The Financial Regulatory Authority (FRA) was established
under Presidential Decree No. 192 of 2009 and by Law No. 10 of 2009. FRA
replaced the Egyptian Insurance Supervisory Authority (EISA), the Capital
Market Authority (CMA), the Mortgage Finance Authority (MFA), and the General
Authority for Investment (GAFI) in overseeing Egypt’s financial leasing &
factoring activities.
The Authority regulates and oversees the non-bank financial
sector and instruments. This includes but is not limited to the capital market,
futures exchanges, insurance activities, mortgage finance, financial leasing,
factoring & securitization, as well as micro, small & medium enterprises
(MSMEs) financing and the Egyptian Collateral Registry.
FRA is entrusted with the crucial responsibility of
safeguarding and balancing the national non-bank financial market. The
Authority not only administers market legislation & development but also
ensures the protection of clients’ rights, issuing rules that guarantee the
efficiency and transparency of related activities. This commitment to client
protection instils a sense of security and confidence in the financial system.
FRA in the Egyptian Constitution:
Article No. 221 of the Egyptian Constitution stipulates:
“FRA is responsible for monitoring and supervising the financial non-bank
sector and instruments, including the capital market, futures exchanges,
insurance activities, mortgage finance, financial leasing, and factoring &
securitization, as regulated by Law.”
Article No. 217 of the Egyptian Constitution stipulates:
“Independent bodies and regulatory entities shall submit annual reports to the
Egyptian President, the House of Representatives, and the Prime Minister,
immediately after their public issuance. The House shall examine these reports
and take the appropriate action within a period not exceeding four months from
the date of receipt. The reports shall be made available to the public. Any
suspected violations or crimes should be reported to the competent
investigation authorities, who shall take the necessary measures in this
respect within a specified period, as stipulated by law.”
FRA Jurisdiction:
● Establishment and
Licensing
● Regulating and
Supervising
● Inspection and
Enforcement
● Investors And
consumers’ protection
● Financial
Awareness and Literacy
● Developing Non-Bank
Financial Markets
Non-Bank Financial Services Under FRA Supervision:
– Capital Market: Incremental Savings ، Investment Funds
– Insurance Activities: Hedge against future
risks to safeguard financial assets.
– Mortgage Finance: Streamline the purchase and
ownership of ready-to-move-in properties.
– Financial Leasing: Permits ownership transfer
of the leased asset to the lessee at the end of the lease term.
– Factoring Activities: Allows businesses to
secure financing by selling their accounts receivable (i.e. unpaid invoices) to
meet their immediate and short-term cash needs.
– MSMEs Financing: Prompts low-income groups to
contribute to the formal economy by granting financing to individuals and
MSMEs.
– Consumer Finance: This includes all forms of
financing that enable the borrower to purchase a commodity or service for
consumption and repay it over a period of not less than six months.
Capital Market
The Egyptian capital market plays a vital role in driving
the national economy by fostering the transformation of accumulated savings
into investments in new economic and social development projects. Capitalizing
on its high-tech-driven instruments and broadening regulatory perimeter, the
Egyptian capital market forged an attractive investment climate.
Private equity funds are investment funds that invest in
listed and unlisted securities while also engaging in capital venture activity.
Being one-of-a-kind in the non-bank financial sector, this activity provides
financing for high-risk and high-value-added projects, including those involved
in advanced technology activities such as biotechnology, information technology
and software. The success of such enterprises contributes to the rapid
transformation into an economy based on knowledge and innovation, as the
Government seeks to boost the competitiveness of the Egyptian economy and
establish adept products and exports.
Insurance Activities
The Egyptian insurance sector is deemed one of the critical
non-bank financial services for its fundamental contribution to the national
growth domestic product (GDP), being integrally linked to other economic
sectors. The sector plays a vital role in addressing risks faced by financial
assets, making it the most essential tool in ensuring the stability and
continuity of sector-related activities.
Private insurance funds are one of the core components of
the Egyptian insurance sector for playing a complementary role to insurance
companies. Private insurance funds provide an array of savings and retirement
schemes, varying in patterns between defined benefits and limited
subscriptions, some of which offer additional pensions alongside the
Government’s pension schemes. They are considered a crucial savings tool
established apart from the originator entity for granting insurance benefits,
additional pensions, social benefits or health care to the originator’s
employees.
