Restrictions on Card Use in Egypt Put Startups to the Test

The Egyptian startup ecosystem is facing a new challenge after local banks decided to suspend the use of debit cards outside of Egypt and limit credit card use abroad to transactions worth $250 per month. This decision, which came into effect in early October, was prompted by the Central Bank of Egypt (CBE) and has caused major concern within the business community, particularly for startups and companies that rely on foreign software technology for their operations.

The Impact of Card Restrictions

The restrictions have imposed a cap on overseas withdrawals and forced many small businesses, which rely heavily on debit cards to pay for social media advertising and software subscriptions, to find new ways to pay their bills. These businesses are primarily affected as debit cards are more widespread in Egypt, accounting for 41% of bank cards, compared to only 8.6% for credit cards.

The decision has been criticized for not considering the impact on startups and sole proprietorships that depend on debit cards for foreign transactions. Many of these businesses have not raised funding from regional or global investors and are likely to be most affected by these changes.

Businesses in Crisis

One of the businesses affected is Infinity, an Egypt-based reseller of domains and hosting. The founder, Mohamed Elmenoufy, expressed his devastation at the news, as his business relies on cloud technology and has to pay for these hostings outside of Egypt. Due to Elmenoufy’s inability to pay subscription bills through his debit card, the company’s operations have temporarily been put on hold.

Many startup and business owners are now reaching out to social media platforms, hoping to connect with those who have a bank account outside of the country. Hisham Eladawy, founder of the HRtech startup Mohr, reports that his inbox has been flooded with messages from people making the same request.

The Future of Egyptian Startups

These card restrictions may force founders to reconsider venturing into entrepreneurship and potentially threaten the existence of current businesses. Salah Eldin Mohamed, CEO of Tasmimak, a SaaS platform for graphic design, is considering moving his business overseas to keep his business afloat and avoid future threats.

The debit card crisis has pushed many Egyptian startups to consider expanding their business abroad due to the growing economic instability and steep pound devaluations. This situation could further weaken the overall investment sentiment in the country.

Possible Solutions

To mitigate the impact of the debit card crisis, some have suggested the establishment of a relief fund and the importance of forging collaborations among startups. Startup founders have been exploring alternatives such as opening a virtual bank account abroad or registering a company further afield.

Some are turning to existing billing solutions offered in EGP, such as those provided by payment gateways and fintech company Fawry and prepaid card provider Meeza. Other companies, such as the software development firm Extreme Solution, have developed new billing solutions in EGP for Google Cloud and Google Workspace services.

While these solutions offer temporary relief, they are limited to certain types of services and products and often have a cap on the number of transactions. This adds to the overall state of uncertainty faced by Egyptian startups. Despite these challenges, the entrepreneurial spirit remains strong as businesses seek innovative solutions to navigate these testing times.