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FRA amends Microfinance Law to include SME Financing

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• Dr. Omran: The amendments issued by Law No. 201 of 2020 include MSMEs financing which represent more than 70% of the Egyptian economy
• Dr. Omran: 3.11 million projects benefited from microfinance activity and paved the way to attract SMEs
• Dr. Omran: FRA is keen to provide a regulatory umbrella that supervises SME financing as such enterprises provide hundreds of thousands of job opportunities annually and reduce unemployment

Dr. Mohammed Omran – FRA’s Chairman states that Law no. 201 of 2020 is issued by a presidential decree to amend Microfinance Law to include SMEs financing, adding that without the issuance of such an integrated legal regulation Egypt Vision 2030 will not be achieved. He points out that such regulation supports medium, small and micro enterprises – which represent nearly 70% of the Egyptian economy – and enhances their competitiveness and role in the national economy.

Dr. Omran welcomes the amendment to Law No. 141 of 2014 on regulating microfinance activity. He adds that the said amendment is considered as an integrated regulation that aims at achieving stability and transparency among dealers in this activity. He emphasizes that SMEs financing is of great importance that is besides its role in completing the cycle of economic activity and raising the rates of economic development in Egypt by offering hundreds of thousands of job opportunities annually and consequently, reducing unemployment.

FRA’s Chairman says  that microfinance activity has grown rapidly over the past 6 years starting from the issuance of microfinance law. During this period, the number of licensed companies, associations and civil institutions reached about 980 entities with a number of branches reaching 2343 spread all over Egypt. He added that financing granted to micro businesses increased to reach about 2 billion pounds at the time of the law’s promulgation by the end of 2014 and it jumped to 17.5 billion pounds by the end of August 2020. The number of microfinance projects benefited from financing reached about 3.11 million projects which contributed significantly to financial inclusion. That is besides including new categories that have not previously dealt with financial institutions, in addition to women empowerment, as the percentage of females that received financing for micro-businesses reached 64% of the total number of beneficiaries, which prompted the Authority – according to Omran – to seek to amend some provisions Law No. (141) of 2014 on regulating microfinance to include SMEs financing.

Dr. Omran adds that the amendments are expected to increase the ability of the target SME groups, and will help them gain access to various means of financing. This will be achieved through applying the best international practices in organizing the work of funding providers, reducing the risks they are exposed to and encouraging them to expand this activity. Also, the said amendment  protects the rights of those receiving funding.

He adds that the said law regulates MSME Finance in a manner that protects the rights of concerned parties and tightens supervision on companies, associations and civil institutions that provide funding so as to ensure efficiency, transparency and manage the risks that they may be exposed to. The Authority’s Board of Directors will issue the rules for practicing the activity and the solvency rules for these entities, respectively, in accordance with the provisions of the law.

FRA’s Chairman points out that Law No. 201 of 2020 on regulating MSME Finance stipulates amending the statute of the Egyptian Microfinance Federation to include the parties authorized to finance medium and small enterprises. The law also allows licensed companies, associations and civil institutions to engage in other non-banking financial activities in accordance with the controls set by FRA’s BOD within the framework of integration among non-banking financial activities that the Authority regulates and controls.

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Regulator Information

Abbreviation: FRA
Jurisdiction: Egypt

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