18 September 2011
The most serious problem with the Ramadan serial al-Rayyan is that it stood wholeheartedly on the side of Ahmed al-Rayyan, despite the serious damage he wrought on the Egyptian economy and the ultimate losses to Egyptian investors. The serial, directed by Shereen Adel and written by Hazem al-Hadidi and Mahmoud al-Bezawi claimed that Rayyan—who was depicted as a lively and affable financial genius—provided great service to the economy and continued to offer high profits to depositors until the government decided to bare its teeth and ruin the experience of fund management companies (FMCs) altogether. The outcome—according to the outlook the serial adopted—was that government intervention led millions of people to lose their savings.
Intrigued by this distortion of reality, I searched my bookshelves for material on the fund management companies, bodies that in 1980s made a strong claim that they abided by Islamic economic rules to attract investors. I found a book entitled Tawtheef al-Fassaad (Corruption Management) by the journalist and writer Badr Aql and published in Cairo by al-Dar al-Arabiya in 1988.
Path to unemployment
In his introduction to the book, the prominent writer Adel Hammouda lashed out at the government for the leniency it displayed when dealing with the FMCs. When these companies finally collapsed, the entire economy was heading into an abyss. The savings rate fell from 12 per cent of the GDP in 1981 to 7 per cent in 1987.
It goes without saying that a lower savings rate implies reduced investment, which in turn results in rising unemployment. Egyptian banks suffered much as savings poured into FMCs. The dealings by the National Bank of Egypt fell from EGP51 million in 1981 to EGP37 million in 1987, while those of Banque Misr fell from EGP40 million to EGP35 million in the same period. Moreover, because the FMCs absorbed huge quantities of foreign currency, the dollar exchange rate against the Egyptian pound skyrocketed.
Hammouda indicated that some senior officials illegally amassed huge fortunes when they helped individuals like Rayyan to collect billions of pounds and transfer their money overseas. These officials included prime ministers and MPs.
In 14 chapters, the book provides a thorough analysis of the workings of prominent FMCs (including al-Rayyan, al-Saad, and al-Hoda). Most of these companies started with illicit currency trading. Salafi sheikhs helped FMCs by a fatwa (Islamic legal opinion) that prohibited dealing with banks on the grounds that interests constituted a form of usury. Some journalists and media institutions, Hammouda reminded, helped propagate for these companies. Religion was effectively used to manipulate the management of funds that absorbed Egyptians’ savings.