Egypt's banks, despite a letup, still spawning capital

After a period of quick growth in the 1970s, the proliferation of banks in Egypt is being slowed. But the ''open door'' for banking - the sector of the economy that benefited the most from this policy - is far from closing.

The Egyptian government, through its Central Bank, seems to be trying to cope with supervision of Egypt's four large government-owned banks, the country's 65 commercial banks, and the 10 development banks.

Early last year there was a slowdown in granting letters of credit and establishing new banks. This was primarily because commercial banks were being criticized for stimulating imports and hurting the trade balance. (Imports consequently fell early in the year, then picked up; overall, imports are down $ 200 to $300 million from the 1981 level.)

But Egypt seems committed to liberal banking. The government places no control on Egyptians' right to foreign exchange. Egyptians can send money out of the country. An American economist says one reason Egyptians abroad remit so much money home is that they have no fear they will not be able to get their money out of Egypt in the future.

The government has also adopted a lenient attitude toward the ''free market, '' or black market, exchange system. Although much government revenue is lost by allowing the differing exchange rates to exist, the government seems unwilling to devalue or float the Egyptian pound. An Egyptian economist interviewed by the Monitor argued that even the money flowing into the black market eventually ends up in the Egyptian economy, and therefore benefits the country.

Although public-sector banks are hurt most by the disparity in exchange rates , economists note that the four big public-sector institutions - the National Bank of Egypt, Bank of Alexandria, Bank Misr, and Banque du Caire - bring in higher profits year after year because of their monopoly over public-sector industry.

Private Egyptian banks seem limited at present because of the largely short-term nature of deposits. This prevents term lending to finance more complex private development in the country. Bankers say they would like the Central Bank to provide discount and other facilities as a lender of last resort.

Although still having to grapple with the public-private conflict in the Egyptian economy, banking here has come a long way since 1974, when those four public banks were the only ones allowed in the country. Nationalization and amalgamation of private banks began in the 1956 Suez crisis. At that time virtually all of the 35 banks were owned by British, French, or Turkish companies. When Britain and France imposed an economic boycott on Egypt, the foreign banks almost succeeded in stopping Egypt's foreign trade.

But with the initiation of President Sadat's ''open door'' policy in 1974, recalls Hamid al-Sayih, former economy minister and chairman of the National Bank of Egypt, Egypt embarked on creation of a domestic capital market.

''We had to develop our own financial market again,'' says Mr. Sayih, who is now chief officer of Egypt's newest commercial bank, the Cairo-Hong Kong Bank. ''Because of our economic program we had to have very strong support from international financial organizations, including banks. The real difference between a developed and a developing country is that a developed country can depend on its own banks rather than borrowing abroad.''

In eight years, 65 new banks were born in Egypt.

''Banks sensed immediately that Egypt is really on the threshold of a major development effort that will be with us 100 years,'' Mr. Sayih says.

The Cairo-Hong Kong Bank is a good example of one of the new commercial banks in Egypt, established, Mr. Sayih says, ''to finance a variety of projects and buy participation in syndicated loans or direct loans.'' The bank is 40 percent owned by the Hong Kong-Shanghai Bank (the world's third largest), 9 percent by private Arab investors, and 51 percent by private-sector Egyptians, with the exception of the Egypt Reinsurance institution, which owns 7.5 percent of the Egyptian share.

Because it is 51 percent Egyptian owned, the new bank can deal in local and foreign currency.

Though his may be the last commercial bank granted a license for the present, Mr. Sayih says he is not concerned the government is preparing to halt the growth of this field altogether: ''The door will not be closed. But the government wants to pause awhile. The central bank is worried about supervision. My own view, however, is that you can never have too many banks.''