Conditions for the Establishment and Functioning of Finance Companies

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Basic Circular No. 4 for Financial Institutions

Basic Decision No. 13819 dated May 21, 2026 Conditions for the Establishment and Operation of Finance Companies

Beirut, May 21, 2026 Governor of the Bank of Lebanon Karim Saeed

The Governor of the Bank of Lebanon, Based on the provisions of the Monetary and Banking Law, particularly Articles 178 to 182 thereof, Based on the provisions of Law No. 160 concerning Leasing Operations dated December 27, 1999, Based on the provisions of Law No. 520 dated June 6, 1996 concerning Credit Operations, Based on the decision of the Central Council taken in its session held on May 6, 2026,

Decides as follows:

Section I Definitions

Article 1 - Definitions: For the purpose of applying the provisions of this Decision, the following terms are understood to have the meanings set forth below:

First: Definitions

1. Financial Institutions (Finance Companies): These are institutions whose primary subject matter is conducting Lending Operations of any type and/or Credit Operations, provided they meet the conditions stipulated in Articles 179, 180, 181, and 182 of the Monetary and Banking Law and in Law No. 520 dated June 6, 1996 concerning Credit Operations. The term "Finance Companies" is used interchangeably with "Financial Institutions" for all defined institutions, wherever it appears in foreign-language texts issued by the Bank of Lebanon and the Banking Control Commission.

2. Lending Operations (Lending): This is the process of lending a sum of money and repaying it under specific conditions and in accordance with regulatory texts issued by the Bank of Lebanon, including the following: • Consumer Lending (Lending Consumer): Financing granted to a natural person for personal, family, or household purposes, not for commercial or professional purposes, including personal loans, car loans, education loans, credit and charge cards, and other similar products for consumption purposes in accordance with Basic Decision No. 7776 dated February 21, 2001, provided that the volume of such loans granted to one person or several related persons does not exceed approximately 100,000 USD (one hundred thousand US dollars). • Housing Loans (Loans Housing): Loans granted to persons to purchase a home for the purpose of residing in it or leasing it, in accordance with the conditions and ceilings specified in Basic Decision No. 7776 dated February 21, 2001. • SME Financing (Lending SME): Financing granted:

• To self-employed professionals to finance their professional activities.
• To sole proprietorships and companies conducting economic activities for commercial or production purposes, provided that their total assets or annual business volume do not exceed approximately 10,000,000 USD (ten million US dollars) and their number of employees does not exceed 60 employees. This financing includes working capital financing, asset purchases, expansion, equipment financing, and other financial needs related to commercial activity in accordance with Basic Decision No. 7776 dated February 21, 2001. • Digital Lending (Lending Digital): Conducting Lending Operations via electronic means in accordance with Basic Decision No. 7548 dated March 30, 2000 (concerning Financial and Banking Operations via Electronic Means), provided that the volume of such loans granted to one person does not exceed approximately 10,000 USD (ten thousand US dollars). • Leasing (Leasing): The process of leasing equipment, machinery, and vehicles of all types purchased from the lessor for the purpose of leasing them out while retaining ownership, provided that the lessee is granted the right to purchase them for an agreed price determined at contract execution, taking into account, even partially, paid installments as lease fees, in accordance with Law No. 160 dated December 27, 1999. • Factoring (Factoring): Any process whereby the institution purchases or receives receivables belonging to the client or finances them for the purpose of collecting them from debtors, in exchange for a fee or commission. • Margin Lending (Lending Margin): A lending process to finance the client in purchasing a portfolio of bonds or financial instruments secured by this portfolio, in accordance with Basic Decision No. 7135 dated October 22, 1998, and provided that the Financial Institution has obtained a license from the Capital Market Authority to conduct activities related to financial instruments.

3. Fiduciary Operations (Operations Fiduciary): A contract whereby a natural or legal person, called the creator, grants another person, called the trustee, the right of management and disposal, for a specific purpose, over rights or movable assets called the fiduciary estate, in accordance with Law No. 520 dated June 6, 1996 and Basic Decision No. 6349 dated October 24, 1996.

4. Microfinance (Microfinance): Loans granted, either physically or digitally in accordance with digital lending conditions, to individuals or very small institutions consisting of four persons or fewer, for the purpose of assisting them in creating or developing productive (industrial, agricultural, craft) or service, tourism, or commercial projects specific to them, or improving their living or housing conditions, provided that the maximum limit for each loan does not exceed approximately 10,000 USD (ten thousand US dollars) and that its repayment period does not exceed six years.

