Egyptian Financial Supervisory Authority

Egyptian Financial Supervisory Authority

Chairman of the Board of Directors

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Board of Directors Decision No. (172) of 2014

Dated 21/12/2014

Regarding the Conditions, Rules, and Procedures for Licensing Companies to Operate in the Microfinance Activity

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Board of Directors of the Egyptian Financial Supervisory Authority

After reviewing Law No. (159) of 1981 on Joint Stock Companies, Companies Limited by Shares, and Limited Liability Companies and its Executive Regulations;

And Law No. (95) of 1992 on the Capital Market and its Executive Regulations;

And Law No. (10) of 2009 on Regulating Supervision over Non-Banking Financial Markets and Instruments;

And Law No. (141) of 2014 Regulating the Microfinance Activity;

And Presidential Decree No. (192) of 2009 Issuing the Basic Statute of the Egyptian Financial Supervisory Authority;

And EFSA Board Decision No. (158) of 2014 Regarding the Determination of Microfinance Fields and Values,

And EFSA Board Decision No. (161) of 2014 Regarding the Conditions for Registration, Continued Registration, and Striking Off in the Register of Auditors for Microfinance Companies, Associations, and Non-Governmental Organizations Licensed to Operate in this Activity by the Authority;

And EFSA Board Decision No. (171) of 2014 Regarding Service Fees for Entities Operating in the Microfinance Activity;

And upon the approval of the Board of Directors of the Egyptian Financial Supervisory Authority in its meeting No. (22) dated 21/12/2014;

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Decided:

(Article One)

Licensing Conditions

Companies seeking a license from the Authority to operate in the microfinance activity must meet the following conditions:

1. They must take the form of an Egyptian joint stock company.

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(Article Two)

Temporary Licensing Procedures

Licensing applications must be submitted to the Authority on the form prepared by the Authority, accompanied by the following documents:

a. A recent official extract from the company's commercial register.

b. The company's founding contract and its articles of association.

c. A declaration from the company's legal representative confirming that no amendments have been made to the data and documents on which the company was established, or that such amendments have been notified to the Authority if they occurred.

d. A statement detailing the members of the board of directors and their expertise, along with evidence confirming that the Chairman, board members, Managing Member, and managers responsible for financing and risk management are of good repute, and that no criminal conviction or judgment for a crime involving honor or trust, or any of the crimes stipulated in company, commercial, or capital market laws, or a declaration of bankruptcy (unless their reputation has been restored) has been issued against any of them.

e. Proof of the company's headquarters possession, whether by lease or ownership.

f. A declaration from the company's Managing Member confirming their responsibility for actual management and full dedication to this role.

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(Article Three)

Paid-up Capital

A temporary license may be issued with a paid-up capital of no less than 25% of the minimum issued capital stipulated in Article One, clause (4), to be fully completed before applying for the final license.

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(Article Four)

Licensing Rules

The Authority shall review the licensing application regarding the fulfillment of stipulated conditions, considering market demand for new company licenses. Upon approval, it shall issue a temporary license until the administrative and IT infrastructure, organizational structure, and other requirements stipulated in Article One, clause (6) of this Decision are verified and completed, after which the final license shall be issued. The company's operation of the activity until the issuance of the final license, as well as its receipt of deposits or engagement in any other activity beyond the licensed scope, shall be reviewed. The Authority may prohibit the exercise of all or part of the licensed activities or cancel the license for all or part of them, in accordance with Article (11) of Law No. (171) of 2014.

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(Article Five)

Final Licensing Procedures

The company holding a temporary license must submit an application to the Authority for a final license within a period not exceeding six months from its issuance, accompanied by the following:

a. Evidence of completing the administrative and IT infrastructure, organizational structure, work manuals, and other requirements stipulated in clause (6) of Article One of this Decision.

b. Membership in the Egyptian Microfinance Union upon its establishment.

c. Fulfillment of the minimum paid-up capital stipulated in clause (4) of Article One. The Authority shall review the submitted application and conduct necessary desk and field inspections to verify the company's compliance with licensing requirements within a period not exceeding two weeks from the date the company fulfills the required documents. In case any requirements are not met, the Authority shall notify the company of what needs to be completed. The Authority shall commit to issuing the final license to the company within one week from confirming its compliance with the aforementioned requirements.

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(Article Six)

Licensing Fees

Licensing fees shall be set at one percent of the company's paid-up capital, with a maximum of one hundred thousand Egyptian pounds. The fee difference shall be settled upon an increase in the issued capital, up to the aforementioned maximum limit; otherwise, the license shall be deemed null and void.

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(Article Seven)

Supervision and Oversight Cost Fee

The Authority shall be entitled, every quarter, to a supervision and oversight cost fee from each licensed microfinance company at a rate of half a percent (0.5%) of the financing balance provided to the company's clients during the previous quarter. It shall be calculated based on the average financing balance during the period. The supervision and oversight cost fee shall be paid within a period not exceeding six weeks from the end of each quarter.

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(Article Eight)

Ownership Controls

No natural or legal person, or group of related parties, may own 50% or more of the capital of a company licensed to operate in the microfinance activity without obtaining the Authority's non-objection based on the controls issued for this purpose.

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(Article Nine)

Regularization of Existing Companies

Existing companies on the date of implementation of Law No. (141) of 2014 that wish to obtain a license from the Authority to operate in the microfinance activity must fulfill the requirements stipulated in Articles One through Seven of this Decision, observing the following:

1. The company's net equity according to its latest annual or periodic financial statements must not be less than the minimum paid-up capital stipulated in Article One of this Decision.

2. The company must submit plans to regularize its status in accordance with Law No. (141) of 2014, specifically committing to fulfill clause (2) of Article One within a period not exceeding six months from the date mentioned.

3. The company must commit to submitting the previous opening financial statements prior to the start of the licensed activity within thirty days, accompanied by an auditor's report and evidence of their approval by the company's General Assembly. Based on the company's operations and its engagement in microfinance-related activities, the Authority may license the company to commence operations, provided it commits to fulfilling all requirements stipulated in clause (2) within the specified period; otherwise, the license shall be deemed null and void.

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(Article Ten)

This Decision shall be published in the Egyptian Official Gazette and on the Authority's website, and shall take effect from the day following its issuance.

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Chairman of the Board of Directors

Sherif Samy

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Chairman's Office

Egyptian Financial Supervisory Authority

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20 Emad El-Din St. - Cairo - Egypt
Telephone: (+202) 37737133
Fax: (+202) 35741000
Email: info@efsa.gov.eg
Website: www.efsa.gov.eg
P.O. Box: 618 - Postal Code: 11111