The Central Bank of Egypt (CBE) has taken a step toward initiating a monetary easing cycle by cutting interest rates by 2.25% at its most recent meeting. This has sparked questions about whether the cut is sufficient to stimulate the non-banking financial sector, which is suffering from the burden of high financing costs.
Market participants believe that non-bank lending across various sectors is likely to improve as interest rates begin to decline. This, in turn, will enhance individuals’ and companies’ ability to access financing, leading to a recovery in activity.
In its second Monetary Policy Committee meeting of the year, the CBE reduced rates for the first time in more than four years—by 225 basis points—from a historic high. The overnight deposit and lending rates and the main operation rate were set at 25%, 26%, and 25.5%, respectively.
High interest rates often hinder borrowing and lending within non-banking financial activities. Yet, total financing provided by institutions under the supervision of the Financial Regulatory Authority (FRA) jumped to around EGP 118.5 billion by the end of February.
Mortgage Finance
Mohamed El-Kahky, Managing Director of Tamweely Mortgage Finance, noted that recent growth in real estate activity is largely due to rising property prices, which in turn increased the value of mortgage financing, along with a boost in financing for property portfolios.
The value of mortgage financing by FRA-supervised companies increased 1.3 times in February, reaching EGP 2.8 billion compared to EGP 1.23 billion in February of the previous year. This accounted for approximately 2.4% of total non-banking financial activity during the period.
El-Kahky told Al Borsa that the recent interest rate cut will encourage individuals to seek mortgage financing from companies, thus boosting the sector. He expects activity to increase by more than 20%.
He added that with further expected rate cuts this year (up to 4% in two phases), total activity could grow by as much as 40%.
According to the FRA, total mortgage refinancing jumped 262.5% in February, reaching EGP 522 million, up from EGP 144 million during the same period two years ago.
The number of mortgage contracts rose to 1,420 in February 2025, compared to 928 in February 2024—a 53% increase.
SMEs
Amr Aboul Azm, CEO and Managing Director of Erada Micro and SME Finance, said high interest rates significantly impacted lending volumes. However, with rates beginning to decline, activity is expected to pick up due to its importance in generating jobs and supporting Egypt’s economy.
He added that lower rates would reduce financing costs for companies, easing capital burdens and enhancing their borrowing capacity for expansion or securitization purposes.
SME financing reached EGP 1.05 billion in February with 500 clients, compared to EGP 873 million and the same number of clients in February the year before.
Commercial activity accounted for 69.09% of all SME financing by the end of February, followed by 16.82% for services, 10.91% for production, and 3.19% for agriculture.
Consumer Finance
Ahmed Osama, CEO of Drive Finance, stated that the consumer finance market remains underdeveloped, which presents further growth opportunities. He noted that the current market size has already surpassed older financing sectors.
He added that the recent rate cut, along with potential cuts this year that could total up to 8%, will support strong growth in the coming period.
Installment sales through FRA-regulated companies rose to EGP 6.4 billion, up from EGP 3.5 billion in the same month last year, accounting for 5.4% of total non-banking financial activity by the end of February.
The FRA reported that consumer finance clients reached more than 753,800 in February 2025, up from 258,900 in February 2024—a 191.2% increase, despite a drop in the average loan amount per client.
Leasing
Leasing activity rose by 76.4% in February, with total contracts reaching EGP 11 billion compared to EGP 6.3 billion a year earlier, despite ongoing challenges.
According to the FRA, the number of clients in the leasing sector grew by 19.4% during the same period, with 197 contracts signed versus 165 in the comparable period.
The CBE has imposed limits on credit facilities for leasing companies: 1% for a single company and 5% of a bank’s loan portfolio. Facilities must also be for specific purposes and backed by supporting documents.
The sector also faces challenges such as foreign currency shortages and difficulty in obtaining foreign currency loans except for specific import cases, limiting expansion.
Mowafak Gamea, Managing Director of Arab African Leasing & Factoring, noted that real estate developers are increasingly relying on leasing as a financing solution, particularly with the expansion of new urban cities. The return of import activity, supported by greater FX availability in banks, has further driven demand for importing machinery, equipment, and commercial vehicles.
He emphasized that leasing is closely tied to interest rate movements, and the 2.25% rate cut is expected to further stimulate the sector, especially as the cut was long anticipated.
Factoring
Gamea also predicted a significant rise in factoring, due to growing market demand for such services. Factoring is expected to grow at rates close to short-term bank lending, especially as more companies issue formal invoices for services.
Factoring volumes surged by 93.8% in February to EGP 7.9 billion, up from EGP 4.1 billion in February 2024, capturing 6.67% of total non-banking financial activity.
Movable Collateral
He noted that the movable collateral registry has improved the performance of the non-banking financial sector by anchoring transactions to officially registered assets.
Registering assets prevents fraud and double financing, enhancing market credibility. He expects this trend to continue.
The value of registered movable collateral reached EGP 3.233 trillion by the end of February, compared to EGP 2.522 trillion a year earlier—a 28% increase.
The number of registered items rose to 209,000, up from 163,000—a 28.3% increase.
Registrations were distributed as follows: 61.3% for physical assets, 31.7% for bank accounts, 4.6% for production inputs, and 2.4% for commercial assets.
