By: Ali Ahmed

Financial literacy
A bank is a financial institution licensed to
receive deposits and make loans. Banks may
also provide financial services, such as wealth
management, currency exchange, trade
finance, custody services and safe
deposit .boxes
 INTEREST
PAID
INTEREST
RECEVIED

!!! HOW BANKS WORK

 CENTERAL BANKS

COMMERCIAL BANKS

INVESTMENT BANKS

: TYPES OF BANKS
 INTEREST DIFICIT UNITS
SURPLUS
UNITS

EAR/APY APR

- APY

APR

HOW BANK
MAKE PROFITS

IMPORTANCE OF COMMERCIAL BANKS

 » CHECKING/CURRENT ACCOUNTS
» SAVING ACCOUNT
» CERTIFICATES OF DEPOSIT
» DEBIT CARD
» CREDIT CARD
» MORTGAGE LOAN
» PERSONAL LOAN
» CAR LOAN
» EDUCATIONAL LOAN

?? What does banks offer

 Remove the deficiency of
capital by stimulating
savings and investment

» A very important characteristic of an under-

developed economy is deficiency of capital
which is the result of insufficient savings
made by the community.
» Underdeveloped economies hardly save 5% of
the national income, whereas they should save
and invest at least 15%.

HOW BANKS PARTICIPATE IN THE

?? ECONOMY
 SOURCES OF
FINANCE

» Banks represent an important

source of finance through
providing different types of
loans .

INTERMEDIARY BETWEEN LOCAL

BANKS AND FOREGIN TRADERS

»Banks help in finalizing deferred

payments, arrangements between the
local and foreign firms through
undertaking foreign exchange business
 HELP IN PROPER
ALLOCATION OF FUNDS

» The banks operate primarily for profits.

When the banks lend their funds for more
productive uses, their profits will be
maximized. A region/economic sector with
growth potential attracts more bank funds

IMPROVE STANDARD OF
LIVING

» Banks improve the standard of living of the

people through supporting the economy as a
whole
 HELPS IN PROVIDING FUNDS
FOR THE GOVERNMENTS

Helps in facilitating
monetary policy

» Banks help in facilitating monetary

policy formulation and developing
entrepreneurs are some of the other
roles played by commercial banks in the
economic life of every country
 The CBE is the regulator for all banks
operating in Egypt. It guarantees the
safety of funds, adequacy of capital base
and ensure adequate risk taking behavior

:The central bank of Egypt

This simply what a central
bank does !!
 Innovatio
n Fund
SME
Initiative
Mortgage
Finance
Electronic
Initiative
Payments
Financial
Inclusion

CBE INITIATIVES:
 GDP

» the CBE encouraged

banks operating in
Egypt to participate in
the activities of the
Arab Financial Inclusion
Week

: Financial Inclusion
These activities include approaching remote
areas, clubs, and universities by banks to present
their products. Customers also were allowed to
open accounts without expenses or a minimum
limit.

Financial inclusion
» In 2017, the “National Council for Payments”
was established with the purpose of reducing
the use of banknotes outside the banking
system, stimulating the use of electronic
payments, and developing the national
payments systems

Electronic Payments
» The government has signed a MOU with
Visa to enable digital payment of
government subsidies to 22 million
Egyptian families
» The Ministry of Communications & IT and
MasterCard signed an MoU to extend
financial services to 54 million Egyptians.

Electronic Payments
 Above Middle Low income
middle income
10.5% 8% 5% - 7% Interest
Rate
15k for 10 k for
Individuals individuals Max
&20k for 14k for < 2,100 Monthly
Households households Income

Mortgage Finance Initiative

» In January 2016, the CBE launched an
initiative directing banks to increase finance
provided to SME with the target to have
SMEs accounting for 20% of banks’ total
loan portfolios by the end of 2019
» Credit guarantee company is also issuing
guarantees to SMEs to minimize the risk for
banks

SME Initiative
 » In February 2018, CBE governor
announced the launching of EGP 1 billion
fund, which will support innovation.

