الهيئة العامة للرقابة المالية

• The Authority participated in a panel discussion exploring FinTech’s role in streamlining access to non-bank financial services under a flexible regulatory framework

Dr. Mohamed Farid – FRA Chairman:

• Our objective is to ensure market stability while promoting the integration of innovative technologies, thereby enhancing the non-bank financial sector’s role in driving the national economy.
• Innovation, entrepreneurship and technology serve as the foundational pillars for achieving both inclusion and stability within the non-bank financial market.
• By launching the regulatory sandbox, the Authority affirms its dedication to drive innovation and develop innovative solutions to address challenges in the non-bank financial sector.
• I commend the regulatory sandbox to startups and entrepreneurs within the non-bank financial services sector as a valuable tool for the development of their business models.
• Digital transformation necessitates more than online platforms; it requires a comprehensive overhaul of systems and infrastructure with data protection central to its design.
• Digitizing non-banking financial transactions strengthens the sector’s competitiveness, promoting insurance, investment, and financing inclusion.
• Ongoing development of legislations regulating the sector to promote flexibility and create an environment conducive to attract investments in diverse activities.
• We refined startup evaluation methods to better suit their business models and bolster their expansion and growth strategies.
• FRA has reduced the minimum capital requirement for establishing fintech startups in non-bank financial activities to EGP 15 million down from EGP 75 million.
• The Authority approved the establishment and licensing of three startups with various activities in the non-bank financial sector.
• FRA established listing and trading regulations for SPAC shares, leading to the formation of Egypt’s first SPAC.
• The Authority introduced Robo-Advisor investment services in Egypt, enabling portfolio management companies to offer automated investment advice.
• FRA currently evaluating the use of AI algorithms in diverse activities for near-term deployment
• To accelerate digital transformation and support entrepreneurship, FRA is building strong partnerships that enable businesses to leverage non-bank financial services for growth.
• FRA values Entlaq’s research and reporting contributions, which align with our initiatives to bolster innovation’s impact on the national economy.

Dr. Mohamed Farid, FRA Chairman inaugurated the launch ceremony of “Egypt’s FinTech landscape Report,” a collaborative effort between Entlaq Holding and Embassy of the Netherlands in Cairo. The event drew a distinguished audience, including Hossam Heiba, GAFI CEO, Ambassador Peter Mollema, the Netherlands’ ambassador in Cairo, alongside senior FRA officials, Entlaq executives and a diverse cohort of Egyptian and international entrepreneurs.

Building upon this momentum, Eng. Ahmed Khalifa, Executive Director of FRA Regulatory Sandbox & Chief Data Officer, contributed to a pivotal panel discussion. This session centered on the expansion of FinTech within Egypt and the profound influence of startups on the global economic landscape. In his address, Eng. Khalifa underscored FRA’s proactive initiatives in fostering FinTech innovation and the dynamic evolution of the Egyptian market. He further elaborated on the Regulatory Sandbox’s operational scope, elucidating its role in empowering startups to refine and optimize their business models.

In his address, Dr. Farid underscored the Financial Regulatory Authority’s (FRA) commitment to achieve a delicate equilibrium between market stability and the seamless integration of innovation and technology. This strategic approach aims to amplify the non-bank financial sector’s contribution to the national economy.  FRA achieves this through developed regulatory frameworks that accelerate market growth while simultaneously safeguarding stability and mitigating potential risks amidst persistent economic volatility.

Furthermore, FRA Chairman articulated that innovation, FinTech and entrepreneurship constitute the cornerstone of the Authority’s strategic priorities. These priorities are pivotal in achieving financial inclusion and providing robust support to startups, thereby driving FRA’s intensified efforts in these domains.

Dr. Farid emphasized FRA’s launch of the Regulatory Sandbox, a pivotal tool for fostering FinTech innovation. This initiative empowers non-bank financial practitioners to leverage cutting-edge technologies and provides a controlled environment for entities, both seeking and holding registration in FRA’s FinTech outsourcing register to conduct rigorous testing of innovative applications, including business models and related mechanisms.

Dr. Farid highlighted the Regulatory Sandbox’s role in boosting FRA support for FinTech startups. This initiative aims to elevate innovation within the sector, expand access to services and enhance the capabilities of digital non-banking financial companies and providers.

He further stated that FRA is committed to keep pace with unprecedented technological advancements, fostering an interactive ecosystem that benefits all stakeholders. This ecosystem will connect companies delivering smart solutions to non-bank financial institutions with research centers, universities, business incubators and accelerators, investors and global technology firms.

Dr. Farid emphasized that the Sandbox is pivotal to achieve FRA’s vision of leading innovation in non-bank financial services. By streamlining consumer access to emerging technologies and ensuring robust regulatory standards, the Sandbox will empower startups to secure investor confidence and attract capital, thereby cultivating a vibrant ecosystem for sustainable growth.

