In terms of agents, current regulation allows banks to choose the entities they want to use as agents. Agents are
considered service providers to the bank, and as a result they need to be authorized by the bank to be part of the
mobile financial service offering. NTRA however, would like only MNO-owned shops and bank branches to
function as agents. For the time being the most conservative approach is being implemented, testing the business
model in order to allow regulators check the security of the agent network. CBE says that it is open to enabling
retail chains to serve as agents, but it does not believe small shops should perform KYC requirements, while
allowing them to perform cash-in and cash-out functions. There seems to be a desire among regulators and
banks to move one step at a time. Some of the banks are also being very cautious about the entities they are
Promoting Mobile financial services in Egypt under the Deauville MENA Transition Fund
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willing to use as agents, in order to properly manage the risks that agent use entails. Agents can perform KYC,
register new users, and provide cash-in and cash-out services. Account opening requires national ID, birth date,
and the mobile number. The information provided by the customer is confirmed with the national Identity Card
(that all Egyptians are required to have) and checked with the national and UN AML database. The best way to
proceed with these questions are all subjects which could be considered under this assistance project.
Remittances
Egypt received 7.7 billion USD (6.1 billion EUR) in remittances in 2010, according to the World Bank, representing
3.5% of its GDP. However, this number increased dramatically along the following years, representing 14.3 billion
USD, and 18 billion USD in 2011, and 2012 consequently. The most widely used method to send remittances to
Egypt are bank transfers 62.4%, followed by a friend or relative visiting 21.5%; money transfer services in
partnership with banks 6.8%; post office 4.6% and Western Union 3.0%. Remittances form a significant proportion
of household income, representing, on average, 43% of the total household income of the receiver. According to
the World Bank remittances database, sending money to Egypt is relatively inexpensive compared to other
countries of the region. One of the reasons behind the relatively low fees of remittances to Egypt is that banks
market remittance transfers by lowering fees to beneficiaries (recipients), since they do not generally provide any
other specific branded service for remittances senders or receivers.
Although the remittances system is quite efficient, the CBE hopes that mobile financial services can take this
development even further. As well as facilitating transfers to remote areas, the CBE believes that mobile financial
services should be taken not solely as a money transfer tool, but rather that they should also offer the options to
bank and spend amounts received. This emphasis on products beyond simple transfers is also in line with the
successful solutions based on the distribution of remittances in Kenya and the Philippines. Identifying the best
ways to develop these services will be part of this project.
Banking and microfinance
Egypt is with Morocco leading the development of Microfinance in the region. As of June 2011, the total of “active
borrowers” was estimated to exceed 1.6 million, served by more than 400 institutions with a total outstanding
portfolio of almost EGP 2.2 billion (approximately 280 million EUR). In spite of this large number of institutions,
market research indicates a supply gap estimated at some 90 percent. NGOs are the major suppliers of
microcredit in Egypt with a market share of 83 percent of the total number of active borrowers and 68 percent of
the total outstanding portfolio of microcredit in Egypt. The six biggest MFIs control over 60% of active clients and
more than 40% percent of the total outstanding portfolio. At least half of these large MFIs are interested in
transforming their business models whenever the new regulatory framework for payments is approved.
Egyptian Banks have implemented downscaling strategies since 1987, when the National Bank for Development
(now part of the Abu Dhabi Islamic banking group) started offering microfinance services. Since Egypt does not
have price caps on interest rates, other banks followed such as state owned Banque du Caire in 2001 and
Banque Misr (also state owned), in 2004, and Bank of Alexandria (owned by Italian Group Intesa San Paolo).
Together they represent 14 percent of the active borrowers and 26.5 percent of the total outstanding portfolio of
microcredit in Egypt. National Bank of Egypt (state owned) also aims at implementing a downscaling strategy to
deliver microfinance services. Once the National Bank of Egypt completes its downscaling strategy, all three state
owned commercial banks, which account for some 45% of deposit market share and 34% of loans, will have
started delivering financial services to the base of the pyramid.
