Following the Central Bank of Egypt (CBE) directive, local banks have suspended the use of debit cards outside of Egypt and restricted credit card usage abroad to transactions valued at $250 per month.
Since October 9 2023, the available payment methods for transactions outside of Egypt were restricted to credit cards and cards associated with foreign currency accounts. This decision was a response to Egypt’s foreign currency shortages during a more extensive economic downturn.
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Additional limitations on the use of credit cards for overseas transactions would be introduced a few days later, including a cap on overseas cash withdrawals. The CBE said that this decision was prompted by instances where credit card holders were making foreign transaction withdrawals even when they were not abroad.
According to local publications, many small businesses in Egypt heavily depend on debit cards for settling bills related to social media advertising accounts and software subscriptions. This reliance on debit cards is primarily because they are more prevalent in Egypt, constituting 41% of all bank cards, whereas credit cards are less common, with a penetration rate of 8.6%.
According to a paper by a local university, the decision ‘has not taken into account startups and sole proprietorships whose businesses depend on debit cards for foreign transactions.’
The impact of these restrictions is expected to be most strongly felt by smaller startups and businesses that have not secured funding from regional or global investors. Those that have received investments from global investors are likely to consider incorporating their operations abroad and maintaining bank accounts located outside of Egypt to mitigate the effects of these limitations.
Startup founders have been actively seeking alternative solutions to address the limitations on debit card usage, including registering a company or opening virtual bank accounts in more distant locations to work around these constraints.
Others are exploring alternative billing solutions that allow them to transact in Egyptian Pounds (EGP). For instance, they can make payments for social media ad accounts through services provided by payment gateways and fintech companies like Fawry and prepaid card providers like Meeza.
Additionally, some startups have incorporated billing services into their offerings. For instance, Telda, an Egyptian online banking startup and prepaid card provider, has recently introduced a billing service that allows users to pay for various social media and streaming platforms through their app via Fawry.
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