Amr A.G. Hassanein and Mohamed M.G. El‐Barkouky
The purpose of this paper is to evaluate the current mortgage system in Egypt.
Abstract
Purpose
The purpose of this paper is to evaluate the current mortgage system in Egypt.
Design/methodology/approach
The institutional and regulatory structures of two international mortgage systems, namely: the USA and the Malaysian were examined through an extensive literature survey. On the other hand, data on the Egyptian mortgage system were collected, analyzed, then compared to both practices.
Findings
The results identified several limitations in the Egyptian mortgage practice such as: inefficient procedures of property registration; absence of an efficient mortgage secondary market; relatively high‐mortgage lending rates; non‐existence of various types of mortgage instruments and lack of credit enhancement tools.
Research limitations/implications
The study presented several recommendations for improving the existing mortgage practice, among which were: realizing a proper secondary market and lowering mortgage lending rates.
Practical implications
By 2002, a sharp decline was experienced in the sales of housing units due to the various credit restrictions adopted by banks, coupled with high‐interest rates in relatively short amortizing periods. Accordingly, home finance process was held up, as the purchasing power of low‐ and middle‐income homebuyers was not sufficient to buy homes with such provisions. This situation imposed the need for a long‐term housing financing mechanism that would directly retrieve the residential construction sector.
Originality/value
This research was innovative in the sense that it directed the Egyptian Government's attention to the existence of Cagamas in Malaysia and accordingly, the first liquidity facility company in Egypt was established in June 2006.