الهيئة العامة للرقابة المالية

Dr. Islam Azzam, FRA Chairman:

• The new Resolution strikes a balance between facilitating business operations and enhancing governance.
• The Authority is committed to keep pace with market developments; these amendments address practical issues revealed during implementation.

FRA Board of Directors chaired by Dr. Islam Azzam, has issued a resolution amending key regulations governing foreign currency financing rules under resolution No. (318) of 2025. The amendments aim to resolve practical challenges identified during implementation within the financial leasing and factoring sectors.

The updated rules introduce a new foreign currency financing case for financial leasing and SME financing: “Sale and Leaseback” operations designed to finance imports, purchase assets, or settle foreign currency liabilities tied to a client’s operational activities.

This inclusion aligns with the legislative and regulatory framework governing financial leasing, particularly FRA Board resolution No. (82) of 2019, which regulated sale and leaseback transactions and their operational guidelines.

This new case complements the existing permitted scenario: financing “import operations falling directly within the scope of the client’s business activity.” In both instances, the resolution mandates that financing transactions must be substantiated by supporting documentation, such as opening a letter of credit (LC) or equivalent through a bank, or via documentary, electronic, or physical proof of completion. Clients operating within free zones are exempt from this requirement.

For factoring activities, the amendments classify free-zone clients (assigning companies) as foreign parties. They also introduce procedural flexibilities for international foreign currency factoring—specifically addressing markets where “correspondent factors,” previously mandated by regulatory rules, are unavailable.

A key enhancement allows factoring companies to substitute the correspondent factor with a bank, insurance entity, venture capital firm, foreign financing institution, or any other entity recognized by FRA, ensuring all parties’ financial rights are secured in non-recourse factoring arrangements.

In recourse factoring scenarios—where the factoring company retains the right of recourse against the client (the seller assigning financial rights)—the amendments permit foreign currency financing even in the absence of the aforementioned institutions.

To further support financial leasing, factoring and SME financing companies when extending foreign currency facilities, the resolution  expands permissible funding sources. In addition to equity/internal resources, local banks, authorized forex dealers, and foreign institutions (subject to prior FRA approval), companies can now utilize loans from shareholders, subsidiaries, or affiliate companies, as well as any other funding sources approved by  FRA.

Dr. Islam Azzam, FRA Chairman of stated that the resolution provides factoring and leasing companies with greater operational flexibility when interacting with market participants in foreign currency financing. He emphasized that balancing business facilitation with robust governance will accelerate growth in both sectors and boost their overall economic contribution.

He added that the swift amendment of rules introduced earlier this year reflects the Authority’s responsiveness to real-world feedback and emerging market requirements. This approach stems from continuous coordination with the Egyptian Leasing and Factoring Federations and FRA’s policy of active stakeholder dialogue when crafting regulatory frameworks.

Dr. Islam Azzam expressed confidence that these refinements will streamline procedures, accelerate transaction settlements across all counterparties and overcome complexities arising from cross-border legal and regulatory disparities.

Factoring is a short-term financing mechanism designed to accelerate cash flow, improve liquidity, and enhance profitability. Through an agreement between the factor (the factoring company) and the seller (the assigning company), the factor purchases present and future receivables resulting from the sale of goods or provision of services.

Financial Leasing is a contractual agreement between a lessor and a lessee. Under the contract, the lessor transfers the possession and use of an asset—owned or acquired from a supplier—to the lessee for a specified period and rental payment to support income-generating activities.