- Enhancing performance indicators within the first nine months, maintaining market stability, enhancing professional qualifications, and introducing new products are top priorities.
- New regulations have been issued to govern non-bank finance and support its growth. Amendments to Consumer Finance Law are anticipated in the near future
Dr. Islam Azzam , Vice Chairman:
- Digital transformation is boosting non-bank financial services, expanding access to insurance, financing, and investment
- To date, 21 projects have been registered in the Voluntary Carbon Market as well as three Validation/Verification Bodies (VVBs). Significant efforts are underway to stimulate both supply and demand
- Accelerating the development of a derivatives market to mitigate price fluctuations
- The unified insurance law is a significant step forward for the industry. We’re working diligently to finalize the executive regulations for its implementation
- A new credit rating license is expected to enhance competition and improve the efficiency and quality of services provided in this sector. Based on ongoing market developments and evolving needs, the possibility of granting a third license is being considered.
Dr. Islam Azzam, Vice Chairman of the Financial Regulatory Authority, delivered a keynote speech at the opening session of the 6th annual Habi Conference, entitled “Flexible Reform: A Smooth Transition Through Economic Challenges.” His speech was followed by a panel discussion where he highlighted several key issues. Dr. Azzam participated alongside Ahmed Kouchouk, Minister of Finance, and Dr. Rania Al-Mashat, Minister of Planning and Economic Development and International Cooperation.
Dr. Azzam discussed the Financial Regulatory Authority’s initiatives to develop the non-bank financial sector and strengthen its contribution to the national economy. He drew attention to FRA’s decision to issue a license for the establishment of a second credit rating agency in Egypt. This will result in the introduction of a new player in the market, providing credit rating services and enhancing the efficiency, competitiveness, and quality of these services. Dr. Azzam emphasized the crucial role of credit rating agencies in assisting investors in making informed investment decisions, noting that these agencies are subject to regulations designed to ensure the accuracy and reliability of their rating.
Dr. Azzam drew attention to FRA’s Decrees No. 91, 92, and 93 of 2023. These decrees increased the minimum capital requirements for leasing companies, factoring companies, consumer finance companies from EGP 10 million to EGP 75 million, for small and medium-sized enterprise financing companies from EGP 30 million to EGP 75 million, and for microfinance companies from EGP 15 million to EGP 75 million. Additionally, the minimum capital for real estate finance companies was increased to EGP 100 million. Furthermore, another decree was issued approving a proposed amendment to the Consumer Finance Law No. 18 of 2020 regarding licensing requirements and business operations, which has been sent to the Prime Minister.
The Vice Chairman further emphasized FRA’s commitment to financial inclusion. He highlighted the completion of the regulatory framework for accelerating digital transformation and achieving financial inclusion within the non-bank financial sector. This was accomplished through the issuance of Decree No. 139 of 2023 concerning technological equipment, information systems, and security measures for the use of financial technology, Decree No. 140 of 2023 regarding digital identity, digital contracts, digital records, and the use of financial technology in non-bank financial activities. This in addition to Decree no. 141 of 2023 on establishing an Outsourcing Registry, for companies engaged in FinTech activities. Additionally, FRA issued a provisional license with a capital of EGP 15 million for startups seeking to engage in non-bank financial activities using financial technology. As a result, four companies have been registered in the outsourcing service providers’ registry. These companies have already partnered with 40 non-bank financial institutions, and are on track to collaborate with an additional 60.
Turning to the Voluntary Carbon Market, Dr. Azzam emphasized the significant progress made. He noted that approximately 21 carbon reduction projects have been registered, following the issuance of Decree No. 31, which outlines the rules for listing and delisting voluntary carbon credits. Furthermore, FRA has registered around 145,000 voluntary carbon credits across a diverse range of sectors, encompassing agriculture and projects in India, Nepal, Bangladesh, and Egypt. These achievements underscore FRA’s dedication to advancing sustainable development goals.
Dr. Azzam also highlighted the issuance of Decrees No. 140 and 148 of 2024 regarding amending listing and delisting rules on the Egyptian Exchange and amending Board of Directors’ Decree No. 11 of 2024, which regulates listing and trading shares of special purpose acquisition companies (SPACs). As a result, the first company of this kind has been established.