The National Postal Authority (Egypt Post) is the leader in terms of micro deposits, serving 21 million people with
18 million savings accounts valued at approximately EUR 3 billion. It also offers pensions (3.5 million customers)
and insurance (1.3 million customers). Given its very large network with 3,800 branches (60% of which offer
Promoting Mobile financial services in Egypt under the Deauville MENA Transition Fund
Page 7
financial services) and its 1,700 distribution centers that handle postal logistics its potential in mobile financial
services either as a third-party agent network or offering directly mobile financial services to its customer base is
very relevant. This is all the more relevant when one considers that the transformational impact of mobile financial
services is a function not only of the efficiency of the mobile payments platforms but also of the outreach of its
network of agents.
The Principle Bank for Development and Agricultural Credit (PBDAC) is another interested organization which
serves nearly 4 million farmers and rural customers and has deep outreach into rural areas with 1,500 Branches
and 30,000 employees. Given that the agriculture sector receives only 1.7 percent of all loans provided to the
economy, the importance of this specialized state owned institution in providing not only credit but also savings,
payments and remittances to the agriculture sector is critical. For these institutions, as for any other MFI, mobile
payments infrastructure would allow them to implement a more efficient business model.
11. Alignment with Transition Fund Objective
During the EIB’s workshop, representatives of Central Banks agreed on the transformational impact that
innovative means of payments can have not only on access to finance but also in terms of economic
development. Promoting innovative retail payments solutions will improve financial inclusion by supporting the
development of alternative business models of financial services based on prepaid platforms, cellular technology,
remittances and the use of agents. Access to quality financial services – including means of payments, savings,
credit, insurance and money transfer systems – is crucial for low-income households to smooth consumption,
manage risks, invest productively, and respond to financial shocks. Furthermore, mobile payment methods can
facilitate international remittances, retail payments and microfinance services. As such, this project supports the
objective of the Transition Fund by fostering sustainable and inclusive economic growth through promoting
access to finance by underserved households and micro and small enterprises. The objective is achieved by
supporting CBE in its effort to expand access to finance by enhancing the offer of innovative retail payment
services, which are intended to have a direct impact on increased financial inclusion and economic growth.
In addition to its alignment with the general objective of the Transition Fund, this project is aligned with each of the
Fund’s pillars. First, it is aligned with Investing in Sustainable Growth since innovative retail payment solutions
such as mobile money directly relate to topics such as innovation and technology policy, enhancing the business
environment competition policy, private sector development strategies, and in particular access to finance.
Second, the project aims to promote inclusive development and job creation by increasing financial inclusion.
Third, this project enhances economic governance by improving public financial management and the oversight
capacity of the Central Bank, thus helping to create a sound and reinforced banking system. Finally, the
promotion of innovative retail payment solutions such as mobile money enhances competitiveness and integration
since it facilitates trade and private sector development for the informal economy by providing reliable payment
and financial services.
12. Alignment with Country’s National Strategy
The core aim of the CBE Payment System Department is to ‘Maintain financial stability through preserving safety
and efficiency in payment systems and secure the availability of convenient payment services at the level of broad
customer use and reach to sustain the Egyptian national economy hence mounting up with Egypt as a payment
systems model’ (from ‘Strategic Framework for the National Payment System in Egypt’, provided by the CBE).
This broad and high level strategy outlines, among other aspects, the role of the CBE in using its regulatory
function to promote financial inclusion. Promoting mobile payments, as well as developing other new, cheap and
efficient payment channels, is a core part of the actions defined by the strategy for financial inclusion.
Promoting Mobile financial services in Egypt under the Deauville MENA Transition Fund
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Indeed, even before the publication of the national Strategic Framework, the Central Bank of Egypt (CBE) began
looking at the issue of mobile payments regulation in 2009. While the CBE is generally conservative, it recognizes
the potential of mobile payments as well as the growing interest from Egypt’s MNOs and decided to address the
issue before any major initiatives were launched by potential payment providers. In February 2010, the CBE
Board passed new regulation on mobile phone payments and one month later issued a Circular to all banks,
indicating “preliminary approval” for banks to partner with MNOs on mobile money transfers.
