Aggregated News From Investment Management Regulators

Law No. 176 of 2018 was issued to regulate financial leasing and factoring activities

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• Dr. Mohammed Omran: The law regulates non-banking financial institutions and tools that contribute to providing  financing for projects, in particular small and medium enterprises
• The law includes, for the first time, the regulation of microfinance leasing to provide financing for microenterprises
•  FRA’s  Board of Directors holds consecutive meetings to issue the rules  that regulate financial leasing and factoring

Dr. Mohammed Omran – FRA’s Chairman welcomed the issuance of Law No. 176 of 2018 by the President of the Republic, that Law which regulate financial leasing and factoring activities. The Law was issued after the approval of the Parliament and it is considered as one of the steps of FRA’s ambitious program to develop legislations that regulate non-banking financial markets and instruments. He added that financial leasing helps in providing medium- and long-term financing for projects, particularly SMEs. On the other hand, financial leasing enable these projects to obtain financing required for their activity through the conclusion of financial leasing contracts for medium and long term periods ending with the ownership of the assets.

FRA’s Chairman emphasized  that the law introduces a new way to provide financing through selling properties owned by the projects – including land – and re-lease and use proceeds of selling in financing investment activities of these projects.

Dr. Omran noted that the legislator was keen to exempt selling these properties for the purpose of re-lease from tax on real estate’s transaction with regard to real estates and value-added tax (VAT) for other assets.

Dr. Omran revealed that within the framework of providing financing for micro-projects, the said law included – for the first time- rules that allow companies, associations and NGOs operating in microfinance to obtain license from the Authority to practice microfinance leasing activity in order to promote its role in providing financing for micro-projects and consequently, this will enhance the effective role of non-banking financial institutions in financial inclusion.

 He added that the law allowed financial leasing companies to engage in operating leases activities so as to provide capital assets for investment projects through medium- and long-term lease contracts without ending with ownership.

In addition, the said law regulates factoring activity. It allows all projects to obtain the present value of their short-term financial rights arising from the long-term selling through companies licensed by FRA to engage in factoring activities to provide working capital financing. On the other hand, the Law regulates factoring internationally in a manner that encourage export through allocating exporters’ financial obligations.

Dr. Omran confirmed that FRA’s Board of Directors will hold consecutive sessions to issue all the decisions and rules governing financial leasing and factoring activities.
It should be noted that the said law has included several rules to regulate licensing of companies engaged in financial leasing and factoring, as well as governance rules and disclosure requirements and other rules related to dealers’ protection. 

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Regulator Information

Abbreviation: FRA
Jurisdiction: Egypt

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