Dr. Azzam also highlighted FRA’s efforts to enhance market performance and foster the role of non-bank financial institutions in the national economy. He noted that FRA has introduced amendments to the consumer finance law, eliminating the six-month period that companies were previously required to wait before coming under FRA’s supervision.
In terms of professional development, Dr. Azzam emphasized the launch of the first specialized actuarial diploma in insurance, a joint initiative with the Insurance Federation of Egypt “IFE” and the American University. This led to the qualification of 80 actuaries through two diploma programs. Furthermore, a pioneering USD-denominated pension plan was introduced to cater to the needs of Egyptian expats.
Dr. Azzam also highlighted the significant growth of the non-bank financial sector during the first nine months of 2024. The total financing provided by entities under FRA’s supervision reached a remarkable EGP 646.6 billion.
He explained that share issuances witnessed a significant growth of about 33% during the first nine months of 2024, reaching EGP 365.4 billion compared to EGP 274.8 billion in the same period of 2023. Additionally, issuances of securities other than shares (corporate bonds and securitization) amounted to approximately EGP 23.5 billion during the period between January and September 2024, compared to around EGP 48.2 billion during the corresponding period in 2023.
Regarding the insurance sector, Dr. Azzam stated that the value of premiums collected increased to EGP 69 billion during the period from January to September 2024, compared to EGP 54.97 billion in the corresponding period of 2023, achieving a growth rate of 25.6%. On the other hand, the value of claims paid increased to EGP 31.49 billion in the first nine months of 2024, compared to approximately EGP 24.67 billion in the corresponding period of 2023, achieving a growth rate of around 27.6%.
He also noted that the value of new investments in private insurance funds during the period from January to September 2024 reached approximately EGP 20.1 billion. He pointed out that the total real estate financing provided by companies in the non-bank financial sector doubled to approximately EGP 17.76 billion during the period from January to September compared to approximately EGP 6.7 billion in the corresponding period of 2023.
Regarding leasing contracts, Dr. Azzam highlighted that they reached approximately EGP 82.3 billion during the period from January to September 2024, compared to approximately EGP 78.5 billion during the corresponding period of the previous year, achieving a growth rate of around 4.9%. The total value of factoring activity reached approximately EGP 47.95 billion during the period from January to September 2024, compared to approximately EGP 31.54 billion during the corresponding period in 2023, achieving a growth rate of around 52.2%.
In terms of consumer finance, he indicated that the total value of consumer finance granted reached approximately EGP 41.9 billion during the period from January to September 2024, compared to approximately EGP 33 billion during the corresponding period in 2023, with a growth rate of 26.7%. The value of movable assets registered in the movable collateral registry reached EGP 2.82 trillion by the end of September 2024.
Dr. Azzam indicated that MSME financing reached EGP 71.3 billion by the end of September 2024, compared to approximately EGP 49.65 billion by the end of September 2023, achieving a growth rate of around 43.6%. The number of beneficiaries remained relatively stable at approximately 3.8 million by the end of September 2024.
In addition, he shed light on the issuance of the Unified Insurance Law, which sets new and comprehensive rules for regulating the insurance industry and expanding the scope of compulsory insurance. He explained that the Authority is working to implement the Unified Insurance Law, which includes setting financial year dates for insurance and reinsurance companies, establishing reconciliation procedures, and approving standardized bylaws for private insurance funds.
That is besides issuing regulatory framework governing the registration, operation, and dissolution of private insurance fund.
Dr. Azzam announced that the Authority is working on new regulations to govern private insurance funds. These regulations will address investment guidelines, corporate governance for insurance and reinsurance companies, fund management practices, training and licensing of insurance brokers, and technical provisions for different types of insurance. Also, the basis for the formation and use of technical provisions for each branch of property and liability insurance. In addition to a proposal on the controls for insurance companies’ dealings with foreign reinsurance brokers (non-residents) and a draft of the executive rules and regulations for Healthcare Management companies.
Also, he pointed out that the Authority is expediting the establishment of derivatives market in collaboration with the Exchange. He emphasized that derivatives market aims to mitigate the impact of price fluctuations, enabling businesses of all sizes to hedge against currency and interest rate risks. Moreover, it empowers investors to effectively manage the risks associated with a diverse range of investment instruments. It will stimulate investments in stocks and bonds, providing access to a diverse array of derivative instruments including futures, forwards, and options.
Last modified: December 10, 2024