This Transition Fund-funded project has been designed to meet the CBE’s request for support in translating its
high-level Strategic Framework into implementable action plans to meet the CBE’s pre-defined strategic goals for
Financial Inclusion, as well as Retail Payments, Governmental Payments, Remittances, Oversight, and Payment
Statistics. (More details of these goals are given in the breakdown of goals to be incorporated into the actions
plans under each of Components 1-4.)
C. PROJECT DESCRIPTION
13. Project Objective
This project is a response to the CBE’s request for support with the objective of promoting access to finance
through the development of a country wide strategy to develop mobile financial services and retail payment
infrastructure in Egypt.
This objective will be achieved through technical assistance and capacity building in order to ensure the
implementation of well-develop action plans to support retail payments in Egypt.
By extending the range of payment options available, users (often low-income people) without access to
traditional financial services can be encouraged to join the financial system. This can directly improve the lives of
these individuals by offering them options beyond a cash-only system. It also in turn develops the economy, both
by increasing the amount of transactions carried out through formal channels and also by providing opportunities
for innovative new products to develop (such as mobile financial service applications).
14. Project Components
The payments remit of the CBE covers the following areas and these will be the backdrop to the creation of the
action plans:











Encouraging the development of payment systems and services in Egypt.
Promoting the efficiency and use of electronic payment services.
Ensuring the integration and interoperability of payment systems and services.
Ensuring a sound legal foundation for all payment systems and services.
Developing standards, rules and guidelines for operation of payment systems.
Enforcing adherence to stated standards, rules and guidelines.
Adopting risk-controlled payment systems and services.
Ensuring consumer protection.
Fighting criminal acts in payment instruments.
Maintaining competitive market conditions.
Encouraging and developing cooperation and collaboration between the Egyptian payment stakeholders.
Promoting Mobile financial services in Egypt under the Deauville MENA Transition Fund
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
Promoting cooperation with regional and international bodies.
The project will take into account all the following payment instruments, which together make up the retail
payments system:






Cards
Pre-paid cards
Direct Credit (DC) transfer
Direct Debit (DD) transfer
Mobile Wallet
Cross border electronic fund transfers
The strategy to be developed will take into consideration the following markets, in order to achieve its objective of
promoting access to finance:




Commercial payment market (P2B & B2P), for example, payments at merchant stores, purchases from
the internet, etc.
Government payment and collections (G2P & P2G), for example, payment of taxes and customs to
government, and payment of government payroll and pensions, payments to government suppliers, and
distribution of subsidy and social aid.
Remittances analysis: including inflows to individuals and small businesses.
Financial inclusion: including but not limited to micropayments for people without access to banking
services.
The 6 components of the project aim to provide the needed capacity and assistance to achieve the above goals,
all in the framework of implementing the CBE’s existing Strategic Framework for the National Payment System in
Egypt.
Component 1:
Developing an action plan with implementable actions for the CBE to develop Retail Payments in Egypt
for the coming 5 years. (USD 200,000, ISA executed)
The action plan will define the steps for the CBE to take over the coming 5 years in order to meet the following
long-term goals:
1. Promoting issuance of cards.
2. Extending the use of third party processors to provide enhanced services including card processors and
ATM/POS switches/drivers, by applying standards to regulate cards industry.
3. Achieving better oversight of companies operating cards, ensuring good regulation of outsourcing
services, and developing regulations aimed at mitigating operational risks and reaching economies of
scale.
4. Developing ATM and POS acceptance by encouraging third party companies to introduce white label
(third party operated) and brown label (third party operated, but bank sponsored) ATMs and by
encouraging companies to expand in POS business on behalf of acquiring banks.
5. Encouraging the acceptance of POS through targeting new merchants in broad geographic areas.
6. Developing DC & DD market of Automated Clearing House (ACH), e.g. through coordinating with banks
to build products for corporates.
7. Minimizing the use of paper checks in Egypt by adapting laws to encourage the shift from paper checks to
Direct Credit transfers and by transferring all governmental checks to electronic channels.
8. Encouraging the move to electronic channels by reducing their cost and enhancing efficiency.
9. Bundling payment services with other bank services such as savings or insurance.
10. Promoting interoperability among payment channels.
Promoting Mobile financial services in Egypt under the Deauville MENA Transition Fund
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11. Expanding government payroll project integrating all project stakeholders and acting as a facilitator and
catalyst.
