On the 21st of March 2022, the CBE raised the interest rates by 100 bps for the first time in five years, after calling a special monetary policy meeting. Minutes later the Egyptian Pound tumbled by over 15% to 18.2 EGP/USD. In response, the National Bank of Egypt and Banque Misr declared they will issue a one-year saving certificate at an annual interest rate of 18%.
What is a Certificate of Deposit?
A certificate of deposit (CD) is a type of savings account that usually has a fixed interest rate and time period (maturity period). CDs generally have higher interest rates than normal savings accounts but they don’t allow easy access to your money until a term ends. If you withdraw your money before the maturity date, you are subject to an early withdrawal penalty, which can significantly reduce the interest you earned on the CD.
Interest Rates of CDs across Egyptian Banks
There are different types of CDs. CDs can have:
- Different denominations (EGP, USD, EURO etc.)
- Floating -variable- or Fixed rates
- Different Maturity Dates
- Different Payout Periods (monthly, quarterly, semi-yearly, yearly)
- Different Minimum Amounts
To stay consistent throughout the comparison, I focused on EGP denominated CDs with fixed interest rates, a maturity of 3 years and monthly payments across different banks in Egypt. I called different banks across Egypt to determine their rates. The initial comparison was done in July 2021 but this table has been updated in March 2022 after the devaluation of the Egyptian Pound. The interest rates of private banks are expected to increase further in the coming days and I will make sure to update the table accordingly. Here’s my summary:
|Bank Name||Annual Interest Rate||Maturity||Frequency||Min Amount||Denominations|
|Banque Misr||18.00%||1 year||Monthly||EGP1,000||EGP1,000|
|MID Bank||11.25%||3 years||Monthly||EGP1,000||EGP1,000|
|Bank Misr||11.00%||3 years||Monthly||EGP1,000||EGP1,000|
|Egypt’s Housing & Development Bank||10.50%||3 years||Monthly||EGP1,000||EGP1,000|
|QNB Al Ahly||10.50%||3 years||Monthly||EGP1,000||EGP1,000|
|Bank Audi||10.50%||3 years||Monthly||EGP5,000||EGP1,000|
|Suez Canal Bank||9.00%||3 years||Monthly||NA||EGP1,000|
This comparison was conducted during July 2021. Please note that interest rates are subject to changes depending on various macroeconomic factors.
Clearly, state-owned commercial banks offer higher interest rates. NBE and BM have the highest one-year yielding CDs in Egypt of 18%. As mentioned earlier interest rates have increased in response to the devaluation of the Egyptian pound. This table will be updated in the coming days according to the latest developments.
Why should I buy CDs?
Generally, the more risky the investment is the higher the expected return of the investment. CDs of Egyptian banks offer a very good risk-reward ratio as they offer relatively high rates -even in real terms- and are considered a low risk investment. Headline urban inflation has hit 5.7% in August 2021 which is the highest in 9 months; nevertheless, it still means that the real return of the investments is very high especially given the low interest rate environment that we are currently living in. Interest rates in the US are hovering around 0% and in Switzerland and Japan have reached negative territory.
Other investments with high interest rates?
There are other investments that could potentially offer higher rates than CDs in Egypt. However, these investments are considered riskier. Buying Egyptian stocks, for example, could potentially offer returns that far exceed the returns of CDs -click here for my top lessons investing in the Egyptian stock market-. However, this requires a lot of research, hard work and good market timing. You could do everything right and still lose money in the stock market. That is why I would always recommend you not to put all of your money into stocks and to diversify your portfolio. Other high-risk, high-return investments that have recently been gaining momentum in Egypt are venture capital and private equity where you invest in startups or private companies but that’s a story for another post -click here to take a look at the top funded startups in Egypt-.