Aggregated News From Investment Management Regulators

Dr. Omran: The national strategy for non-banking financial services aims at increasing financial leasing portfolio to 80 billion pounds by 2022


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• Dr. Omran: The legislation issued last August includes, for the first time, the regulations governing micro-financial leasing activity to provide financing for micro-enterprises
• Dr. Omran: Decisions issued by FRA aim at increasing the role of financial leasing in promoting  and financing investment projects at the governmental and private sector levels

Dr. Mohammed Omran – FRA’s Chairman emphasized that the National Strategy for Non-banking Financial Services (2018-2022) aims primarily to increase the competitiveness of the Egyptian economy and increase its attractiveness to domestic and foreign investments. He added that the indicators on which competitiveness reports and global business climate depend on – largely- focused on the performance of non-banking financial sector activities and gave considerable weight to their efficiency and development.

Dr. Omran said during the opening session of the “Partnership for Development of Financial Leasing” that the National Strategy for Non-banking Financial Services focuses on attracting new domestic and foreign investments to the financial services sector, thus helping to improve its efficiency, increase its competitiveness and transfer a great deal of advanced foreign experiences  to Egypt.  Also, he emphasized that the strategy aims at improving transparency and combating corruption, improving the levels of good governance, and strengthening the institutional framework of the sector in Egypt in front of leaders of banking financial institutions and companies engaged in non-banking financial activities as well as representatives from industry, trade, transport, housing, software, energy and construction sectors.

FRA’s Chairman explained that the strategy aims at increasing financial leasing portfolio to 80 billion pounds by 2022 compared to 28.6 billion pounds by the end of 2017. Also, he noted that there is an  increasing interest in identifying what is presented on the conference’s  platform to explore the challenges and possible decisions to facilitate and provide financial leasing in a manner that helps to double the role of financial leasing in  promoting investment projects  and providing  financing at both governmental  and private sector levels. That is besides developing forms of partnership between financial leasing companies and business community as a qualitative financing tool that provides financing opportunities for big companies in addition to small, medium and micro enterprises.

Dr. Omran added that Law No. 176 of 2018 was issued on regulating financial leasing and factoring- last August – as non-banking financing tools for economic, productive, service or commercial purposes.  The said Law seeks to provide a variety of financing tools for projects whether productive or services; in addition, it will enhance financial inclusion. Also, he pointed out that the new Law will spread non-banking financing tools across the country and provide access to segments of society that currently do not benefit from many financial services. Moreover, the said law allows branches of companies and NGOs licensed to practice microfinance activity pursuant to the provisions of Law no. 141 of 2014 to provide micro-financial leasing- in light of the rules set by FRA’s BOD. It is worth mentioning that the company’s database recorded 2.6 million citizens by the end of the second quarter of 2018 to reach a greater number of dealers in the small or handicraft industries in all governorates, which is an additional motivation for small complementary industries and opens prospects for creating new jobs.

As part of activating provisions of the law, FRA’s BOD issued a number of regulatory decisions, including licensing regulations for financial leasing companies and reconciliation procedures. In addition, FRA’s BOD issued a decision on the rules set for preparing and examining financial statements and currently there are discussions held with financial leasing companies on capital adequacy standards which companies must adhere to.

Later, Accounting and Auditing Standard Committee will hold a meeting to discuss leasing accounting standards, which include the accounting treatment of financial leasing activity.

Dr. Omran noted that the volume of financial leasing activity now exceeds seven times the activity in 2008, with contracts worth 3.8 billion pounds before transferring the activity to the non-banking financial activities under FRA’s supervision, and it jumped to 28.6 billion pounds by the end of 2017. The total value of contracts during the nine months of this year was about 27 billion pounds, and the value of financial leasing contracts is expected to exceed 35 billion pounds by the end of this year.

FRA’s Chairman confirmed that in light of the recent legislation regulating financial leasing activity, contracts that transfer ownership of the asset to the lessee and concluded in accordance with the provisions of the Financial Leasing and Factoring Law shall be exempted from notarization and real estate publicity fees. In addition, the new Law grants some new tax advantages that promote financial leasing activity “such as exemption from tax on real estate actions stipulated in Law 91 of 2005 for real estate assets that are sold to the lessor for the purpose of re-leasing”.

By the end of the session, FRA’s Chairman pointed out that the Authority aims through the National Strategy for Non-banking Financial Services to create a non-banking financial system that is inclusive and conducive to the economic growth. A non-banking financial system that improves the rates of financial inclusion , enhances sustainable development and social justice, achieving non-banking financial openness to the global economy and reaching the best risks’ management related to the safety and stability of the financial system.

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Regulator Information

Abbreviation: FRA
Jurisdiction: Egypt

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