Innovation Fund
 Career Banking
decision terms &
making products

SAVING Budget

Financial awarenessand planning

investing and
spending
Career decision Banking terms & SAVING and Budget planning
making products investing and spending

Self-
employed V.S Employee

Rewarding in the
long-term Employee benefits

No boss Steady income

Choosing working Financially organized

hours Less Time
Freedom to manage the Consuming
company Better Work-Life
Self-accomplishment Balance
 Career decision Banking terms & SAVING and Budget planning
making products investing and spending

Funding strategy
» Bootstrapping

» Family/Friends

Where to find support for self-

employed business ??
3. Incubators/Accelerators

4. Investor
 Career decision Banking terms & SAVING and Budget planning
making products investing and spending

2017 2018

V.S
100 L.E 115 L.E

INFLATION

» In brief, whenever you invest your money, you should expect

to get a higher return in the future.
» However investments come in different shapes:
1. Lifetime of the investment: the longer it is the higher the
return (interest rate)
2. Risk: the riskier it is the higher return
 Career decision Banking terms & SAVING and Budget planning
making products investing and spending

B) INTEREST RATES AND

INFLATION
» Putting your money in the
bank is not considered an
investment, the interest rate
offered is simply to keep the
value of your money.
» Everything gets more
expensive, so interest rates
try to cover the increase in
prices, so that you are able
to buy the same thing after
a period of time.
 Career decision Banking terms SAVING and Budget planning
making & products investing and spending

C) Credit Cards and Loans

» Credit cards and loans

are two faces of the
same coin, borrowing
money that is not yours
to buy something you
can’t afford now, but
hope to be able to pay
off later.
 Career decision Banking terms SAVING and Budget planning
making & products investing and spending

A) The Leverage Of Interest

Rate
» As mentioned before,
interest gives leverage that
if you save 10 EGP today,
when the 10 EGP could buy
you 2 cans of a soft drink.
In 10 years, the 10EGP at
the bank will be 30EGP,
which would buy also 2 cans
of a soft drink in 10 years
Career decision Banking terms SAVING and Budget planning
making & products investing and spending

» B. HEDGING: Diversified Investment

Portfolio (hard currency, real estate,
gold, stocks… etc.)
75
25 %
% RIS
RIS K
K
AVE
R.

Total portfolio risk :

50%
Career decision Banking terms SAVING and Budget planning
making & products investing and spending

» When creating an investment portfolio, make

sure to add items that behave in opposite
way.
G U
O
L S
D D

» If you have both USD and Gold investments

in your investment portfolio, their movements
will neutralize each other and you shall
maintain accordingly a steady portfolio.
 Career decision Banking terms SAVING and Budget planning
making & products investing and spending

» A) Future Financial Planning

» It is very important for every person to have a
financial plan for the following reasons:

1. It makes you in control of your wealth

2. It avoids cases where you are in negative cash
3. It gives you a peaceful mind so that you can
treat yourself by spending more knowing that it
is in your budget capabilities
Career decision Banking terms SAVING and Budget planning
making & products investing and spending

50-30-20 BUDGETING METHOD

50% - NEEDS
GROCIERS
HOUSING
UTILITIES
20% - SAVING HEALTH INSURANCE
CAR PAYMENT

30% - WANTS

SHOPPING
DINNING OUT
HOBBIES
 Career decision Banking terms SAVING and Budget planning
making & products investing and spending

B) savings vs. Installments (credit

vs. Debit)

SAVE ? TAKE LOAN/USE C.C ?

» Credit is simply borrowing from your future. You take

a loan to enjoy the product today, hoping that tomorrow
you will have excess money to pay off your debt.
» In terms of financial independence, loans should only
be used for business needs. You take a loan at 15%,
because your business will make you earn 20%, so you
are seeking the 5% profit of money you didn’t have.
» QUESTIONS ??