While remittances play a vital role in Egypt’s economy, with women receiving the majority of funds, only a fraction is invested. Financial constraints, a risky investment climate, and systemic barriers like corruption and bureaucracy hinder households from turning remittances into economic growth drivers.
Remittances by Egyptians working abroad have long been crucial to the local economy. However, it is high time to delve deeper into this phenomenon and work towards maximising the benefits of such a valuable asset.
‘A Study on Remittances and Investment Opportunities for Egyptian Migrants’ is the title of a comprehensive report recently launched in Cairo. The study was conducted by the International Organization for Migration (IOM) in collaboration with the Egyptian Ministry of Manpower and Migration (MMM), the Centre for Migration and Refugee Studies (CMRS) at the American University in Cairo, and the Italian Cooperation for Development.
The study’s significance lies in the fact that Egypt consistently features in literature on the economics of remittances as a prominent exporter of labour and a major recipient of cash inflows.
While the global financial crisis led to an annual decline in remittance flows by 10 per cent, Egypt ranked as the seventh-largest recipient of remittances globally at the start of 2009, with an estimated inflow of USD 7.8 billion. According to the study, remittances accounted for 5.8 percent of Egypt’s GDP in 2008.
Who Sends the Money?
In addition to examining the rules, regulations, and policies governing investment, the IOM study included an empirical survey of 200 remittance-receiving households across Cairo, Monofeya, Fayoum, and Sharkeya. This survey is considered unprecedented, as it sheds light on much of the ambiguity surrounding this economic activity.
The study revealed that Egyptian migration is overwhelmingly a male-driven phenomenon, with men comprising 91 per cent of the remittance senders in the sample. These migrants ranged in age from 15 to 70, with a median age of 35.
Mr. Roberto Pitea, IOM’s regional research officer, told Al-Masry Al-Youm: ‘There is an interesting finding that remittance receivers are predominantly female (70%).’ He also noted that the organisation is now examining whether this trend leads to greater empowerment for women in migrant households, with plans to publish results on this issue soon.
The education levels of migrants were found to be notably high, with 59 per cent holding university degrees—an ironic contrast to the Egyptian population overall, where only 10 per cent are university graduates.
The study further highlighted that 81 percent of migrants are employed in the Arab Gulf countries, with 47 per cent residing in Saudi Arabia, 12 per cent in the United Arab Emirates, 11 per cent in Kuwait, 7 per cent in Qatar, 3 per cent in Oman, and 1 per cent in Bahrain. The remaining migrants are dispersed among other countries, with 7 percent of the total sample working in Europe.
Where Does It Go?
The research team found that remitted amounts ranged from LE110 to LE15,000, with the median sum received by migrant families surveyed being LE1,500. However, variations emerged when the results were analysed at the governorate level.
Respondents from Cairo reported a median remittance income of approximately LE3,000, while in Fayoum, the median was only LE600. This aligns with the profile of migrants from Fayoum, who generally have lower levels of university education and occupy lower-paying jobs.
Interestingly, only 1 per cent of migrants explicitly left the country with the intention of saving for investment. Nevertheless, 20 percent of remittance-receiving households channelled funds into various forms of investment. Among these, nearly half invested in real estate, while smaller numbers directed funds towards Small and Medium Enterprises (SMEs), stock markets, or agriculture.
The vast majority—around 80 per cent—prioritised using remittances to meet the daily needs of their families, including healthcare and education.
Although he advocates for greater investment of remittances, Pitea does not dismiss the significance of this predominant spending trend. ‘Twenty-seven per cent of respondents said they used remittances for education and healthcare, which are forms of investment in human capital. This highlights a critical role that remittances play in Egyptian society, beyond poverty alleviation,’ he said.
Why Most Migrant Households Do Not Invest
The study highlights that around 80 percent of migrant families interviewed across the four governorates do not engage in investment.
When asked why they refrain from investing, the most common explanation given by household heads was concerns over pre-existing financial constraints, coupled with limited or no access to formal credit.
Additionally, 20 percent of respondents described the investment climate in Egypt as ‘too risky,’ while another 10 per cent cited a lack of information about available investment opportunities.
A significant majority of respondents also believed that government policies play a crucial role in their investment decisions. Corruption in its various forms was identified as the primary obstacle to investment in Cairo, whereas high taxes were the main concern for respondents in Fayoum.
Similarly, bureaucracy emerged as a significant issue for those interested in investing in both Monofeya and Sharkeya.
This article is originally published by Al Borsa