Board of Directors Decision No. 121 of 2018 Regarding the Conditions and Procedures for Licensing Companies Engaging in Microfinance Activities

Egyptian Financial Regulatory Authority Board of Directors Decision No. 121 of 2018 Dated 30/7/2018 Regarding the Conditions and Procedures for Licensing Companies Engaging in Microfinance Activities

Board of Directors of the Egyptian Financial Regulatory Authority

Having reviewed the Joint Stock Companies, Partnerships Limited by Shares and Limited Liability Companies Law No. 159 of 1981 and its Executive Regulations; And the Capital Market Law No. 95 of 1997 and its Executive Regulations; And Law No. 10 of 2009 Regulating Supervision over Non-Banking Financial Markets and Instruments; And Law No. 141 of 2014 Regulating Microfinance Activities; And Presidential Decree No. 193 of 2009 Issuing the Basic Statute of the Egyptian Financial Regulatory Authority; And Board of Directors Decision No. 158 of 2014 Regarding the Determination of Microfinance Activity Fields and Values; And Board of Directors Decision No. 161 of 2014 Regarding the Controls for Registration, Continuation of Registration, and Striking Off from the Register of Auditors for Microfinance Companies, Associations, and Non-Profit Institutions Licensed to Conduct this Activity with the Authority; And Board of Directors Decision No. 171 of 2014 Regarding Service Fees for Entities Operating in Microfinance Activities; And Board of Directors Decision No. 53 of 2018 Regarding the Controls for Granting and Maintaining Licenses and Rules for Share Ownership of Companies Operating in Non-Banking Financial Activities; And upon the approval of the Authority's Board of Directors in its session dated 30/7/2018:

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Article One Obtaining the Authority's In-Principle Approval for Company Establishment

Without prejudice to establishment or licensing requirements under Law No. 141 of 2014, and in light of market demand for new companies, the company must submit an application to the Authority for in-principle approval for establishment, accompanied by the data and documents required and stipulated in Article Four of Board of Directors Decision No. 53 of 2018 Regarding the Controls for Granting and Maintaining Licenses and Rules for Share Ownership of Companies Operating in Non-Banking Financial Activities.

Article Two Licensing Conditions

The following conditions must be met by companies seeking licensing from the Authority to engage in microfinance activities:

1. It must take the form of an Egyptian joint stock company.
2. Its activity must be limited to engaging in microfinance activities and related services.
3. The majority of its capital shares must be owned by legal entities.
4. The issued capital must not be less than fifteen million Egyptian pounds, and the paid-up capital must not be less than (50%) of the aforementioned minimum, to be fully paid within three years.
5. Appropriate expertise and good reputation must be present in the Chairman of the Board, the Managing Director, and the Directors responsible for financing and risk, in accordance with the rules and controls for conducting the activity issued by the Authority's Board of Directors.
6. A commitment must be submitted by the Chairman of the Board or the Managing Director to comply with the rules and controls for conducting the activity issued by the Authority's Board of Directors, and that the company possesses the technical capabilities, information systems, risk management, fund collection, financing operations monitoring, and customer complaint examination system, in accordance with the steps of the aforementioned decision.
7. It must have at least one external auditor who meets the conditions stipulated in Board of Directors Decision No. 161 of 2014.

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Article Three Licensing Procedures

Licensing applications shall 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, certified by the competent administrative authority. (c) A declaration from the company's legal representative that no amendments have been made to the data and documents upon which the company was established, or notification of any amendments in case they occur. (d) A statement listing board members and their experience, along with evidence confirming that the Chairman, board members, Managing Director, and Directors responsible for financing and risk have good reputations, and that no judgments have been issued against any of them for felony or misdemeanor sentences for crimes involving honor or trust, or for crimes stipulated in companies, commerce, or capital market laws, or for bankruptcy declarations, unless their reputation has been restored. (e) Proof of occupancy of the company's premises, whether by lease or ownership. (f) A declaration from the company's Managing Director that they are responsible for actual management and are fully dedicated to it. (g) Commitment to comply with the rules and controls for conducting the activity issued by the Authority's Board of Directors. (h) A statement detailing the administrative and IT infrastructure, organizational structure, work manuals, and other regulations stipulated in Article Two, item (6) of this Decision.

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Article Four Licensing Examination

The Authority shall conduct an intensive examination of the licensing application, documents, and data regarding the availability of stipulated conditions, and form a committee within the Authority for field verification to ensure the availability of the administrative and IT infrastructure, organizational structure, and other requirements of Article One, item (6) of this Decision. The committee shall prepare its report on this matter within a period not exceeding two weeks from the date the company completes the required documents.

In case any requirements are not met, the Authority shall notify the company of what it needs to complete, and the Authority shall commit to issuing the license to the company within one week from receiving confirmation of the company's fulfillment of the aforementioned requirements and payment of the licensing fees.

Article Five Licensing Rules

The company is prohibited from conducting activities until the license is issued, and is also prohibited from receiving deposits or conducting any other activity other than those authorized by the license. The Authority may prohibit the conduct of all or some of the licensed activities or cancel the license for all or some of the licensed activities, in accordance with Article (11) of Law No. 141 of 2014.

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Article Six Licensing Fees

Licensing fees are set at one percent of the company's paid-up capital, capped at one hundred thousand Egyptian pounds. The difference in licensing fees shall be settled upon an increase in the issued capital, up to the aforementioned maximum, and the Authority may take any of the measures stipulated in Article (11) of Law No. 141 of 2014.

Article Seven Supervision and Control Cost Fees

The Authority is entitled, every quarter, to a supervision and control cost fee from each company licensed to engage in microfinance activities, at a rate of half a percent (0.5‰) of the financing balance provided to clients during the previous quarter, calculated based on the average financing balance during the period. The supervision and control cost fee shall be settled within a period not exceeding six weeks from the end of each quarter.

Article Eight Controls for Owning 50% or More of the Company's Capital

No natural person, legal entity, or group of affiliated parties may own 50% or more of the capital of a company licensed to engage in microfinance activities without obtaining prior approval from the Authority in light of the controls issued for this purpose.

Article Nine Board of Directors Decision No. 172 of 2014 is hereby repealed.

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

Chairman of the Board of Directors Dr. Mohamed Omran