In an official statement, the FRA explained that it aims to ensure financial stability within non-banking financial institutions, a critical component for bolstering the national economy and meeting individual needs.
Driven by a significant increase in new licenses granted to companies in the microfinance and consumer finance sectors, the Financial Regulatory Authority (FRA) announced it would temporarily halt accepting new applications for licenses related to micro-project financing and consumer finance.
In an official statement, the FRA explained that it aims to ensure financial stability of non-banking financial institutions, a critical component for bolstering the national economy and meeting individual needs.
To ensure the ongoing solvency of these service providers, the FRA is committed to double-checking the financial health and technological capabilities of non-banking financial institutions, it explained.
In the past two years, FRA has issued 10 new licenses for microfinance activities, with an additional six applications currently under review.
In consumer finance, about 15 companies have been licensed, and four more applications are pending evaluation.
According to the authority, around 3.8 million individuals benefit from microfinance services, while about 1.9 million people use consumer finance, with total financing reaching EGP 56.2 billion for microfinance and EGP 35.5 billion for consumer finance.
FRA plans to hold a virtual community dialogue with stakeholders in the non-banking finance sector soon, before the implementation of financial solvency standards based on Basel III guidelines.
It will also be reviewing the commitment of companies operating in non-banking financing activities that have a minimum capital requirement of EGP 75 million, while mortgage financing requires a minimum of EGP 100 million.
The suspension of new applications to establish a company and initial approvals for licensing to engage in microfinance or consumer finance activities using traditional methods will last for one year, with the possibility of renewal.
However, this decision does not affect companies that have already established themselves, obtained initial approvals, or submitted license applications prior to October 11, 2024.
Additionally, companies looking to engage in microfinance or consumer finance through financial technology will not be affected by this suspension, in accordance with the Law Regulating and Developing the Use of Financial Technology in Non-Exchange Financial Activities, Law No. (5) of 2022.
