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 latest meeting. This move has raised questions about whether the reduction is sufficient to revive the non-banking financial sector, which has been struggling under the burden of high financing costs.
Market participants believe that non-banking lending across various activities will see improved performance with the start of interest rate cuts, which in turn will increase the ability of individuals and companies to obtain financing, leading to a revival in activity.
In its second Monetary Policy Committee meeting of the year, the CBE reduced interest rates for the first time in over four years from their historic highs by 225 basis points. This brought the overnight deposit rate, lending rate, and the main operation rate to 25%, 26%, and 25.5%, respectively.
High interest rates often pose an obstacle to non-banking financial activities involving borrowing and lending. Nevertheless, the total financing provided by entities regulated by the Financial Regulatory Authority (FRA) surged to about EGP 118.5 billion by the end of February.
Mortgage Finance
Mohamed El-Kahky, Managing Director of Tamweely for Mortgage Finance, attributed the recent growth in the real estate sector to the rise in property prices, which in turn increased the value of loans issued, along with a boost in financing for real estate portfolios.
The value of mortgage financing provided by companies under the FRA increased by 1.3 times in February, reaching EGP 2.8 billion compared to EGP 1.23 billion in February of the previous year, accounting for approximately 2.4% of total non-banking financial activities during that period.
El-Kahky told Al-Borsa that the recent interest rate cut would encourage individuals to obtain mortgage loans, leading to increased activity. He estimated that the growth in the sector could exceed 20%.
He also projected that mortgage financing could grow by as much as 40% if interest rates continue to decline, expecting rates to fall by another 4% in two phases throughout the current year.
According to the FRA, total mortgage refinancing jumped 262.5% in February, reaching EGP 522 million, up from EGP 144 million during the same month the year before.
The number of mortgage contracts rose to 1,420 in February 2025, compared to 928 in February 2024, an increase of 53%.
SMEs Financing
Amr Aboul Azm, CEO and Managing Director of Erada Micro and SME Finance, said high interest rates significantly impacted lending rates. However, the beginning of a rate decline would lead to a rebound in activity, which is vital for Egypt’s economy as it generates job opportunities.
He added that lower interest rates would reduce financing costs for companies, easing capital burdens and improving their ability to borrow for expansion or securitization.
SME financing reached EGP 1.05 billion in February, with 500 beneficiaries, up from EGP 873 million the previous year with the same number of clients.
Commercial activity accounted for 69.09% of total financing by the end of February, followed by the service sector at 16.82%, 10.91% for production companies, and 3.19% for agricultural businesses.
Consumer Finance
Ahmed Osama, CEO of Drive Finance, stated that the consumer finance market remains unsaturated, providing ample room for growth. He noted that the sector’s current scale already surpasses some older financing sectors.
He expects strong growth in the sector, especially with recent and projected rate cuts potentially reaching up to 8% this year.
Installment purchases by Egyptians through FRA-regulated companies rose to EGP 6.4 billion, up from EGP 3.5 billion in the same month last year, representing 5.4% of total non-banking financial activity by the end of February.
FRA data showed consumer finance clients exceeded 753,800 in February 2025, up from 258,900 in the same month of 2024—a 191.2% increase—despite a decline in average financing per client.
Leasing
Leasing activity rose 76.4% in February, reaching EGP 11 billion in contract value compared to EGP 6.3 billion during the same period the year before, despite sector challenges.
FRA reported a 19.4% increase in leasing clients, with 197 contracts signed versus 165 a year earlier.
The CBE imposed lending caps on leasing firms, limiting direct and indirect credit facilities to 1% per company and 5% of a bank’s loan portfolio. Loans must be purpose-specific and supported by documentation confirming use in lease contracts.
Challenges include foreign currency shortages and difficulties in accessing foreign currency financing except in specific import cases, leading to reduced expansion in the sector.
Mowafak Gamea, Managing Director of Arab African Leasing and Factoring, said increased reliance on leasing by property developers for financing real estate and land, along with revived imports due to improved FX availability, helped drive demand, especially for commercial vehicles and machinery.
He noted leasing is highly sensitive to interest rates, and the 2.25% rate cut is expected to further stimulate the sector, especially since the reduction was anticipated for months.
Factoring
Gamea also forecasted significant growth in factoring due to the broad market need for such services. He noted its growth could rival that of short-term bank lending, especially with many companies issuing formal invoices for services.
Factoring volumes surged 93.8% in February to EGP 7.9 billion from EGP 4.1 billion in February 2024, accounting for 6.67% of non-banking financial activity.
Movable Collateral Registry
Gamea added that the movable collateral system has improved non-banking financial performance by anchoring operations on assets officially registered in the name of financing companies.
This registration prevents fraud or multiple loans on the same asset, boosting market credibility. Continued growth in collateral registrations is expected.
The value of recorded movable assets reached EGP 3.233 trillion by the end of February, up from EGP 2.522 trillion a year earlier, a 28% increase.
There were about 209,000 registrations, up from 163,000—a 28.3% rise.
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 store assets.
