The Financial Regulatory Authority (FRA) is working on developing new financial products and providing all financing tools necessary to keep pace with developments in global markets and provide the best international practices as well as provide new types of investment funds to achieve sustainable development goals.
Islam Azzam, the FRA’s Deputy Chairperson, revealed in his interview with Daily News Egypt that the authority is currently working on providing serious financing products in the Egyptian market to keep pace with global developments, especially products related to microfinance activity.
What are the most prominent new financing products that the authority intends to provide in 2022?
The FRA is currently working on developing micro and macro digital finance products as well as sustainable green microfinance products. It is studying the availability of Islamic microfinance and a product to serve the agricultural sector.
The authority’s goal in providing serious private green financing products is to motivate low-income workers in various economic sectors to adopt environmentally friendly and more sustainable practices as well as integrate informal economy projects into the formal sector.
The FRA also seeks to develop all categories of the institutional capacities of microfinance agencies and encourage the establishment of investment funds to finance microfinance agencies.
The authority is also studying introducing direct financing products in the small and medium enterprises (SMEs) financing sector, according to different financial models.
Regarding the activity of investment funds, what are the new controls expected to be enforced this year?
The authority is currently working on the necessary controls to allow establishing funds specialised in achieving development goals within the objectives of financial control to develop forms of establishing investment funds in line with international best practices.
It is noteworthy that the authority has received a request to establish a fund to finance non-banking financial activities from the Egyptian Company for Funds Administration Services (ServFund).
The FRA also seeks to facilitate the work of real estate investment funds to encourage this type of funds by evaluating assets from one real estate evaluator, with a minimum, and not requiring that the targeted investments be registered in the real estate registry.
Among the facilitation measures is the exemption from concentration ratios in the investment policy as well as allowing the submission of a semi-annual evaluation periodicity instead of a quarterly one for funds not listed on the EGX. Private equity funds will also be treated according to these two clauses.
Moreover, the authority is currently studying several investment funds under establishment, including two funds to invest in precious metals (gold), a private equity fund aiming to invest in SMEs, a stock fund, and finally a private equity fund to engage in venture capital activity to support companies operating in the field of non-Egyptian financial services.
The recent period witnessed great development by the FRA over the activity of establishing investment funds by creating new categories of funds such as transferable funds and open funds with multiple issues in addition to allowing the subscription, purchase, and redemption of investment fund documents electronically.
Furthermore, the number of investment funds increased to 15 during 2020 and 2021, compared to one fund in 2019.
Does the authority have requests to issue green bonds? What are the latest developments in terms of issuing blue and brown bonds?
The authority is currently studying two green bond issuances, as it is handling two draft notes, and it is expected that they will be completed in 2022. The number of requests submitted to the FRA may reach four.
Legislative amendments are being implemented to the executive regulations of the capital market law to make blue and brown bonds available. Moreover, at least one issuance will come out this year.
A Rights Securitisation Law would contribute to a boom in bond issuances at a rate of 40% in 2020 for about 30 issuances. The authority is currently studying four issuances with a value exceeding EGP 2.5bn.
This year will also witness much activity in corporate bond issuances, with up to five issuances expected — two more than last year.
What is the expected volume of sukuk issuances in 2022?
The volume of sukuk issuances is expected to reach EGP 8bn this year, and the authority is about to seal an issuance and expects four more this year.
Are there new applications to establish consumer finance companies?
Consumer finance activity witnessed significant growth rates during the last period, especially after its organisation. Furthermore, the FRA is seeking to establish the legal framework with all parties concerned to organise the financial technology system in non-banking financial markets.
The volume of movable collateral registries was estimated at EGP 984bn by the end of 2021.
What are the latest developments in the Fintech Law?
The law was approved by the Communications and Information Technology Committee of the House of Representatives and is being presented to the General Committee. It includes 24 articles.
The projects include digital identity, a sandbox robo-adviser, subtech, outsourcing services, and electronic insurance applications, in addition to digital platforms, digital identity, and akyc technology.
The authority has held meetings with companies specialised in digital identity systems in preparation for the upcoming phase, as a growing demand for e-payments is expected.
Is the authority done with issuing controls to organise the contract exchange in preparation for launching a futures stock exchange before the end of this year?
This is supposed to happen within the next six months. The authority finished the relevant feasibility study a while ago.
The expected investment cost for the futures exchange is EGP 65m, according to a feasibility study prepared by the authority.
The authority has completed the feasibility study for the exchange to allow issuing futures and option contracts on stock and indices.