Arab Finance: Precious metals and gold investments are considered the most secure options available during times of high inflation and currency depreciation. There are additional reasons to invest in precious metals and gold. Recently, the Egyptian market has been introduced to alternative ways to invest in metal and gold digitally. Evolve Holding is one of the leading companies to introduce a full-fledged precious metals ecosystem supported by technology.
So, Arab Finance has interviewed Sameh El Torgoman, CEO and Founder of Evolve Holding, who explained to us the innovative investments in precious metals and gold.
1. First and foremost, could you tell our readers how the idea of creating precious metals investment funds came to be?
At Evolve Holding, our objective is to support the development of a well-structured, robust, and globally integrated precious metals ecosystem in Egypt as well as work to enable banking and non-banking financial institutions to provide innovative precious metals investment products. The current Egyptian precious metals market is characterized by distortions such as the absence of a transparent pricing mechanism, the inconsistency of purity compared to international standards, a lack of liquidity due to the absence of adequate and regulated investment and financing channels, and dependence on cash transactions. The idea for creating a precious metals investment fund was rooted in the need for a democratized gold-backed investment product, and we believe that the fund will help create an applicable environment that will protect its investors from the currency's informal and distorted market.
Providing a regulated, safe, and sustainable savings and investment channel will further support the Central Bank of Egypt’s (CBE) financial inclusion efforts by attracting Egyptians’ gold savings into the financial sector, which were directed to the informal gold market. This will contribute to limiting cash transactions, restraining money laundering and fraud activities, and providing efficiency and transparency to both individuals and businesses.
The fund will democratize access to gold and monetize substantial frozen capital currently held in physical gold assets across the country, as the fund units are sold in a minimum denomination of EGP 100. This will ultimately unlock wealth and create added value for the Egyptian economy. Offering an EGP-denominated gold-backed investment fund will expand the size and value of both the domestic gold market supply chain and the capital market, increasing their respective growth contributions to gross domestic product (GDP).
2. How does the gold-backed fund work? And how does it differ from the traditional ways of getting funds and loans?
Gold-backed funds allow investors to purchase certificates that hold gold bars as their underlying asset with no minimum lockup time directly from their banks and brokers. These certificates represent the equivalent ownership of gold and offer clients the opportunity to invest directly in gold and gain exposure without the need to hold the physical commodity. Buying and selling investment certificates can be carried out by any institution that has the license to distribute fund ICs. Current examples include banks, brokerage companies, investment platforms, and innovative digital distribution and payment solution providers. The fund sources its gold in EGP from internationally certified Egyptian refineries, and subscriptions and redemptions are also in EGP.
3. How does Evolve Investment Holding liaise between digital retail, the capital market, logistics, and the customer?
What you have mentioned are some of the central elements of the gold market and supply chains. These different components should be assembled harmoniously and work following international standards to create the basic infrastructure required for a full-fledged and active gold market. One of Evolve's primary goals is to establish these linkages in the Egyptian market.
Our subsidiary companies form the ecosystem's key pillars and business activities, ranging from the procurement of gold from local and global certified refineries, market making, and gold trading to the design of gold-backed investment products, launching a digital gold retail platform, and providing state-of-the-art logistics and assaying services.
4. Evolve Holding's trading arm, GNT, introduced the London Bullion Market Association (LBMA) standards in Egypt; how did this affect the trust of your investors?
GNT provides services at the standard of LBMA with regards to sourcing, movement, and earlier on before forex crunch bullion. Everything is accounted for, which increases consumer trust: invoiced, non-cash, internationally warranted purities, digitally enabled, globally insured, and collateralizable. This increased clients’ trust in our organization. The partners we have partnered with and introduced to the ecosystem strengthen and reaffirm trust.
5. Can you tell us about your target audience? And can you walk us through the investor’s journey to benefit from your services?
Our offerings cater to all income segments that are clients of banking and nonbanking financial institutions. Our offerings are equally suitable for EGP 1000 and EGP 500 million portfolios. The investor journey entails filling out all necessary documents to have access to the wide variety of offered products and services.
