Aggregated News From Investment Management Regulators

FRA approves the introduction of an innovative financing product to microfinance sector – Monday 2/11/2019


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• Dr. Omran: 3,000 EGP maximum value of Nano finance and repayment period shall not exceed 90 days
• Dr. Omran: The introduction of Nano finance for the first time in Egypt coincides with the celebration of the 10th anniversary of FRA’s establishment
• Dr. Omran: Nano finance is an innovative financing product that based on the availability of mobile finance and using FinTech Applications

Dr. Mohammed Omran, FRA’s Chairman reveals that FRA’s BOD allows at its meeting earlier this week microfinance companies to introduce a new financing product for the first time in the microfinance sector namely (Nano finance).

FRA’s Chairman says that the international experiments conducted on the innovative product (Nano finance) indicates that it is mainly used to cover the needs of marginalized groups and those most in need of financial services and suffer from access to finance. In particular, Nano-finance product seeks to provide working capital needs and requirements to small farmers and self-employed persons, home-based businesses, day-to-day vendors and street vendors of both sexes (male and female). In addition, it encourages young people to start implementing entrepreneurial thinking. Also, the new product enables a better lifestyle for citizens and is expected to have a significant and positive impact on enhancing financial inclusion in Egypt.

Dr.  Omran says that Nano finance requires very simple documents from the client; the most important document is the client’s identity and personal photo. He adds that the product is based on using financial services technology with the ability to create a digital credit structure consisting of 3 pillars (Mobile Application, Machine Learning, and Smartphone).

According to Dr. Omran, FRA is entering a new decade by using the financial services technology known as Fintech to facilitate access to finance. He asserts that the advantage of merging the three regulators is clearly shown now after ten years of FRA’s establishment. As now there is  a clear and comprehensive institutional framework for the sector which has a comprehensive non-banking financial services strategy that seeks to develop microfinance business in line with  promoting financial inclusion products and consistent with the Sustainable Development Strategy (SDS): Egypt Vision 2030.

The Chairman of the Authority emphasizes that the Board of Directors has obliged microfinance companies wishing to introduce the new product (Nano Finance) with a number of controls, first of which is to classify the product as one of the individual financing products with a maximum value of 3000  EGP (no collective financing may be granted through it). He adds that the new product aims at providing Finance to cover the needs of the neediest groups of society (males and females) and youth and to provide working capital needs for their micro-economic activities. The main source of repayment is the cash flows generated by the project and repayment period shall not exceed 90 days.

Dr. Omran adds that microfinance company is committed – before granting finance – to conduct credit inquiries about the applicant and its guarantor (if any) for those whose financing exceeds 500 EGP through one of the licensed entities from the Central Bank. Moreover, if the company failed to conduct such inquiry for reasons beyond its control and accepted by the Authority, then it shall undertake the requisite inquiry within two working days of granting finance and keep it in the client’s file. In addition, the company shall not renew the existing finance if there is any credit issue/ problem. Also, the company shall update the data and information of its clients and their credit status continuously at the Egyptian Credit Bureau “I-Score” at periodic intervals (every two weeks maximum).

The Board of Directors has also been keen to ensure the sound management of the risks faced by the microfinance company. FRA’s BOD obliges the company to submit a declaration stating that it is committed to arrange credit insurance policies with one of the entities operating in non-payment risks or life insurance companies accepted by the Authority as soon as it is available in the market. The policy shall cover at least 25% of the value of the product’s portfolio by the end of each month.

Dr. Omran confirms that FRA’s BOD has tightened controls on granting finance when the company uses electronic applications through digital multimedia to exchange data and information, or to operate and manage Nano product portfolio. So, FRA’s BOD obliges the company to obtain an approval of the competent entities to authorize such applications and functions in accordance with the requirements of applied laws and regulations in this regard (if any).  Also, FRA’s BOD calls upon taking the necessary measures towards securing the electronic application database and the customer data against risks of damage, penetration and loss. In addition, FRA’s BOD stresses on the need to obtain the client’s permission upon using any kind of personal data and information that may be required for the purposes of providing the product. Moreover, the company shall maintain the protection of the client’s full privacy and ensure that it is not misused by its employees or agents or shared with others without his explicit consent.

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Regulator Information

Abbreviation: FRA
Jurisdiction: Egypt

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