Aggregated News From Investment Management Regulators

FRA receives requests to establish consumer finance companies and grants license to practice the activity immediately after the publication of the law in the Official Gazette – Thursday 26/3/2020

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Dr. Omran: Consumer finance companies shall take the form of an Egyptian joint stock company and their issued and paid up capital shall not be less than ten million pounds

Dr. Omran: Financing volume shall exceed 25 million pounds in order to obtain license to practice the activity

Dr. Omran: Applying the same rules of ownership in companies operating in the field of non-banking financial activities. In addition, legal persons shall participate in companies’ capital by not less than 50% and in financial institutions by not less than 25%.

Dr. Omran: FRA’s BOD has set conditions and controls for establishing consumer finance companies and licensing them.

Within the framework of activating consumer finance law in Egypt issued by presidential decree No. 18 of 2020 and published in the Official Gazette, Dr. Mohammed Omran – FRA’s Chairman announced that FRA has received numbers of requests to establish consumer finance companies according to the form prepared the Authority. He added that FRA’s BOD issued terms and conditions set for establishing and licensing consumer finance companies.

Dr. Omran explained that FRA’s BOD decision no. 56 of 2020 had specified the procedures for establishing consumer finance companies. He noted that the said decision stated that the form prepared by the Authority shall be submitted   attached  with a request from the founders ’agent that includes in particular the name of the consumer finance company, names of  founders, issued and paid up capital, three Copies of the primary contract form, company’s statute , bank deposit certificate issued by one of the banks authorized to receive subscriptions stating that  the issued capital is fully paid , that is besides  a declaration from the company’s auditor emphasizing that he is operating in the company  and that he shall be registered at FRA’s registries.

FRA’s Chairman said that the Board’s decision stipulated that consumer finance company shall  take the form of an Egyptian joint stock company and that its issued and paid-up capital shall not be less than ten million pounds. He added that the Board was keen to apply the same rules of ownership in companies operating in the field of non-banking financial activities that had previously been approved in the first half of 2018. FRA’s BOD decision that legal persons shall participate in companies’ capital at a rate of not less than 50% and in financial institutions by not less than 25%.  On the other hand, companies that engaged in consumer finance activity before the implementation of this law shall be exempted from this provision unless an acquisition is implemented or a change is occurred in its ownership structure exceeds one third of its issued capital.

Dr.  Omran added that the Authority’s board of directors was keen to limit the company’s purpose to consumer finance activity unless the Authority grants the company a license to engage in other non-banking financial activities. He added that companies shall set an internal regulation that regulates procedures of granting finance and determines financing rates according to clients ’ability. Also, companies shall inquire about its clients with one of the credit reporting agencies. In addition, it shall set risk management mechanisms, capital adequacy, dealing with customer complaints that shall be handled by its managers and employees.

In order to reassure the availability of the Fit & Proper principle in those who lead the work in the consumer finance companies, Dr. Omran stressed that the Managing Director must have at least ten years of experience in banking, finance, financial affairs, or legal fields after obtaining a suitable high qualification. He shall be fully dedicated to the company’s management.  Also, Managers of Departments related to finance, credit, risks and internal audit shall have an experience of seven years in banking, finance, financial affairs, or legal fields after obtaining a suitable high qualification and shall work on a full time basis.  On the other hand, Managing Director or Executive Director (as the case may be) and Managers of departments referred to shall conduct a personal interview at the Authority’s headquarters.

FRA’s Chairman pointed out that the second part of FRA’s BOD decision no. 56 of 2020 was related to granting license to providers of consumer finance through submitting license request attached to the primary contract, the company’s statute , the commercial registry and the tax card, as well as the amount of financing provided by it  which shall not be less than 25 million Egyptian pounds according to the latest approved financial statements.  Moreover, consumer finance companies shall take the form of a joint stock company, limited Partnership (LP) or Limited Liability Partnership (LLP). Also, it shall allocate an amount of not less than 10 million EGP (the minimum amount set by FRA’s BOD) to practice consumer finance activity.

It is worth noting that the first article of consumer finance law has defined consumer finance companies as producers or distributors of goods who engage in consumer finance activity. The law demanded providers of consumer finance to obtain a license from the Authority and be listed at its registry whenever the provided funding -annually- exceeds the limit determined by the Authority’s Board of Directors, provided that it shall not be less than twenty-five million pounds.

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Regulator Information

Abbreviation: FRA
Jurisdiction: Egypt

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