Is there an interest rate cap in Egypt?

Article 227(1) of the Egyptian Civil Code (Law No. 131 of 1948) allows the contracting parties to agree a rate of interest, and provides that if they agree a rate above the statutory maximum it must be reduced to seven per cent, with whatever was paid above that figure repayable. Article 227(2) extends the ceiling to any commission or benefit stipulated by the creditor that would carry the total above it, treating such a charge as concealed interest.

Can an Egyptian loan agreement charge a prepayment fee?

Article 544 of the Egyptian Civil Code provides that a borrower under an interest-bearing loan may, after six months from the loan, declare his wish to cancel the contract and repay within six months of the declaration, paying interest for the six months following the declaration. The article states that he may in no way be obliged to pay interest or any consideration of any kind by reason of early payment, and that any agreement extinguishing or limiting his right to repay is void.

Can interest be compounded in Egypt?

Article 232 of the Egyptian Civil Code prohibits charging interest on accrued interest, and provides that in no case may the total interest collected by the creditor exceed the capital. The article preserves the position under commercial rules and usages, and Article 233 addresses the calculation of compound interest on a current account according to commercial custom.

Loan Agreement in Egypt

Two Civil Code rules dominate Egyptian loan drafting. Conventional interest that the parties agree above the statutory ceiling must be reduced to seven per cent and the excess already paid must be returned, and any commission or benefit stipulated by the creditor that pushes the total over that ceiling is treated as concealed interest and is itself reducible. Separately, a borrower under an interest-bearing loan has a statutory right to prepay that cannot be contracted away, and cannot be charged interest or any other consideration for prepaying.

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Governing law

Loans of money are governed by Articles 538 to 544 of the Egyptian Civil Code (Law No. 131 of 1948), and the interest ceiling and the rules on default interest and compounding by Articles 226, 227 and 232.

Egyptian Civil Code (Law No. 131 of 1948), Arts. 538 to 544 (Arabic text via WIPO Lex, consolidated to Law No. 55 of 1970)

What a loan agreement has to contain in Egypt

A loan is a contract by which the lender undertakes to transfer to the borrower ownership of a sum of money or another fungible thing, on terms that the borrower returns at the end of the loan a thing of the same quantity, kind and quality.
Egyptian Civil Code (Law No. 131 of 1948), Art. 538
The borrower must pay the agreed interest when it falls due, and where there is no agreement on interest the loan is treated as being without consideration.
Egyptian Civil Code (Law No. 131 of 1948), Art. 542
Where the parties agree a rate above the statutory maximum, it must be reduced to seven per cent and whatever was paid in excess of that must be returned.
Egyptian Civil Code (Law No. 131 of 1948), Art. 227(1)
Where the obligation is a sum of money known in amount at the time of the demand and the debtor is late in paying, damages for delay are four per cent in civil matters and five per cent in commercial matters, running from the date of the judicial claim unless the agreement or commercial custom fixes another date and unless a law provides otherwise.
Egyptian Civil Code (Law No. 131 of 1948), Art. 226
Interest may not be charged on accrued interest, and in no case may the total interest the creditor collects exceed the capital, all of this without prejudice to commercial rules and usages.
Egyptian Civil Code (Law No. 131 of 1948), Art. 232

What catches drafters out

Where interest was agreed, the borrower may after six months from the loan declare his wish to cancel the contract and repay what he borrowed within a further six months, paying interest only for the six months following the declaration. He may in no circumstances be obliged to pay interest or any other consideration for early repayment, and any agreement waiving or restricting that right is void.
Egyptian Civil Code (Law No. 131 of 1948), Art. 544
Any commission or benefit of whatever kind stipulated by the creditor which, together with the agreed interest, exceeds the statutory maximum is treated as concealed interest and is reducible where it is shown that the commission or benefit does not correspond to a real service actually rendered by the creditor or to a legitimate benefit.
Egyptian Civil Code (Law No. 131 of 1948), Art. 227(2)
Where the creditor in bad faith prolongs the dispute while claiming his right, the judge may reduce the interest, whether legal or agreed, or refuse it altogether for the period during which the dispute was prolonged without justification.
Egyptian Civil Code (Law No. 131 of 1948), Art. 229