6. How can a society that currently buys physical gold from stores transition to digital purchasing?
Current trends show the Egyptian population’s readiness to adopt digital solutions, as seen by the rapid growth of the population’s frequent digital usage, including online presence and payments. There has been significant growth in the number of internet and mobile internet users, with an estimated compound annual growth rate of 9%. Similarly, the population that made or received digital payments also stands at a compound annual growth rate of 9%, while the number of pre-paid cards has a growth rate of 13% annually. These factors prove to be a steering force that will drive the transition from buying physical gold from stores to digital purchasing.
Furthermore, the growth of digital payments paints a clear picture of digital adoption in Egypt. The total transaction value of digital payments is projected to reach $14.15 billion in 2023, with an estimated compound annual growth rate of 11.36%. The digital commerce segment makes up 80% of the total transaction value of digital payments, which is projected to reach $11.26 billion in 2023. Similarly, according to the CBE, the number of e-wallets in the Egyptian market grew over the past three years to 26 million, up from 9 million in previous years, and transactions using e-wallets increased to EGP 268 billion in value over the same course, up by 205% compared to previous years. The growth of digital payments, coupled with accessible and easy-to-use interfaces, competitive pricing, and flexible solutions, further prove the case for the transition to digital purchasing.
Our digital structure offers investors incentives and benefits that are otherwise absent in traditional brick-and-mortar purchases of gold. They include accessibility and diversity of products; compliance with domestic legal frameworks; fair pricing; accurate purity and weight based on international standards; hassle-free transactions through digital payments; and instant liquidation, storage, and delivery. We also offer our customers convenience, a low minimum investment, divestment options, and the ability to unlock financing backed by their holdings. Currently, gold jewelry and coins sold in brick-and-mortar outlets are a comparatively expensive form of gold investment because they involve high markups and workmanship costs that are never retrieved in value when sold. Jewelry and coins are also of lesser purity than gold bars and, therefore, hold less value, making them less advantageous investment options. Jewelry and coins are also less liquid compared to gold bars, as they require longer recycling processes to sell. When it comes to gold bars in Egypt, most do not meet international and well-established standards of weight, purity, and origin and are therefore not considered investment-grade gold.
7. Evolve Investment Group received The Global Economics award for the "Most Innovative Gold-Backed Investment Products" at the end of 2022. What did this award mean to you? And how is this in line with your company’s vision and plan?
It was a pleasure to be the first organization in Egypt to receive such an award. The award recognizes our continued efforts in collaborating with the financial services sector and regulatory authorities to design frameworks that would enable the provision of alternative and innovative gold-backed investment and financing products, unlock wealth, and create added value for the Egyptian economy.
8. How have global changes in the precious metals market, particularly the gold market, affected your business?
Gold is considered one of the most secure investment options available; it holds its value and is a secure and highly liquid asset. In times of high inflation and deterioration in the value of fiat currencies, gold acts as a currency hedge and wealth preservation instrument. As a result, the value of gold rises during times of uncertainty or economic crisis, as investors seek safer investment options rather than equity market instruments, which are vulnerable to a variety of economic and geopolitical factors. The world is now witnessing economic uncertainty, restrained growth, and high inflation amid disruptions in global supply chains, brought about primarily by the COVID-19 outbreak, signaling the start of a deep worldwide recession.
Domestically, we have witnessed the severe devaluation of the Egyptian pound and soaring inflation. The expectations are that in the short term, we may see more depreciation, coupled with rising inflation and the weakening of purchasing power. Both global and domestic economic uncertainties have prompted Egyptians to preserve their wealth in gold, and we believe that Evolve Holding is well-positioned to cater to the needs of Egyptians, who are looking for alternative ways to invest their hard-earned income and protect their wealth in such volatile times. Through our offering, Egyptians can now be introduced to a multitude of new and innovative financial products and solutions to build and protect their wealth for generations to come. Advancements in the global market enable us to transfer knowledge and technology to the Egyptian market to further ground-truth precious metals’ positive role both on the micro- and macro-levels.