Second: Classification of Activities The activities conducted by the Financial Institution are classified as follows:

1. Primary Activities Include activities that form the core of the Financial Institution's business, namely: • Lending Operations • Fiduciary Operations • Microfinance

2. Secondary Activities Include activities provided by the Financial Institution as secondary to its primary activities, namely: • Card Acquiring and Issuance Operations (Acquiring and Issuance Card), subject to prior approval from the Bank of Lebanon and compliance with Basic Decision No. 7299 dated June 10, 1999. • Financial Instruments Operations for the Institution's Own Account (Trading Proprietary), in accordance with Article 153 of the Monetary and Banking Law and related circulars issued by the Bank of Lebanon. • Activities related to Financial Instruments Operations for Clients, subject to obtaining a license from the Capital Market Authority and having cumulative capital reserves. • Electronic Payment Service Provider (EPSP) Operations, subject to prior approval from the Bank of Lebanon and compliance with Basic Decision No. 13790 dated January 9, 2026 (concerning Electronic Payment Service Providers), and having cumulative capital reserves. • Other services related to customer service (such as payroll localization, bill payment, bank account and real estate asset management, excluding consulting services...).

Section II Licensing Requirements

Article 2 - General Provisions:

1. No legal person, except banks, may conduct Lending Operations in accordance with the provisions of this Decision, and no natural person may practice Lending Operations as a profession.

2. Any legal person intending to provide any of the services subject to this Decision must obtain prior approval from the Bank of Lebanon to receive a "Financial Institution" license to provide one or more of the following categories: Category | Service A | Lending Operations (Lending) B | Fiduciary Operations (Fiduciary) C | Microfinance (Microfinance)

3. The Central Council of the Bank of Lebanon grants the license to establish a Financial Institution as it deems serving the public interest, after confirming the Proper & Fit status of the founders, economic right holders, shareholders in the Financial Institution's capital, and persons designated for senior executive roles, particularly regarding the absence of any criminal or civil judgments against them or their partners in Lebanon or abroad for committing ordinary crimes, theft, misappropriation, fraud, money laundering, terrorism financing, or bankruptcy declaration, and regarding their inclusion in local or UN sanctions lists.

4. The Financial Institution must restrict its subject matter to providing one or more of the services mentioned above and operations directly related to these services.

5. A Financial Institution providing Category "A" service may also provide Category "C" service without obtaining an additional license for this purpose and without increasing the minimum capital.

6. A Financial Institution may expand its services provided that: a - It obtains prior approval from the Bank of Lebanon for any additional service within the categories mentioned above. The Bank of Lebanon reclassifies any unlisted service into the appropriate category. b - It increases the minimum capital as stated in Article 5 below. c - It demonstrates the feasibility of providing the additional service and its ability to manage associated risks.

7. A Category "C" Financial Institution may not provide services of Categories "A" and "B" until it obtains a license from Category "A" or "B"; in this case, it cannot benefit from the special conditions pertaining to Category "C".

8. The Financial Institution must indicate on its documents and electronic website, in addition to the information required by the Commercial Law, its registration number on the list of Financial Institutions issued by the Bank of Lebanon and its affiliated category.

Article 3 - Licensing Documents:

1. Applicants seeking a "Financial Institution" license to provide one or more of the aforementioned categories must submit an application in four copies, one original, accompanied by the documents specified in Annex No. (2).
2. The license application is automatically rejected if it does not include all documents listed in Annex No. (2) and/or prepared according to the conditions stated therein.

Article 4 - Legal Form:

1. The licensed Financial Institution must be a Lebanese joint-stock company with named shares, and its shareholding structure must be simplified and clear, showing all shareholders down to the ultimate economic beneficiaries.
2. Foreign Financial Institutions or branches of foreign companies established in their home country as joint-stock companies may open branches in Lebanon in accordance with the conditions stipulated in this Decision.

Article 5 - Minimum Capital:

1. The Financial Institution must allocate a minimum capital in Lebanese Lira for each category listed in the table below: Category | Required Minimum Capital A | 300,000,000,000 LBP (Three hundred billion Lebanese Lira) B | 75,000,000,000 LBP (Seventy-five billion Lebanese Lira) C | 50,000,000,000 LBP (Fifty billion Lebanese Lira)

2. The minimum capital requirements are cumulative according to the number of categories.

3. Capital subscription is made in a single lump sum at the Bank of Lebanon within a maximum period of 3 months from the date of licensing, under penalty of license revocation.

4. The declared capital is deposited in a special and independent account opened specifically for this purpose at the Bank of Lebanon under the name of the concerned institution.

5. The aforementioned capital is issued after completing the registration of legal documents with the relevant authorities according to standard procedures, and a copy is provided to the Bank of Lebanon.

6. The same mechanism specified above is followed for each capital increase.

7. The paid capital by shareholders must be sufficient to cover start-up and operational costs (Capex & Opex) for at least one year.