FRA Chairman called on non-bank FinTech startups to leverage the Regulatory Sandbox for enhanced business model and project efficiency.

He underscored that digital transformation is a fundamental shift, requiring robust systems and infrastructure, with data protection central to its success. He emphasized that the rapid digitization of non-bank financial transactions significantly accelerates the sector’s competitiveness, driving widespread insurance, investment and financing inclusion.

In addition, Dr. Farid affirmed that FRA has finalized the legislative and regulatory framework to expedite digital transformation and achieve financial inclusion. This was accomplished through the issuance of some decisions and executive regulations aimed at digitizing non-bank financial transactions, thereby expanding access to these services.

This initiative is a continuation of the legislative framework initiated in 2022 with Law No. 5, which regulates the use of FinTech in non-bank financial activities, and subsequently bolstered by Decree No. 58, outlining specific conditions and procedures necessary for companies and entities seeking to establish, obtain licenses and receive approvals to conduct non-bank financial activities using FinTech.

Also, FRA issued Decree No. 139 of 2023 outlines the required technological infrastructure, information systems, and security mechanisms for FinTech use in non-banking financial activities.

Dr. Farid shed light on Decree No. 140 of 2023, the first regulatory decree of its kind in the financial sector. This decree addresses digital identity, digital contracts, digital registries, permitted uses of fintech in non-bank financial activities and necessary compliance measures. This in addition to Decree No. 141 of 2023 that establishes the Outsourcing Registry for FinTech companies providing outsourcing services, including E-KYC and E-contract records to financial institutions.

As a result, four companies joined the outsourcing service providers register, promptly initiating contract negotiations with nearly 84 non-bank financial institutions. Concurrently, licenses were issued to seven companies, including innovative FinTech startups within the non-bank finance sector, empowering them to deploy fintech solutions. Furthermore, a pioneering partnership was established between an insurance company and a telecommunications provider, revolutionizing the electronic marketing and distribution of insurance policies.

Dr. Farid emphasized the ongoing evolution of legislative and regulatory frameworks, reflecting FRA’s commitment to empower startups and entrepreneurs within the national economy and foster innovative concepts across diverse sectors.

He further detailed that FRA has proactively issued numerous executive regulations and decisions to bolster entrepreneurship, innovation and FinTech, cultivating a conducive regulatory landscape for startups. This includes the implementation of tailored startup valuation standards. FRA has developed valuation methodologies that align with diverse startup business models, incorporating new approaches that accurately reflect the unique operational dynamics and growth of startups, particularly during pre-revenue and pre-sales stages. This strategic initiative facilitates startups’ access to crucial funding for growth, expansion and business development, enabling them to achieve their strategic objectives.

To enhance accessibility for FinTech startups, FRA has implemented streamlined establishment and licensing requirements for non-banking financial activities, setting the minimum capital requirement at 15 million Egyptian pounds. This represents a substantial reduction from the standard 75 million pounds for non-banking financial companies, with the exception of real estate finance, which retains a 100 million pound minimum.

Dr. Farid asserted that digital transformation fundamentally facilities  access to appropriate financing for all societal segments, driving economic expansion and elevating living standards

FRA Chairman highlighted the Authority’s recent approval of three distinct FinTech startups within the non-bank financial sector. These include a factoring company and a real estate and consumer finance provider, and a fourth company finalizing its licensing process.

Dr. Farid also highlighted FRA’s issuance of regulations for the registration and trading of Special Purpose Acquisition Company (SPAC) shares, as outlined in FRA Board of Directors decree No. (148) of 2024. These regulations mandate that SPACs seeking temporary listing on the Egyptian Stock Exchange must possess a minimum issued and paid-up capital of 10 million pounds, with a subsequent obligation to increase this capital to 100 million pounds in cash within three months of listing.

Following this, the Authority approved the first Special Purpose Acquisition Company (SPAC), a venture capital entity targeting acquisitions in the non-bank financial services and FinTech sectors, specifically financing, financial services and payment platforms.

On the other hand, FRA has issued Decree No. 57 of 2024, which establishes rules for regulating the operation of Robo-Advisors for Investment. This marks the first time such regulations have been introduced in Egypt. Robo-Advisor is an electronic system that provides financial advice to clients for the purpose of creating, managing, and rebalancing an investment portfolio using AI algorithms.

He added that portfolio management companies are allowed, if they wish, to provide automated investment financial advisory services through the Robo-Advisor for Investment program, explaining that the use of AI algorithm mechanisms is being studied, soon in various activities other than asset management.

Dr. Farid explained that the Authority has launched partnerships with all relevant parties with the aim of accelerating the pace of digital transformation and supporting entrepreneurship and entrepreneurs to benefit from non-bank financial services in their business development growth journey.

Finally, FRA Chairman values Entlaq’s research and reporting contributions which align with FRA’s initiatives to bolster innovation’s impact on the national economy.