‘Halal’ investment scams resurge in Egypt
Halal scam: yes, it’s a paradox. But these schemes are not what they seem.
SHAIMAA EL-YOUSSEF IN CARO
BASSEM NATHAN is a day labourer from the village of Tanouf in Minya Governorate, southern Egypt. He was looking for a way to protect his earnings from the country’s soaring inflation when he met a self-styled “investment specialist”. The man convinced Nathan and 300 other villagers to take out bank loans and hand over the cash for what was supposed to be a high-yield investment project.
The maths was seductive. Inflation in Egypt had consistently held at more than 10% for years, hitting a peak of 38% in September 2023. The investment project would generate a monthly profit of 10,000 Egyptian pounds ($213) for a 200,000 pound (about $4,200) investment. That’s a 60% annual return, far outstripping even the worst inflation recorded so far. Half of the profits would cover the bank-loan repayment, leaving the rest as passive income for investors such as Nathan.
The track record looked solid too. The scheme had paid its investors consistent monthly returns for four years when Nathan joined. Then the “specialist” reportedly persuaded people to repeatedly double their bank loans and investments. The scheme unravelled when he suddenly declared bankruptcy in 2025.
Alarmed villagers gathered at their local church to report the matter to the priest and tallied their collective losses for the first time: 32-million pounds ($682,300) had been collected between them. They filed a police report. Nathan still faces a lawsuit from the bank for defaulting on the debt he took to invest in the scheme.
The track record looked solid. The scheme had paid its investors consistent monthly returns for four years.
The scams are widespread. In 6th of October City near Cairo, Esraa Gama lost 200,000 Egyptian pounds of her inheritance to a scam that was purportedly investing in a veiled-clothing business. In Mansoura, northern Egypt, Sarah El-Metwally and her sisters sold land to invest 200,000 pounds in what was to be a pharmaceutical business, only to later discover their “investment” was empty warehouses with no drugs. “We are three girls who cannot farm the land,” she says. “We thought this investment would cover our basic needs.”
These ordeals hint at a resurgence of al-mustarih – a local term for predatory investment scammers. They frequently weaponise religious belief to build trust, by denouncing ordinary bank interest as riba (usury, which goes against Islamic principles). They position themselves as a halal alternative for people looking for passive income.
Al-mustarih pyramid schemes first emerged in Egypt in the 1980s. The scammers don’t invest in any productive assets or business. If they invest in anything at all, it is in speculative assets. The most notorious was created by Ahmed Al-Rayan, who attracted more than 200,000 depositors, with assets reaching 6-billion pounds by the mid-1980s. Schemes like his offered a 30% return, when banks were offering just 7%. Al-Rayan was using previous deposits to pay new investors. He was jailed in 1989. New banking rules implemented after his case forced more than 100 investment companies to regularise.
Now, with the country in a deepening economic crisis, these schemes are resurging. The latest data, from 2020, put the poverty rate in Egypt at 29.7%, but World Bank estimates suggest it may have surged past 32% after record inflation and the devaluation of the Egyptian pound. Even with the despair of growing poverty, the scams’ appeal perplexes professional bankers. Sahar El-Damaty, a former deputy chairperson of Banque Misr, points out that official bank interest rates can reach up to 30% on long-term investments, especially on high-yielding certificates of deposit. She also says that Egyptian banks have strong safety records, “yet the shadow economy remains a reckless adventure with zero regulatory safeguards”.
The secret might lie in the scammers’ approach to “customer” recruitment. They often adopt religious personas to lure victims. That modus operandi is so effective that faith in the schemes persists even after they unravel. “The tragedy is that victims often don’t blame themselves. Instead, they sometimes claim the government is to blame for shutting these companies down,” says lawyer Essam El-Islambouli.