The Egyptian Financial Supervisory Authority (EFSA) Board issued a Resolution 172/2014 Sunday regulating the conditions of microfinance companies’ activities. The decision comes in light of Law 141/2014 issued in November 2014, issued to organise for the first time Egypt’s microfinance activities, according to an EFSA statement on Sunday.
EFSA Chairman Sherif Samy said the resolution organises all matters related to exercising microfinance activities, as it addressed companies’ obligations and corporate governance requirements and the criteria for forming Board of Directors.
“ The resolution also organises finance granting, risk management, protection of customers and financial solvency standards, in addition to addressing money credit portfolio regulations, requirements of open , move and stop branches’ activities” said Samy. “The resolution focuses on anti-money laundering requirements and periodical reports required from companies.”
There are some considerations that have to be put into account regarding grant funding for a client, including: client credibility; the extent of his experience; or his ability to exercise the required financing activity. The statement added that this comes alongside: the avoidance of loading the client with funding that exceeds his capacity to repay; a previous deal with the company; and the value of funding which should fit with the project size and its financing requirements.
Samy added companies may grant collective funding for a group of similar individuals, to repay the value of funding. The companies can determine the minimum and maximum number of group members, organises responsibilities within the group, and determine the chairman of each group.
The EFSA stressed that every advertisement issued by the companies, either directly or indirectly, should be honest in its form or content. It should also commit to show the clear and correct data with no reduction of information that is disclosed and allows the public to understand advertising and assess its theme.
Resolution 172/2014 also stated the conditions of the licence as a company should be as a joint stock company, with the majority of its shares is owned by legal persons and its activities related only to microfinance. The companies’ promulgated capital should not be less than EGP 15m, and paid-up capital not less than 50% of the minimum rate of doubtful debts allocations, statement mentioned.
The Board of Trustees overseeing the unit on NGOs’ microfinance held its first meeting, headed by Sharif Samy and issued a resolution on the rules and conditions of a temporary license for NGOs to practice microfinance activity, as a prelude to adjust their legal situation during period no later than next May, according to the text of the law.
