EFG Finance, the non-banking financing platform affiliated with EFG Holding Group, plans to establish a new technological infrastructure that serves all financing activities in its companies.
Alaa Afifi, the company’s CEO, announced the establishment of a platform for technological connectivity between its companies in the non-banking financial sector. He expects the infrastructure to be completed by 2025, with continuous updates afterward.
In his interview with DNE, Afifi said that establishing a platform for non-banking financial companies is part of a plan adopted by EFG Finance to reorganize its companies and arrange them to achieve greater benefits and growth rates.
EFG Finance provides innovative financing services through its subsidiaries, which include the financial leasing and factoring activity in EFG Financial Solutions, the insurance activity in KAF, the real estate financing service through Bedaya, the microfinance service through Tanmeyah which owns Fatura, and the digital payments service through PayTabs Egypt, according to Afifi.
Afifi described the establishment of the technological platform as the biggest project the company is working on in 2024.
He explained that the restructuring carried out by the company may include reorganizing some sectors in 2024, which may involve exiting from some activities if necessary. He indicated that the top priority in 2024 is reorganizing Tanmeyah Development for microfinance.
He stated that the company seeks to create an integration between all its affiliated activities through a unified technological platform, which includes all its financing services to facilitate customer needs, as well as support investment growth, from small projects to major projects.
He stated that the integration between activities and the arms of the EFG Holding Group, which owns the “EFG Hermes” investment bank and aiBANK, will create strong products in the market, utilizing the wide customer network.
The company aims to obtain a license to finance small and medium enterprises to complete the range of products it offers. It has already obtained initial financial oversight approval and is waiting for final approval to launch a new company for this activity that will be fully owned by EFG Finance, according to Afifi.
He went on to explain that the purpose of the new license is to provide financing to larger clients in a fully electronic form, especially those whose financing needs exceed the maximum limit set for microfinance.
It is also considering expanding into the insurance sector by obtaining a property insurance license in addition to its contributions to KAF Life Insurance Company.
EFG Finance will increase the capital of its companies to comply with the instructions of the Financial Regulatory Authority (FRA) and will start with the required increases for Tanmeyah in the first quarter of this year and the SME Finance Company right after obtaining the authority’s license.
The Financial Supervision Department approved increasing the capital of the financial leasing activity to EGP 100m, the capital of real estate financing companies to EGP 85m, and the minimum capital for companies licensed to practice financing small and micro enterprises from EGP 25m to EGP 75m. The capital of consumer finance companies range from EGP 10m to EGP 75m for companies that will be established in this activity.
He revealed the company’s plan to obtain licenses for digital contracts and digital identity for non-banking financial activities after they were recently made available by FRA in Egypt.
In July 2023, FRA allowed the establishment and licensing of new companies that engage in non-banking financial activities using financial technology. These companies can use digital identity, digital records, digital contracts, and digital accounts to complete non-banking financial transactions electronically. Afifi said that obtaining these licenses will serve the technological structure for all non-banking financial activity companies affiliated with the EFG Holding Group.
The Board of Directors of FRA issued a package of executive decisions to activate Law No. 5 of 2022, which regulates and develops the use of financial technology in non-banking financial activities. These decisions are Resolutions 139, 140, and 141, which will pave the way for a new era for the non-banking financial sector using financial technology, to achieve financial inclusion.
He also revealed that non-banking financing activity contributes a large portion to the total revenues of EFG Holding Group, and the importance of the activity is expected to increase despite the current challenges in the market.
The revenues of the non-banking financing platform, EFG Finance, reached EGP 666m in the third quarter of 2023, without a noticeable annual change. This was driven by the strong growth of ValU’s revenues, which increased by 105% annually to reach EGP 314m. ValU contributed the largest share of the platform’s revenues.
Financial leasing activity
EFG Financial Solutions aims to provide financing that exceeds EGP 8bn in 2024 from financial leasing activity. This is a similar amount to the financing provided in 2023.
He pointed out that due to the economic repercussions and the impact of high interest rates on financial leasing activities, the company is targeting high numbers while maintaining low levels of risk. It expects to do that by adopting a new strategy and targeting larger financing for companies with a strong financial position and clear growth in business volume.
He added that the company started financing new sectors that it had not previously financed, most notably tourism, which generates returns from hard currency. He said that the state was also adopting a strategy to support this vital sector. Other sectors include industrial activities that replace imported goods, as many investors refrained from importing due to the currency depreciation.
He explained that there are sectors in which the company has become more conservative and careful in granting financing, such as startups in general, especially with global financing difficulties. He said that the company set various controls to reduce financing risks.
Afifi said that each non-banking financial activity has different dimensions and is affected by the economic repercussions in a different way. He said that investors were wary of making expansions due to high-interest rates, which greatly affected financial leasing activity. However, he said that challenges can sometimes lead to finding innovative solutions.
He concluded by stressing that the current market conditions require constant monitoring of risk levels. He said that growth in the financial activities provided by the company must be accompanied by an effort to maintain the quality of the portfolio of each activity, and by periodic follow-up of clients after granting financing, without exaggerating the required procedures.
