The investment companies and their impact on the Egyptian economy

Unlicensed Islamic investment companies have had a major effect on the Egyptian economy since 1985 and have adversely affected banking and economic policy. They kept private books and could switch back and forth between Egyptian and foreign currency. Deposits in these companies were approximately $4 billion (compared to $25 billion in Egyptian banks). Investors in these institutions lacked both clear legal status and governmental protection of their investments. Such enterprises engaged in speculative activities and paid annual interest rates of 24% on deposits. They operated illegally (they were unregistered and violated the law of foreign exchange) and controlled the foreign-exchange rate by monopolizing the foreign-exchange market. In 1988, the government passed legislation allowing a grace period before these companies had to choose between accepting regulation on deposits or closing. Companies that stayed in business had to state their financial position and deposit their