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FRA issued the Rules regulating Financial Leasing and Factoring

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• Dr. Omran: A package of integrated procedures to activate the provisions of Financial Leasing and Factoring Law after publishing the law in the Official Gazette  
• Dr. Omran: FRA approves licensing rules for financial  leasing and factoring companies 
• Dr. Imran: Adding  micro-financial leasing to the activities  of companies and NGOs  practicing  microfinance according to a number of determinants

Dr. Mohammed Omran – FRA’s  Chairman  revealed that FRA’s Board of Directors  has issued a number of rules and regulatory decisions for  financial leasing and factoring  companies in order to activate the provisions of Law No. 176 of 2018 issued in mid-August on regulating financial leasing and factoring activities. The said Law grants in article no.  (1) financial leasing and factoring companies  a period of six months from the date of applying the Law (15 August 2018) to adjust its positions  in accordance with the provisions of the Law regulating Financial Leasing and Factoring activities.

Decision No. 137 of 2018 issued by FRA’s Board of Directors at its last meeting dealt with the conditions and procedures set for granting initial approval to establish  companies wishing to practice financial leasing, factoring , mortgage  finance or all of them .  Also, the said decision grants license  to practice more than one of financing activities subjected to the Authority’s supervision and also,  grants license for companies and NGOs  licensed to practice microfinance to practice micro-financial leasing.

Dr. Omran emphasized that the BOD’s decision no. 137 of 2018 obliges companies wishing to obtain initial approval to establish a company engaged in financial leasing activities, factoring or more than one of financing activity to take the form of an Egyptian joint stock company. Also, the company’s issued and paid-up capital shall not be less than the minimum limit set to obtain a license to engage in any activity in accordance with the provisions of this decision. In addition, the decision states that the founders of the company shall include legal persons of not less than 50% of the company’s capital and the contribution of financial institutions shall not be less than 25% of the company’s capital. Besides, the company shall provide a feasibility study including the company’s business plan and vision in order to meet market’s needs, introduce new financing products or expand activities into new geographical areas.

FRA’s Chairman added that the decision stipulated the rules and conditions necessary to obtain the license. The licensed company shall practice financial leasing, factoring or mortgage finance, or all of them. Moreover, the said decision stated that the company shall  has an independent headquarters dedicated to the activity and it shall contain all the needed equipment , technological structure and information system.

Dr. Omran pointed out that  FRA’s BOD  decision stated that a number of standards of expertise and professional competence shall be met by the members of the company’s  Board of Directors and provided that no sentences shall be issued against any of them with a penalty of felony or a penalty restricting freedom in an offense against honor or bankruptcy for any of the shareholders of the company whose contribution exceeds 10% of its capital or its Board members  or directors during the five years preceding the submission of license application .  Also, the decision stressed on the need to have experience in banking or financing or financial or legal areas  not less than ten years after obtaining a suitable high qualification for the position of the company’s Managing Director or Executive Director.

FRA’s  Chairman also pointed out that the managers of the financial, credit, risk, internal audit departments and branch managers should have practical experience in banking, financing , financial or legal fields not less than seven years after obtaining a suitable high qualification  and each of them shall be dedicated to carry out the functions of his position.

FRA’s Chairman said that companies wishing to obtain a license to practice more than one activity should abide by terms of incorporation and license. In addition, each activity should have an independent department for managing operations and customer affairs. In addition, each activity should have a full-time executive manager who has experience in banking, financing, financial or legal areas not less than ten years after obtaining a suitable high qualification, moreover the managing director or executive director may supervise one of the financing activities.

Dr. Omran revealed that decision no. 137 of 2018 set forth the indicators that can be relied upon to permit companies, associations and NGOs that practice microfinance activity to engage in micro-financial leasing activity, so that the value of the microfinance portfolio of the company shall not be less than 5 million EGP and the value of financing contract shall not exceed the maximum limit in accordance with the financing purposes specified in Law no.  141 of 2014. Also, the decision stated that companies, associations or NGOs shall not violate Law no. 141 of 2014 or the decisions issued thereof and shall not be subjected to any administrative sanctions or precautionary measures (except alert and warning) from the Authority during the three years preceding the request to add the activity unless it removed the violations and six months have passed on such removal. In addition, companies, associations or NGOs shall provide a plan of action include the mechanisms of practicing micro-financial leasing in addition to its activities.
 

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Regulator Information

Abbreviation: FRA
Jurisdiction: Egypt

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