Egyptians resort to 'Buy-Now-Pay-Later' as economic crisis continues
As Egyptians attempt to survive amid an economic crisis where income is not proportional to rising prices, many have resorted to Buy-Now-Pay-Later (BNPL) plans.
In recent months, fintech firms have surged in the Egyptian market, enabling customers to purchase products or services through loans they pay back over an extended period of time, usually from three up to 60 months.
The New Arab visited the booth of ValU at Mall of Egypt in Giza, the most popular BNPL company in the country, enabling clients to buy what they need and pay for that later in instalments plus interest.
"Over the past few months, there has been an increasing demand for our services from different social classes, mostly middle and upper-middle classes," one sales agent said to TNA.
"We have access to the client's financial status at banks based in the country such as credit card limits and saving accounts [their I-score] and based on this data we provide the limit of purchase. For example, if a client owns a car and a credit card with a reasonable credit limit, s/he is offered up to 150,000 Egyptian pounds/year," he added.
ValU - one of over 30 companies that offer similar services in Egypt - has a roughly 30-per cent market share. The company finances purchases from 2500 stores that sell almost everything such as appliances, electronics, clothes and even groceries.
A 32-year-old accountant found himself obligated to purchase appliances for his new home before marriage via a BNLP plan.
"There is no other way. The prices of appliances have skyrocketed since March last year by almost double and my income has increased by about 10%," he said he TNA as he was filling out a ValU application.
"Seeking buy-now-pay-later plans reflects the declining value of average incomes amid rising prices due to the mounting exchange rate of the US dollar against the Egyptian pound in a country that is mostly dependent on imports," Ahmed Hassan, a financial analyst, told TNA.
"It also echoes a major problem, a trend when people buy what they cannot afford in a bid to maintain their living standard, amidst a high inflation rate and soaring prices, ending up in debt," Hassan added.
Since the pound was first floated in 2016 and dropped in value, financial inclusion in Egypt has grown by 131%. According to the Central Bank of Egypt, 39.6 million citizens of the almost 104 population have accounts enabling them to conduct financial transactions.
Earlier this month, the Egyptian pound weakened by more than 13%, reading a new low of below 32 Egyptian pounds against the US dollar.
Currently, US$1 is equivalent to about 31.71 Egyptian pounds.
The Egyptian economy has been hit hard by the Covid-19 pandemic and the recent Ukrainian-Russian war, events that also disrupted global markets worldwide.