12. Promoting the provision of pensions through the post office.
13. Encouraging governmental supplier payments electronically.
14. Promoting the acceptance of POS at government units, through agreeing on a model for Government
POS and communicating closely with all stakeholders to achieve a fast implementation plan.
15. Developing payment services providers’ licensing regulations and procedures.
16. Developing different payment services and channels regulations, covering licensing criteria and off/on site
inspection.
17. Developing e-banking regulations (mobile, internet, and phone banking).
18. Developing regulations for outsourcing of financial services.
19. Revisiting/enhancing remittances regulations.
This component will be ISA-executed in close coordination with the country.
Component 2:
Developing a data collection and analysis methodology to better understand the market trends and
properties and enable adequate monitoring of the system (150,000, ISA executed).
1. Developing and ratifying a scheme for retail market data collection and analysis, and prospective market
indications for different development methods.
2. Implementing a mechanism for data collection and analysis on remittances from banks and service
providers.
This component will be ISA-executed in close coordination with the country.
Component 3:
Developing an action plan for improving efficiency of bank remittances inflows to Egypt. Components to
include (150,000, ISA executed):
1. Studying remittances channels to Egypt from key countries including e.g. KSA, Libya and USA. (At
present, some of this information is available e.g. KSA-Egypt; UAE-Egypt, but the CBE wishes to build on
this data to include other countries and other channels)
2. Analyzing cost factors, reach of services, ease of access to funds, and time of end-to-end transfer.
3. Developing official channels in different ways including developing bilateral agreements with the central
banks and commercial banks in countries of scope.
4. Cooperating with a number of central banks which have strong experience in remittances, especially
Mexico and Philippines.
This component will be ISA-executed in close coordination with the country.
Component 4:
Developing an action plan targeting financial inclusion, defining and prioritizing required actions to
promote the inclusion of the poor and this without access to banking services in the financial system.
Elements to consider include (200,000, ISA executed):
1. Methods to expand the use of Egypt Post in promoting financial inclusion, e.g. by expanding payment
services through Egypt Post ATMs and POS.
2. Promoting mobile payments, through increasing number of services provided through mobile.
3. Expanding the usage of agents as providers of financial services, by developing regulations further to
ensure enhancing reach while not compromising quality and reputation of financial services, referring in
particular to the example of Brazil as a model in branchless banking.
4. Studying the feasibility of introducing new cheap and efficient payment channels, including mobile
financial services.
5. Promoting awareness of payment services, including through building work groups and committees from
the financial sector.
Promoting Mobile financial services in Egypt under the Deauville MENA Transition Fund
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6. Promoting public policy objectives on financial inclusion to commercial banks.
7. Bundling payment services with other bank services relative to financial inclusion.
8. Promoting interoperability among payment channels relative to financial inclusion.
This component will be ISA-executed in close coordination with the country.
Component 5:
Knowledge sharing workshop (USD 35,000, country executed)
In support of the regional dimension of this program, each country will organize a workshop to share experience
and feedback from the activities it has carried out under the program. This is valuable because each country has
requested assistance with different aspects of their mobile financial services and financial inclusion programs. By
sharing this knowledge among the central banks and financial sectors of the three countries of this program, and
potentially with other interested parties and countries, the impact of the program will be heightened.
This component will be executed by the country.
Component 6:
Setting up the implementation of the action plans within the CBE (USD 100,000 ISA-executed).
The action plans produced under the preceding phases must be directly implementable by the CBE. In order to
ensure that this implementation is achieved successfully after the end of this Transition Fund-funded project, the
CBE requests assistance establishing the necessary implementation structure within the central bank. The TA will
work with the CBE to ensure that the next steps, which will have been defined in the action plans, are clear and
that the CBE has the capacity to implement them.
This component will be ISA-executed in close coordination with the country.
Component 7:
Project Management, Coordination, Monitoring and Evaluation (USD 80,000 – country-executed).
