Egypt - The Financial Regulatory Authority (FRA) has detailed the reasons for halting the acceptance of new applications for licences to establish companies aimed at providing micro-project financing or consumer finance through traditional methods.

The Authority explained that this step stems from its keenness to ensure financial stability for markets and non-banking financial institutions, which enhances their role in the national economy and fulfils the needs of individuals. Additionally, the noticeable growth in new licenses issued by the Authority for companies working in consumer finance and financing micro-projects makes it necessary for the supervisor to ensure the financial solvency of service providers.

The Authority also revealed that 10 new licenses were granted to companies operating in the microfinance activity over the past two years, in addition to about six applications currently being considered from 25 licensed companies, and about 10 applications from civil society organisations wishing to obtain the license.

Licenses were granted to about 15 companies during the last two years in the consumer finance activity. About four applications are under study out of a total of 30 licensed companies.

The number of beneficiaries of the microfinance activity reached 3.8 million, in addition to about 1.9 million beneficiaries of consumer finance, with financing values ​​amounting to EGP 56.2bn for microfinance and about EGP 35.5bn for consumer finance.

The Authority stressed that it is exerting efforts double check the financial solvency and technological requirements of non-banking financial institutions. It noted that a virtual community dialogue will be announced within days with companies operating in non-banking financing activities before the implementation of financial solvency standards according to Basel III, in parallel with reviewing the extent of the commitment of companies operating in non-banking financing activities. Meanwhile, the Authority had announced that the minimum capital should be EGP 75m for those companies, while mortgage finance should at least be a minimum of EGP 100m.

FRA’s new decision stipulated the suspension of accepting applications for the establishment and initial approvals for companies wishing to obtain a license from the Authority to engage in microfinance or consumer finance activities using traditional methods. It has also suspended accepting applications for a license to practice the activity of microfinance for civil society organizations and institutions, for a renewable period of one year, in accordance with Resolution No. 184 of 2024.

The decision exempted companies wishing to practice microfinance or consumer finance using the fields of financial technology, in accordance with the Law Regulating and Developing the Use of Financial Technology in Non-Exchange Financial Activities issued by Law No. (5) of 2022.

According to the Authority, the suspension decision also exempts companies established, obtained initial approvals or had already submitted applications to obtain a license to practice either of the above-mentioned activities before the implementation of this decision, which came into force on 11 October 2024.

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