• Dr. Omran: FRA increases the depth of financial inclusion for a wide range of microfinance clients
In order to complete the effective role played by companies and associations engaged in microfinance activities in the field of financial inclusion and providing multiple alternatives to finance small and medium enterprises , Dr. Mohammed Omran – FRA’s Chairman emphasized that FRA’s BOD appreciated the vital role played by the units operating in microfinance activity where the number of beneficiaries reached 2.8 million with total microfinance balances of 11.5 billion pounds by the end of 2018. He added that it was important to set the rules and regulations necessary for these units to start micro-leasing activity.
That is after the Board approved licensing of companies, associations and civil institutions to engage in micro-leasing activity to create another area of financing for micro-projects by providing assets and equipment to carry out the activities through leasing contracts ending with the ownership of such assets and equipment.
Dr. Omran revealed that a decision was issued by FRA’s Board of Directors to oblige companies, associations and civil institutions that are engaged in microfinance activities in accordance with the provisions of Law No. 141 of 2014 and licensed by the Authority to engage in micro-leasing activity, to allocate independent accounts to carry out micro-leasing activities. Also, it shall prepare independent financial statements to carry out micro-leasing activity and specify an amount of not less than ten million pounds to engage micro-leasing.
Moreover, FRA’s BOD decision no. (14) of 2019 stipulates that companies, associations and civil institutions engaged in microfinance activity and licensed by the Authority to engage in micro-leasing activity shall take into account a number of controls. The said controls shall include internal control systems. In addition, companies shall define the rules for granting financing and managing associated risks. Also, it shall ensure the availability of information systems and means of protecting and securing them besides, other periodic reports that must be submitted to the Authority.
On the other hand, taking into account the nature of the activity performed by the associations and NGOs, the regulations set out specific rules for capital adequacy standards to be applied by these financial institutions engaged in micro-leasing activity. The capital adequacy represents a fundamental pillar of the safety of institutions’ financial position; also, it increases levels of trust in these institutions and its ability to perform its role. In addition, the adequacy of the intuitions’ financial resources to meet its obligations in due time is the backbone of this financing activity.
Dr. Omran pointed out that the field is now available and ready after the issuance of these rules for companies, associations and civil institutions licensed to engage in micro-leasing activities besides microfinance activity, to meet the financing needs of micro-projects, while shortening the time and effort in searching for any other financing channels.