CBE will house a Project Management Team for activities associated with project coordination during the length
of this Transition Fund-funded project, including interfacing with the consultant team and implementing a
comprehensive monitoring and evaluation (M&E) system. The Project Management Team will be located at the
Central Bank of Egypt.
This component will be country-executed.
15. Key Indicators Linked to Objectives
The first set of indicators linked to this TA operation are the intermediate results of each component. There is also
a set of indicators like to the project objectives which will be tracked over time to measure the transformational
impact of the proposed project in Egypt. The seven intermediate results indicators are:




Intermediate Result One: Developed an implementable action plan for retail payments in Egypt for the
coming 5 years, considering market needs and resources to be completed four months after
commencement of the operations and presented to the EIB and the CBE.
Intermediate Result Two: Developed a data collection and analysis methodology to better understand
the market trends and properties to be completed six months after commencement of the operations and
presented to the EIB and CBE.
Intermediate Result Three: Developed an action plan targeting the family remittances inflow to Egypt to
be completed eight months after commencement of the operations and presented to the EIB and CBE.
Intermediate Result Four: Developed an action plan targeting financial inclusion, explaining required
actions to promote the inclusion of the poor in the financial system to be completed twelve months after
Promoting Mobile financial services in Egypt under the Deauville MENA Transition Fund
Page 12



commencement of the operations and presented to the EIB and CBE.
Intermediate Result Five: Successful completion of a workshop to enable knowledge sharing of country
experience between countries participating in the program.
Intermediate Result Six: Establishment of an implementation structure within the central bank, to be
completed by the end of the project (fifteen months after commencement of operations).
Intermediate Result Seven: Work carried out by CBE team in local coordination of the project.
Indicators linked to the PDO aim to track innovative retail payments services promotion and in general retail
payments system reform. The progress made needs to be assessed periodically against the vision and objectives
established earlier on. The performance of the project will be assessed against indicators to measure the
following. These will also serve as project milestones. (A detailed breakdown is given in section F)










Access metrics: This would include metrics like number of accounts per 1000 adults, number of credit,
debit and prepaid cards per capita, proportion of Internet banking and mobile payment customers. This
set of metrics helps in assessing the penetration of payment services.
Per capita cashless transactions: This is the number of cashless transactions both inter-institution and
intra-institution over a year in relation to the population of the country.
Infrastructure metrics: This would include metrics like agents, ATMs and POS terminals per 1000
inhabitants. To get a more accurate assessment, metrics for specific geographic areas is very important
and indicative.
Transactions per acceptance infrastructure: This is the number of transactions per ATM, POS, agent,
mobile or any other acceptance infrastructure over a period of time. This serves to measure the level of
interoperability and usage of infrastructure.
Cost of Cash deposit and withdrawal: The fees for deposit and withdrawal of a representative amount at a
representative frequency across types of institutions, channels and accounts.
Percentage of payment instructions received through electronic means: This is the share of payment
instructions received through electronic means in the total number of payment instructions (including
electronic plus paper-based and face-to-face channels).
Percentage of government payment transactions made through electronic payment mechanisms: This is
the share of government payment transactions made both as a payee and a payer using electronic
payment mechanisms in the total of government payments (i.e. using all types of payment mechanisms).
Cost for a domestic remittance between parties with accounts in different institutions: This is the total cost
(for the sender and for the receiver) of making a domestic remittance between parties maintaining
accounts in two different institutions using the available payment mechanisms and channels. To make it
comparable, this should be for a representative amount and shown as a percentage of such amount, and
for different institutions and different modes.
Cost of international remittances from certain countries to Egypt: This is the total cost (including fees,
currency exchange cost, delay in delivery –parking cost-) of making a remittance from KSA, Emirates,
Kuwait, Libya, USA, UK, Jordan to Egypt, using the available payment mechanisms and channels. To
make it comparable, this should be for a representative amount and shown as a percentage of such
amount, and for different institutions and different modes.
Cost to maintain specific payment product accounts by institution type: This is the cost for the consumer
to maintain specific payment product accounts like a bank account for debit cards, prepaid card account,
a mobile money account, etc.
