2.3 million in debt: Chasing relief in Egypt’s consumer credit boom

When Basel Karam needed a new laptop, he found himself short of the 20,000 pounds (roughly $400) required for even the cheapest model. With prices doubling since the March 2024 currency devaluation, he had little choice but to turn to a non-bank consumer finance company.

Time was not on his side. Expecting further price hikes, Basel acted quickly to secure the laptop on credit. He obtained a loan equivalent to the device’s cost in a matter of days, sidestepping the bureaucratic hurdles by applying under his aunt’s name, who had a solid credit record.

Basel, 17, was relieved at first. But that relief was short-lived. With monthly installments of 2,335 pounds, the final cost of the laptop would reach 28,000 pounds (about $550)—a steep price for someone without a stable income. “I don’t earn anything yet. I’m not even in the job market,” he told Al Manassa.

Demand surges, interest falls

In the first quarter of 2025, the number of Egyptians taking out non-bank consumer loans nearly doubled, reaching more than 2.3 million clients. This came as the central bank reversed a years-long cycle of aggressive monetary tightening by initiating its first interest rate cut in half a decade.

Optimism over falling borrowing costs is fueling interest in the fledgling sector, which only gained traction in Egypt five years ago. Yet the growing appetite for consumer credit is also a symptom of deeper economic malaise. With inflation squeezing purchasing power, millions now rely on credit to buy essentials—from refrigerators to school supplies.

Debt fills gaps

Consumer prices surged at record levels in recent years, at times exceeding 40% annually. As the cost of goods soared, more Egyptians found themselves unable to afford household items without turning to lenders.

Yet even borrowing has become more expensive. In March 2024, the central bank abruptly raised its benchmark interest rate by 600 basis points, triggering a temporary contraction in consumer lending. But the recent softening of rates has revived demand.

“People see this as a window to buy what they need before prices rise again,” said Ahmed Ossama, Managing Director at Drive Finance, a consumer finance company. He noted that access to installment plans allows clients to stretch their budgets despite financial strain. Over the past year, the Central Bank kept interest rates steady before gradually reducing them starting in April 2025 as inflation began to ease. While inflation has declined, it has yet to reach moderate levels—below 10%—helping sustain momentum in consumer finance activity.

According to Ahmed El-Feky, former CEO of a consumer finance firm, both the erosion of purchasing power and aggressive promotional offers have driven the recent surge in consumer lending. “People can no longer afford many goods at current prices,” he told Al Manassa. “At the same time, companies are luring customers with incentives like zero down payments, zero interest for a limited period, and grace periods of several months before the first installment. These factors have all contributed to the boom in consumer finance in recent months.”

Smaller loans, shifting priorities

While the number of borrowers is growing, the total value of disbursed loans actually fell—from 19.4 billion pounds at the end of 2024 to 17.4 billion pounds in early 2025. Analysts say this signals a shift toward smaller loans aimed at basic purchases, particularly household appliances.

“Consumers are increasingly turning to credit to buy necessities, not luxuries,” said Hesham Hamdy, an investment analyst at Zilla Capital. According to Egypt’s Financial Regulatory Authority, household appliances and electronics make up over 30% of consumer loan spending, followed by vehicles at about 20%.

“Recently, we’ve seen a rise in borrowing to purchase gold as a hedge against inflation,” Ossama added, noting that companies are now financing gold transactions as a form of long-term savings.

Who qualifies for credit?

The industry has grown to encompass a wide range of income brackets. However, gaps remain. “The lack of verifiable income data excludes large segments of society,” said Ossama. Most borrowers earn at least 10,000 pounds ($196) a month and tend to be professionals or salaried workers with documented income.

Former consumer finance executive Ahmed El-Feky said the clientele increasingly includes lower-income employees, such as office assistants and cafeteria workers.

Despite the rising demand for consumer loans, finance companies face structural challenges—chief among them the prevalence of informal employment and unregistered income in Egypt. This leaves over 40 licensed firms competing over a limited segment of clients who can provide official proof of income, as the Financial Regulatory Authority requires that monthly repayments not exceed 50% of a borrower’s declared earnings.

For freelancers and self-employed individuals, lenders often conduct field checks to assess the scale of business activity and evaluate repayment potential. According to Ossama, the vetting process is designed to ensure borrowers can meet their obligations. El-Feky added that companies sometimes require additional proof of financial standing—such as car ownership, club memberships, or property deeds—to further mitigate lending risks.

Rising risks of default

With more Egyptians relying on credit to meet everyday expenses, the risk of default is also climbing. While no official data exists, Sameh Elmallah, CEO of Damen ePayment, estimates non-performing loans account for 3–5% of borrowers. “That’s relatively high, and it’s linked to last year’s spike in interest rates,” he told Al Manassa.

El-Feky believes the true default rate is closer to 2%, below global norms. He blames defaults primarily on inflated loan sizes driven by surging prices. “A mobile phone that used to cost 10,000 pounds now sells for 50,000,” he said.

Ossama pointed to behavioral factors as well, such as limited awareness about the importance of timely payments, misuse of funds, income volatility, or unforeseen personal emergencies.

Sector poised for continued expansion

Despite rapid growth, industry insiders believe the sector is far from saturation. “This is just the beginning,” said Ossama, pointing to the proliferation of consumer finance branches in Egypt’s governorates.

The central bank’s lending rate currently stands at 25%. But if it falls to 17–18%, as some expect, broader segments of the population may become eligible for credit, Elmallah noted.

Hamdy of Zilla Capital predicts the consumer finance sector will grow by an average of 50% per quarter, though he cautions against loosening lending standards. “If firms expand recklessly, the risk of widespread defaults will rise,” he said.

As for Basel, he plans to contribute part of his monthly allowance to cover installments, while his father takes on the bulk of the financial burden—a necessary sacrifice, they believe, to keep his education on track.