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The September Stories Issue

Nearly Two-Thirds of Egyptians Don't Use Formal Bank Accounts

Here's what many of them do instead.
Portrait by Nour El Refai

This story appears in the September Issue of VICE magazine. Click HERE to subscribe.

In July, the World Bank Group announced that Egypt would be among the countries included in its Financial Inclusion Global Initiative, a program that aims to improve digital-banking development and security, raise awareness of formal financial processes, and emphasize the importance of owning a bank account. Last year, Egypt teetered on the edge of economic collapse. In response to the crisis, the Egyptian government devalued the country's currency by 48 percent against the US dollar, which triggered a bailout from the International Monetary Fund. As the country grapples with economic turmoil, many are sticking to traditional practices of banking and borrowing, including a centuries-old system called il-gam'iyya, a communal savings and borrowing practice organized among families, friends, or colleagues.


In gam'iyya, a group of people contributes to a pool of money, and each month, one member of the group will take the full sum of collection. The person receiving the funds rotates based on an order predetermined by the organizer, and participants can arrange with the organizer when they will receive their sum. Given the fact that nearly two-thirds of Egyptians do not own bank accounts, large segments of the population, particularly those who work in cash-based service industries or small businesses, continue to rely on this type of economic solution in order to avoid the high interest rates and the paperwork associated with formal banking institutions.

"Gam'iyyas can extend up to five years with no added interest or the threat of being fined or imprisoned."

Hiba Ramadan, a Cairo-born music and children's choir coach at a government culture and arts center, receives her paychecks through a bank account, but she prefers gam'iyya borrowing to bank loans, despite its reliance on personal trust and its lack of guarantees. I spoke with Ramadan, who serves as the leader and organizer of her workplace gam'iyya, about why these informal banking systems remain popular in the face of digitizing the economy and integration into the international banking community, and what the future of Egypt's economic systems may mean for her generation.

VICE: How does il-gam'iyya work?
Hiba Ramadan: Often a colleague needs a sum of money to pay for their marriage, the wedding of their son or daughter, tuition fees, rent, or to cope with a difficult family situation. All of us participate: administrators, security personnel, cleaners, and others. The first practical step is to prepare a table of names of gam'iyya participants and define its duration and the value of each payment. Then we agree on the best order for the names arrangement of the participants. The colleague asking for gam'iyya leads the list; his name is put first or in a place that coincides with whenever he needs the money. He is obliged to contribute a certain amount of his salary throughout the length of gam'iyya.


Is there more than one way to organize the gam'iyya?
There are other ways, such as a colleague proposing gam'iyya with a larger than usual sum of money where each participant pays more than half their salary each month. We invite friends and trusted individuals from outside our work environment, and larger gam'iyya can extend over a long period of time.

What ensures timely payment?
It's a risk. It depends on personal connections and your trust and experience of people. I've encountered problems and have ended up cutting off relationships with some people. This taught me how to pick and exclude.

What if a participant doesn't make a payment?
If someone fails to make the payment on time, I [as organizer] would cover the amount personally. Then the person who missed payment should refund me. It is possible that they don't make up for the payment, but it is later deducted from the amount of money they borrow when it's their turn to receive the collection.

Why do young Egyptians prefer gam'iyya to formal bank loans?
Firstly, we learned the value of participation in gam'iyya since we were students in schools, long before we worked and received our first paychecks. We used to participate in gam'iyyas organized by family and neighbors ahead of holiday seasons and before going back to school, and then we collected our pocket money to make the required payments. Secondly, the length of gam'iyyas can extend up to five years with no added interest or the threat of being fined or imprisoned, as with the banks.

Wael Fathi is a reporter for our VICE Arabia office, launching this fall.