D. IMPLEMENTATION
16. Partnership Arrangements (if applicable)
The Central Bank of Egypt will jointly implement the project with the European Investment Bank. Within CBE the
payment systems department will lead. Within the EIB, both the Economics department and the Policy and
Promoting Mobile financial services in Egypt under the Deauville MENA Transition Fund
Page 13
Business Development Unit will be involved.
The team of consultants will work in partnership with the CBE staff throughout the project, but the project will also
engage other stakeholders like the National Telecommunications Regulatory Authority (NTRA), the Ministry of
International Cooperation, the Ministry of Finance, the financial sector, payment service providers, the
microfinance sector, remittances operators, mobile operators and potentially other key stakeholders to provide
guidance to the project throughout its lifetime. The project will be overseen by The Ministry of International
Cooperation as the ultimate overseer of funds provided to the Egyptian Government, as well as by the European
Investment Bank, as ISA.
On a regional level, the involvement of the Union for the Mediterranean via a UfM label will be sought in order to
promote regional partnership and the sharing of best practice among the countries participating in this program.
17. Coordination with Country-led Mechanism/Donor Implemented Activities
The project will be implemented in coordination with complementary projects to take advantage of synergies
between different donor-funded activities. The EIB will coordinate with other IFIs throughout the implementation of
the project. Steps will be taken to identify synergies with other projects and to leverage linkages between them.
The fact that the Central Bank has been closely involved in creating this request for assistance means that this
proposal has been designed to fill gaps – specifically, the development of next steps for the implementation of the
CBE’s Strategic Framework – rather than duplicating any on-going work.
During the preparation of this proposal, consultations have been undertaken with a number of donors active in
mobile financial services and retail payments infrastructure, and this project has strong potential
complementarities with ongoing and planned activities. One particular example is the IFC investment in payments
network Fawry to adopt branchless banking and mobile financial services, the study of which will allow CBE to
learn more about the operations and the risks assumed. The person responsible for the project in the Central
Bank is also involved in other work regarding remittances, especially in the context of the Arab Iraqi Fund and as
such this body of work may be expected to be incorporate into the present project.
The Local Capital Markets Needs Assessment, which takes place in the framework of the Deauville partnership
under the lead of EBRD and AMF (with the participation of the EIB) is also of relevance. The idea is to identify
shortcomings in the functioning of local capital markets in the Deauville Partnership countries and to come up with
measures to be implemented by governments to reach improvements as well as to identify possible actions to be
taken by IFIs and to coordinate possible IFI involvement.
Overall, the EIB will act as a facilitator to ensure that the implementation team is able to coordinate with relevant
on-going programs and initiatives led by other IFIs. The Ministry of International Cooperation will also play a role
in ensuring such coordination. On a regional level, the involvement of the Union for the Mediterranean via the UfM
label will be sought in order to promote regional partnerships and the sharing of best practice among the countries
participating in this program.
18. Institutional and Implementation Arrangements
The project will be executed under the joint responsibility of the EIB and CBE. Components 1-4 are implemented
by the EIB, via a team of consultants. Component 5 is country executed. Component 6 is jointly executed,
whereby the consultants will collaborate with the CBE staff to establish the appropriate management and
implementation structure.
Promoting Mobile financial services in Egypt under the Deauville MENA Transition Fund
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Project Team: The Project will be implemented by combining CBE’s in-house team with a team of international
consultants.
Ad-hoc Advisory Committee: An ad-hoc advisory committee comprising representatives from the Ministry of
Economy and Finance, the NTRA, the financial sector, payment service providers, the microfinance sector,
remittances operators, mobile operators and potentially other key stakeholders will meet to provide guidance to
the project throughout its lifetime. The project may need to establish a number of advisory teams associated to
different pillars of the project; i.e. a team for mobile payment, another of remittances, and a third of retail
payments. This structure will allow benefiting from different expertise relative to their experience.
19. Monitoring and Evaluation of Results
The results framework for the project is centered around the PDO and specifies PDO level and intermediate
indicators which will be monitored to evaluate project performance towards the objectives (see M&E framework
below).
Primary responsibility for monitoring of PDO results will be given to the Central Bank of Egypt (CBE), which will
present an M&E report to the EIB on an annual basis, including after having completed the project. During
implementation, the CBE will continue to monitor the indicators outlined in section F, as per its usual operations.
