Egyptian Financial Regulatory Authority

FRA Board of Directors Decision No. 142 of 2019

Dated 3/11/2019

NANO FINANCE Regarding Nano Finance Regulations

The Board of Directors of the Egyptian Financial Regulatory Authority

Having reviewed Law No. 10 of 2009 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 Regulatory Authority;

and FRA Board Decision No. 173 of 2014 regarding the rules and regulations for companies practicing microfinance activity and its amendments;

and the Central Department of Microfinance Memorandum dated 28/10/2019;

and the approval of the FRA Board of Directors in its meeting held on 3/11/2019;

Decided:

(Article One)

The regulations stipulated in this Decision shall apply to companies licensed to practice microfinance activity when they wish to offer the Nano Finance product (Nano), referred to herein as "Companies".

(Article Two)

Nano Finance is a microfinance product granted to individuals with a maximum limit of three thousand Egyptian pounds per person, repayable within a period not exceeding ninety days. Installments may not be deferred, and it shall not be offered in a crowdfunding format.

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(Article Three)

Companies shall make the Nano Finance product available by having the client complete a financing application form using electronic applications through multiple digital media for data and/or information exchange and/or for operating and managing the financing station, provided that the Companies observe the following:

1. The financing application form shall include the rights and obligations of the client in a simplified and clear manner, with a minimum of the clauses stipulated in Article (32) regarding financing contract regulations as set forth in the rules and regulations for companies practicing microfinance activity. The Companies shall retain evidence of the client's awareness and consent to its provisions and terms, whether through the electronic application or in document form, and provide a copy to the client.

2. Take necessary measures to protect the electronic application's database and included client data against risks of fraud, hacking, and loss, in accordance with Article (16) regarding technical and informational requirements stipulated in the rules and regulations for companies practicing microfinance activity.

3. Obtain the client's prior consent to use their personal data and information required for financing purposes, with a commitment to maintain the confidentiality of such data and information, and ensure they are not misused by the Company, its employees, agents, or shared with others without the client's explicit consent, within the scope of this consent.

4. Obtain approval from competent authorities to operate the electronic application dedicated to providing financing and its functions, in accordance with prevailing legislation and regulations on this matter (if any).

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(Article Four)

Companies wishing to obtain the Authority's approval to offer the Nano Finance product shall comply with the following regulations:

1. Have a system for managing risks associated with using the electronic application, including a client data processing policy and required internal audit procedures to verify the integrity of its implementation.

2. Use simplified awareness and guidance tools regarding Nano Finance for clients, whether visual, audio, and/or written, ensuring clear understanding of how to use this type of financing, its nature, and associated risks, as well as clarifying client rights and obligations.

3. Submit a declaration undertaking to conclude an insurance policy with an insurance entity against default risks or life insurance covered by the Authority, if available in the market, at a rate of not less than (25%) of the Nano Finance portfolio value at the end of each month.

4. Commit to using appropriate means to monitor client debts, characterized by speed and ease of client access, and follow up with procedures applied in case of payment delays.

5. Commit – before granting financing – to inquire about the client wishing to obtain financing and their guarantor (if any) from a credit reference agency licensed by the Central Bank of Egypt if the financing amount exceeds five hundred pounds, and retain this in the client's file. If this cannot be done before granting financing due to reasons beyond the Company's control, the inquiry must be conducted within two business days of granting financing, and financing shall not be renewed if the inquiry reveals issues with the client's credit standing for this type of financing.

6. Commit to updating client data, information, and credit standing with the credit reference agency at least every two weeks.

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(Article Five)

Companies may contract with a field collection agent responsible for collecting client installments. The contract must specify the rights and obligations of each party, and the Company must ensure the agent's compliance with the Authority's customer protection principles regarding collection practices.

(Article Six)

Companies shall establish provisions for doubtful-to-collect financing balances (excluding returns thereon) on the total outstanding balance of the Nano Finance portfolio, at no less than the following percentages:

Provision Percentage	Client Balances According to Payment Delay
3%	Regular clients paying according to allocated resources or delayed by no more than 7 days.
20%	Payment delay exceeding 7 days up to 15 days.
40%	Payment delay exceeding 15 days up to 30 days.
60%	Payment delay exceeding 30 days up to 45 days.
80%	Payment delay exceeding 45 days up to 60 days.
100%	Payment delay exceeding 60 days.
100%	Rescheduled debt balances (after a maximum of three times).

A provision for the full debt balance shall be calculated in cases of death and permanent total disability, offset by the insurance value in favor of the Company.

In case a client with rescheduled debt fails to regularly pay the outstanding amount, a (100%) provision rate shall be applied directly after a payment delay of at least fifteen days.

The Company may exclude the value of the concluded default risk insurance policy from the total outstanding balance of the regular portfolio segment when calculating the required provision.

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(Article Seven)

Companies shall commit to submitting a periodic report to the Authority every two weeks regarding the Nano Finance portfolio, according to the form issued by the Authority for this purpose.

(Article Eight)

In matters not specifically addressed in this Decision, the rules and regulations for companies practicing microfinance activity issued by FRA Board Decision No. 173 of 2014 and its amendments shall apply.

(Article Nine)

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
of the Egyptian Financial Regulatory Authority
Dr. Mohamed Omran