The Central Bank of Egypt's Directive and Its Impact
Startups in Egypt have found themselves facing a unique set of challenges as they grapple with the Central Bank of Egypt's (CBE) directive to suspend debit card usage outside of the country. To circumvent these limitations, founders have been exploring various solutions, ranging from setting up companies abroad to seeking alternative payment methods.
Debit Card Restrictions Create Headwinds
The CBE directive, effective since early this month, curtailed the use of debit cards abroad, limiting transactions to credit cards and foreign currency accounts. This measure was a response to Egypt's foreign currency shortages during a broader economic downturn. Subsequent restrictions were added, including a cap on overseas cash withdrawals, prompted by instances of credit card holders making foreign withdrawals while not abroad.
Implications for Small Businesses
Small businesses in Egypt, particularly those reliant on debit cards for expenses like social media advertising and software subscriptions, have been disproportionately affected. Debit cards are more widespread in Egypt, constituting 41% of all bank cards, while credit cards are less common, with a penetration rate of 8.6%. This regulatory move has created challenges for those who depended on the convenience of debit cards for international transactions.
Startups Seek Creative Solutions
In response, startups have initiated efforts to mitigate these restrictions. Some have considered registering companies abroad or opening virtual bank accounts in more accommodating locations. These strategies aim to maintain access to essential financial services despite local constraints.
Exploring Alternative Billing Solutions
Founders have been resourceful in their quest for solutions. Exploring alternative billing options has become a trend among startups. They are seeking to transact in Egyptian Pounds (EGP) for services such as social media advertising accounts. Payment gateways and fintech companies like Fawry and prepaid card providers like Meeza are emerging as alternative avenues to facilitate these transactions.
Incorporating Billing Services into Operations
To navigate these challenges, some startups are incorporating billing services into their offerings. For example, Telda, an Egyptian online banking startup and prepaid card provider, has introduced a billing service. This feature allows users to pay for various social media and streaming platforms directly through their app via Fawry, offering convenience and flexibility.
A Shifting Landscape for Egyptian Startups
The landscape for Egyptian startups is evolving in response to the CBE directive. While the impact of these regulations is expected to be felt most acutely by smaller startups, those that have secured investments from global investors may consider adapting their operations and banking arrangements to circumvent these constraints. The ability to pivot and innovate will be crucial for these businesses to thrive in the face of evolving financial regulations.