The EIB will be responsible for the monitoring of the intermediate indicators, via reports from the consulting team.
E. PROJECT BUDGETING AND FINANCING
20. Project Financing (including ISA Direct Costs1)
Cost by Component
Transition
Fund
(USD)
Component 1: Developing a strategy for the CBE to
develop Retail Payments in Egypt (ISA-Executed)
Component 2: Developing a data collection and
analysis methodology (ISA-Executed)
Component 3: Developing an action plan targeting
the family remittances inflow to Egypt (ISA-Executed)
Component 4: Developing an action plan targeting
financial inclusion (ISA-Executed)
Component 5: Knowledge-Sharing workshop (TCExecuted)
Component 6: Supporting the implementation phase
(ISA-Executed)
Component 7: Project Management, Coordination,
Monitoring and Evaluation (TC-Executed)
Total Project Cost
200,000
200,000
150,000
150,000
150,000
150,000
200,000
200,000
35,000
35,000
100,000
100,000
835,000
Country
CoFinancing
(USD)
Other CoFinancing
(USD)
Total
(USD)
80,000
80,000
80,000
915,000
1
ISA direct costs are those costs related to the ISA’s direct provision of technical assistance within the project.
Promoting Mobile financial services in Egypt under the Deauville MENA Transition Fund
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Indirect costs related to the provision of CBE staff will be the in kind contribution of CBE and as a result do not
require dedicated financing.
21. Budget Breakdown of Indirect Costs Requested (USD)
Description
For grant preparation, administration and implementation
support:
Staff time and travel
Total Indirect Costs
Amount (USD)
56,000
56,000
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F. Results Framework and Monitoring
Project Development Objective (PDO): This project’s objective is to promote access to finance through the promotion of mobile financial services
and retail payment infrastructure as a whole. This objective will be achieved through the required financing package and technical assistance aimed at
supporting the new retail payments architecture of Egypt.
Cumulative Target Values**
PDO Level Results
Indicators*
Unit of
Measure
Baseline
YR 1
YR 2
YR
3
YR
4
YR5
Frequen
cy
Data
Source/
Methodolo
gy
Reporting
to CBE
Responsibili
ty for Data
Collection
Indicator One: Access
metrics
Number
December
2013
+ 5%
+10
%
+15
%
20%
25%
Annual
Indicator Two: Per capita
cashless transactions
Number
December
2013
+ 5%
+10
%
+15
%
20%
25%
Annual
Reporting
to CBE
CBE
Indicator Three:
Infrastructure metrics
Number
December
2013
+ 3%
+6%
+9
%
12%
15%
Annual
Reporting
to CBE
CBE
Indicator Four: Reduction
in Cost of Cash deposit and
withdrawal, considering
inflation.
Indicator Five:
Percentage of payment
instructions received
Number
December
2013
+ 0%
0%
5%
10%
15%
Annual
Reporting
to CBE
CBE
%
December
2013
0%
0%
0.5
%
1%
1.5%
Annual
Reporting
to CBE
CBE
Promoting Mobile financial services in Egypt under the Deauville MENA Transition Fund
Page 17
CBE
Description
(indicator
definition
etc.)
Number of
active
accounts per
1000 adults
Per adult
(>15) number
of cashless
transactions
both interinstitution
and intrainstitution
Agents,
ATMs and
POS
terminals per
1000
inhabitants
The fees for
deposit and
withdrawal
Number of
payment
instructions
through electronic means
Indicator Six: Percentage
of government payment
transactions made through
electronic payment
mechanisms
%
December
2013
+
10%
+20
%
+30
%
40%
50%
Annual
Reporting
to CBE
CBE
Indicator Seven:
Reduction in cost for a
domestic remittance
between parties with
accounts in different
institutions
%
December
2013
0%
0%
2%
4%
6%
Annual
Reporting
to CBE
CBE
Promoting Mobile financial services in Egypt under the Deauville MENA Transition Fund
Page 18
received
through
electronic
means
respect
divided by
the total
number of
payment
instructions
Number of
government
payment
transactions
made both as
a payee and
a payer using
electronic
payment
mechanisms
divided by
the total
number of
government
payments
The total cost
(for the
sender and
for the
receiver) of
making a
domestic
remittance
between
parties
Indicator Eight: Cost to
maintain specific payment
product accounts by
institution type, with focus
on accounts targeting
Financial Inclusion.
