Regulatory Alerts2019-10-15
Circular dated October 13, 2019 regarding regulatory controls for microfinance
The Central Bank of Egypt has issued a new capital adequacy framework for microfinance institutions. This regulation will come into effect on January 1, 2022. The guidelines include the following key points: 1. A minimum core capital requirement of EGP 50 million ($3.26 million) and a total capital requirement of EGP 75 million ($4.89 million) for banks dealing with microfinance institutions, with an additional 15% requirement for those with more than 20 branches. 2. Microfinance institutions must obtain a commitment from clients to repay their loans and provide information on the total number of outstanding loans they have provided to each client. 3. Banks dealing with microfinance institutions are required to have a loan portfolio exposure limit of 20%. 4. Microfinance institutions are required to submit quarterly reports to the Financial Regulatory Authority, including their financial statements and information on their loan portfolio. 5. Microfinance institutions cannot refinance loans more than ten times. 6. The Central Bank of Egypt will establish a scoring system (Score-I) for supervising these institutions and monitoring their performance with their clients. 7. These institutions cannot issue more than four rounds of capital increases. 8. These institutions must adhere to the Financial Regulatory Authority's guidelines and regulations, including compliance with any violations identified by the authority by a specific date. These guidelines will apply to all banks and non-bank financial institutions dealing with microfinance institutions, and they must abide by the new framework within the stipulated time frame.