State-owned bank the National Bank of Egypt (NBE) collected EGP 35 billion (around $ 4.46 billion) through the newly-issued "platinum month certificate," a fifth of which has come from outside the banked economy, an NBE official said Monday.
On Nov. 8, the NBE offered the savings certificate in Egyptian pounds at a high annual interest rate of 12.5 percent, with payments made monthly to certificate holders. The certificates mature after three years, starting from the day after the date of purchase and is automatically renewed.
Yehia Aboul Fottouh, executive board member at the NBE, told state news agency MENA that EGP 7 billion (some $894 million) of the money depostied since the certificate's issuance was from the non-banked economy.
He added that demand for the certificates has surged in the past few days. Other than the high return offered on the savings schemes, there is huge demand for them because of the periodic returns made out to holders, timed conveniently every month, and because payments are disbursed regularly throughout the duration of the certificate.
The Egyptian government had previously collected $8.17 billion (64 billion Egyptian pounds) within eight working days in September 2014 by issuing five-year investment certificates at an interest rate of 12 percent.
At the time, the government sold the public certificates dubbed the Suez Canal investment certificates, to build what it called the "New Suez Canal," a project that involved deepening parts of the 146-year-old waterway and constructing a 35-kilometre long by-pass or parallel canal. The project was inaugurated last August but a developmental project to modernise the entire area creating a logistical hub is in the planning phase.
Aboul Fottouh said the purpose of issuing the platinum certificates is to create "financial inclusion" and to increase Egypt's banked population. He added that issuing certificates is the most practical way to reinvest in various projects.
Platinum certificates offered by the NBE cost EGP 1,000 each ($128).
State and private banks have recently raised the saving scheme on certificates to 12.5 percent. This interest rate was around 2.5 or 3 percent higher than the available return on a saving scheme offered in Egyptian banks at the time.
Although attractive to many, the high interest rates offered on the certificates have been linked to recent dips in the Egyptian stock exchange, several analysts have previously told Aswat Masriya.
Muhammad Elnagar, the head of research and investment at El Marwa Brokerage previously told Aswat Masriya that the higher interest rates reduce liquidity in the stock market, especially for Egyptian investors who have sustained "great losses" since the start of the year.
The higher interest rate can be a "guaranteed" compensation for these losses, he said.
The certificates are also prompting many to believe that the CBE will raise the domestic interest rates.