Number
December
2013
0%
0%
5%
10%
15%
Annual
Reporting
to CBE
CBE
n/a
Once, 6
months
after
project
start
Reporting
to the CBE,
EIB
Consultants,
CBE
maintaining
accounts in
two different
institutions
using the
available
payment
mechanisms
and channels
Divided by
the amount
sent
Cost for the
consumer to
maintain
specific
payment
product
accounts
INTERMEDIATE RESULTS
Intermediate Results:
Intermediate Result 1:
Developing a strategy for
Retail Payments in Egypt
for the coming 5 years,
considering market needs
and resources
Report
n/a
1
n/a
n/a
n/a
Promoting Mobile financial services in Egypt under the Deauville MENA Transition Fund
Page 19
Developed
an
implementabl
e action plan
for retail
payments in
Egypt for the
coming 5
years,
considering
market needs
and
resources to
be completed
Intermediate Result 2:
Developing a data
collection and analysis
methodology to better
understand the market
trends and properties
Report
n/a
1
n/a
n/a
n/a
n/a
Once, <8
months
after
project
start
Reporting
to the CBE,
EIB
Consultants,
CBE
Intermediate Result 3:
Developing an action plan
targeting the family
remittances inflow to Egypt.
Report
n/a
1
n/a
n/a
n/a
n/a
Once,
<12
months
after
project
start
Reporting
to the CBE,
EIB
Consultants,
CBE
Promoting Mobile financial services in Egypt under the Deauville MENA Transition Fund
Page 20
four months
after
commencem
ent of the
operations
and
presented to
the EIB and
the CBE.
Developed a
data
collection and
analysis
methodology
to better
understand
the market
trends and
properties to
be completed
six months
after
commencem
ent of the
operations
and
presented to
the EIB and
CBE.
Developed
an action
plan targeting
the family
remittances
inflow to
Egypt to be
completed
eight months
after
commencem
Intermediate Result 4:
Developing an action plan
targeting financial inclusion,
explaining required actions
to promote the inclusion of
the poor in financial system
Report
n/a
1
n/a
n/a
n/a
n/a
Once,
<12
months
after
project
start
Reporting
to the CBE,
EIB
Consultants,
CBE
Intermediate Result 5:
Workshop for sharing of
knowledge
Worksh
op
n/a
0
1
n/a
n/a
n/a
Once, at
project
completio
n
Reporting
to the EIB
CBE
Promoting Mobile financial services in Egypt under the Deauville MENA Transition Fund
Page 21
ent of the
operations
and
presented to
the EIB and
CBE.
Developed
an action
plan targeting
financial
inclusion,
explaining
required
actions to
promote the
inclusion of
the poor in
the financial
system to be
completed
twelve
months after
commencem
ent of the
operations
and
presented to
the EIB and
CBE.
Successful
completion of
a workshop
to enable
knowledge
sharing of
country
experience
between
countries
participating
Intermediate Result 6:
Establishing an
implementation structure in
the CBE
Report
n/a
2
3
n/a
n/a
n/a
Six
monthly
during
impleme
ntation
and once
at
completio
n
Intermediate Result 7:
Project management team
will have been operating for
the project
Report
n/a
1
2
n/a
n/a
n/a
Twice,
once
halfway
through
project
impleme
ntation
and once
at
completio
n
Promoting Mobile financial services in Egypt under the Deauville MENA Transition Fund
Consultant
s/CBE
reporting to
the CBE,
EIB based
on
observed
progress in
implementa
tion unit
CBE
reporting to
the EIB
based on
observed
progress in
implementa
tion unit
Page 22
Consultants,
CBE
CBE
in the
program.
Establishmen
t of an
implementati
on structure
within the
central bank
A report
detailing the
activites of
the CBE in
managing
and
implementing
the project
will be shared
with the EIB.