• Microfinance regulation and supervision
Dec 11, 2014

First Egyptian Microfinance Law lays path towards stable market

The Government of Egypt has approved a new law (No. 141 of 2014) that will regulate microcredit provided by non-bank financiers, putting them under the supervision of the Egyptian Financial Supervisory Authority (EFSA).  This concerns mainly microfinance companies and MFI NGOs, whereas banks will continue to be regulated by the Central Bank of Egypt.  The law, approved by the country’s interim cabinet in May 2014, was issued by a Presidential Decree in November after approval by the State Council.

The law aims at strengthening the regulatory framework and practices as well as expanding micro and small businesses’ access to microcredit.  This is by enabling non-bank microfinance institutions (MFIs) to enter the formal microfinance sector, which had been restricted to banks and NGOs.

In the provisions of this law, microfinance means financing any economic productive or service or commercial purposes with the value determined by EFSA and it shall not exceed one hundred thousand EGP. The said value can be increased to 5% per year pursuant to a decree issued by the Prime Minister on the proposal of EFSA’s Board of Directors and in accordance to the economic conditions and the requirements.

The 16 Egyptian MFIs reporting data to the Microfinance Information Exchange (MIX) between 2005 and 2012 served 1 million active borrowers with an aggregate microcredit portfolio of approximately USD 266 million. None of these institutions accept deposits.  The new law prohibits companies and MFI NGOs from receiving any deposits.

About Egyptian Financial Supervisory Authority (EFSA)

The Egyptian Financial Supervisory Authority (EFSA) was established in 2009 with the aim of supervising and regulating the financial services sector, including non-bank financial markets in Egypt. EFSA supervises capital markets, insurance services, mortgages, leasing, factoring and securitization. EFSA is also responsible for licensing non-banking financial services, as well as for the inspection of licensed institutions.

By Mehrechane Nayel