The money pool, commonly known as the “Gamaaya”, is a community where members borrow and save money together. The lack of bank benefits, of which many poor people and borrowers cannot make use, has caused people to participate in money pools, an old custom amongst mainly rural and popular Egyptians.
“I want to marry my daughter and don’t have enough money, and my income does not bear bank loans interest and long and complicated procedures, so I decided to join a money pool to avoid interest,” said Fatma Anwar.
Anwar said that she does not have a certificate of education and does not understand the procedures surrounding bank loans, which also have high interest rates.
Ola El-Khawaga, the Research and Awareness Department director at the Egyptian Banking Institute (EBI), said money pool initiative is ideal for a particular segment of the community. It is, however, only a temporary solution, and has a very limited amount of money.
El-Khawaga added that the money pool provides speedier access to money than with bank loan procedures, and at a specific time and more speed, although it cannot replace banks.
This type of community finance is widespread due to a lack of banking awareness, El-Khawaga said, adding that the money pool concept comes out of making use of social capital by trusted people.
“Banks should offer new products suitable for those people, reconsider interest rates on loans for low-income people, shorten and ease the loans procedures and offer new incentives to attract them,” El-Khawaga said. “The Central Bank of Egypt (CBE) should launch a new initiative or campaign to raise the banking awareness in the community especially in rural and popular areas.”
Meanwhile, Ahmed Raaouf, the administration manager at the Gm3yah.com association, said the association started to provide such services three years ago, and has witnessed great demand and success.
Raaouf added that his association provides loans based on Islamic finance, without interest or usury, which prevent people from risk of prison in case of default.
“The association provides money for borrowing with no limit and anyone can get without paying any benefits and the borrower pays a monthly premium is estimated according to the loan amount and the monthly salary,” said Raaouf. “The borrower can obtain a third of the amount of needed money in the first six months of premiums payment.”
He noted that the borrower receives money through official contracts documented at government agencies that are subject to the courts, which prevents the existence of any suspicion of usury.
The average loan interest in commercial banks is between 14-16% of the loan and changes, according to the amount of loan and its period.