On the other hand, government insurance funds are also among
the main components of insurance activities in Egypt, addressing risks not
usually tolerated by insurance companies or those that the Government decides
to manage by itself.
Mortgage Finance
The non-bank financial sector offers a broad range of
funding opportunities and mechanisms, thus contributing to bridging the
national economy’s financing gap and driving growth. Mortgage finance is one of
the most essential financing instruments for enabling individuals and
institutions to own real estate assets.
The real estate sector is among the key sectors shaping the
Egyptian economy. Its legislative framework is paramount for constituting the
legalities governing the market. Real Estate Finance Law No. 148 of 2001 is the
primary legislation regulating the Egyptian real estate market, as amended
under Law No. 55 of 2014.
On the other hand, mortgage finance provides medium- and
long-term funding for acquiring real estate assets, whether for economic
purposes or housing finance, restoration, repair or maintenance.
Financial Leasing & Factoring
The Financial Leasing & Factoring Law issued in August
2018 enhances financial inclusion and ensures that non-bank financial
instruments reach different segments of society. Meanwhile, the provisions of
Law No. 141 of 2014 allow corporates, associations and non-governmental
organizations (NGOs) authorized to engage in microfinance activity to provide
microfinance leasing services as per the regulations established by the FRA’s
Board of Directors. The legislation aims to support and develop microfinance
providers and expand their non-bank financial services by using their database
to tap more customers in small or craft industries, marking an additional
incentive for complementary small industries that opens up broader prospects
for job creation.
Financial leasing provides financing for productive
enterprises to purchase costly assets. It permits asset utilization and
ownership transfer after the lease period is completed. Financial leasing helps
fund capital expenditure and boosts productive assets at the national level. It
also plays a prominent role in bolstering medium and small industries seeking
to purchase machinery, equipment and start-up supplies.
MSMEs Financing
In 2014, FRA introduced microfinance activity as part of the
Government’s financial inclusion strategy. Microfinance institutions seek to
prompt marginalized groups to contribute to the formal economy by granting
financing to individuals and MSMEs through accessible means, thereby reducing
unemployment and helping to raise income levels of the financially underserved,
reflecting positively on augmenting investments and shoring up the
macroeconomic performance.
Law No. 201 of 2020 was promulgated to amend some provisions
of Law No. (141) of 2014 on regulating the microfinance activity. Accordingly,
the “Microfinance Law” name was changed to the “MSME Finance Law”, aiming to
extend the umbrella of financial inclusion to MSME clients.
Consumer Finance
This includes all forms of financing that tend to enable the
borrower to purchase a commodity or service for consumption and to repay over a
period not less than six months. It primarily addresses the family sector and
can benefit legal persons. At the national economic level, consumer finance
mechanisms help raise domestic demand, boosting investments, employment and
economic growth while driving the family sector to use resources better and
expand its capacity to plan and save.
Consumer finance is deemed one of the main tools for
individuals to access finance, allowing middle- and low-income classes to tap
financial services, thus achieving financial inclusion, one of the critical
pillars of the United Nations’ Sustainable Development Goals (SDGs). It is also
essential to the Sustainable Development Strategy: Egypt Vision 2030. Consumer
finance is subject to the FRA’s Supervision in accordance with the Consumer
Finance Law promulgated by Law No. 18 of 2020.
Egyptian Collateral Registry
Under the FRA’s keenness to develop non-bank financial
services and provide financing for various activities such as mortgage finance
and financial leasing, by the end of 2017, the Authority contracted with the
Egyptian Credit Bureau I-Score to establish and operate Egypt’s first central
movable collateral registry, which was rolled out in March 2018.
FRA Affiliates & Independent Entities:
● Financial
Services Institute (FSI): Raising awareness and qualifying
professionals.
● Regional
Center for Sustainable Finance (RCSF): Improving sustainability
practices and achieving a green economy.
● Egyptian
Institute of Directors (EIoD): Enhancing governance levels.
● Egyptian
Center for Arbitration & Settlement of Non-Bank Financial Disputes (ECAS): Specialized
in arbitration and settlement of disputes arising due to the application of
laws related to non-bank financial transactions among partners, shareholders or
members of sector-specific corporates and economic entities, whether between
them or between these companies and entities, paired with disputes between clients
or beneficiaries of non-bank financial activities with these companies and
entities