Article 6 - Share Trading:

1. The Financial Institution must ensure its bylaws include provisions requiring prior approval from the Bank of Lebanon for:

• Any amendment to its bylaws.
• Any subscription or trading of its shares in the following cases: a - If it results in the subscriber or their affiliate directly or indirectly acquiring a percentage exceeding 5% of the total shares of the Financial Institution. b - If the subscriber or their affiliate owns 5% or more of the total shares at the time of transfer. c - If the subscriber, affiliate, or their affiliate is a current or elected member of the Board of Directors, regardless of the number of shares transferred. The contributions of spouses and minor children, and any economic group within the aforementioned 5% percentage in items (a) and (b), are included.

2. The provisions of Articles (5) and (5 bis) of the Implementing System for Issuing and Trading Bank Shares attached to Basic Decision No. 7814 dated May 11, 2001 apply to companies and investment funds participating in the capital of any Lebanese Financial Institution.
3. The Financial Institution must notify the Bank of Lebanon about each share transfer resulting in the transferee acquiring a percentage equal to or less than 5% of its capital. The concerned Financial Institution ensures, at its full responsibility, the availability of all legal and regulatory conditions (shareholders' right of first refusal, Board approval...) for the share transfers mentioned in item (3) above, and the accuracy of information reported to the Bank of Lebanon, and that the bylaws or partnership agreement for each of the companies and investment funds transferring shares includes a clause stating that all shares of these companies or units of these funds are named and owned, directly or indirectly, entirely and continuously by natural persons or companies with named shares.
4. Share transfers via inheritance or will are not considered transfers under the meaning of this Article.

Article 7 - Prohibitions: The Financial Institution is prohibited from:

1. Conducting foreign exchange operations exclusively for executing supplementary or related operations on behalf of its clients.
2. Loading banknotes, metal coins, metal bullion, and currency.
3. Issuing (Assets Virtual) virtual assets and/or dealing with them and/or facilitating their handling in any form, in accordance with what the Bank of Lebanon issues regarding this matter.
4. Receiving deposits as defined in Article 125 of the Monetary and Banking Law or promoting them to attract deposits.
5. Conducting any activity before obtaining the license from the Bank of Lebanon and fully subscribing to the capital.
6. Distributing realized profit shares during the fiscal year 2025 and prior fiscal years to shareholders.

Article 8 - Proper & Fit: First - The Financial Institution must prove the following:

1. That shareholders, Board of Directors members, and senior management meet the conditions indicated in Annex No. (1).
2. That shareholders' funding sources are clear and legitimate.
3. That its Recruitment Policy (Policy Recruitment) and internal control procedures ensure that its employees or persons delegated/appointed to act on its behalf meet the conditions mentioned in Annex No. (1). Second - The Central Council of the Bank of Lebanon may object to the election of the President or any Board member, or the appointment of any senior executive, or the continuation of their tenure if it finds that they do not meet the Proper & Fit conditions. The Bank of Lebanon's objections in this regard are binding on the Financial Institution and concerned shareholders, and the Central Council enjoys discretionary authority for this purpose exercised according to public interest requirements.

Article 9 - Organizational Structure: The Financial Institution must prepare an organizational structure that:

1. Identifies Board of Directors members and any management personnel, with the responsibility of each.
2. Determines the distribution of various Departments (Departments) and Units (Units) within the Financial Institution and their communication with the General Manager and/or Board of Directors.
3. Includes regulatory departments and units imposed by regulatory texts issued by the Bank of Lebanon (such as Risk Management, Compliance, Internal Audit, and Customer Protection...) and ensures the separation between these regulatory functions and executive functions according to established regulations.

Article 10 - Business Plan (Plan Business) and Exit Plan (Plan Exit):

1. The Financial Institution must prepare a detailed Business Plan (Plan Business) in collaboration with an international audit or consulting firm, or a local audit firm, which proves to the Bank of Lebanon that it possesses the necessary knowledge to prepare the plan scientifically and accurately, including the information indicated in Annex No. (3). The Business Plan must be updated when applying for a license to provide an additional category.
2. The Business Plan must cover a forecast period of not less than five years and must have been subjected to Stress Test Scenarios (Scenarios Test Stress), with results evaluated by the audit firm and highlighted in the final evaluation report of the Business Plan.
3. The Financial Institution must prepare a detailed Business Plan (Plan Business) as specified in item (1) of this Article upon each transfer that may significantly affect (Influence Significant) the institution's decisions and business strategy.
4. The Financial Institution must prepare an Exit Plan (Plan Exit), particularly if it fails to achieve its objectives (Objectives Business), including the steps intended to be taken to protect its clients.

Article 11 - IT Infrastructure (Infrastructure IT) and Information Security (Security Information): The Financial Institution must prepare a detailed description of its IT infrastructure and information security framework, including at least the following:

1. The IT architecture diagram covering applications, systems, data centers, networks, and operations.
2. Information security measures taken to protect client assets and their financial and personal data, and to mitigate operational risks, fraud risk, and misappropriation risk.
3. Agreements related to outsourcing information technology services from external sources (where applicable).

Article 12 - Risk Management Framework (framework management Risk):

1. The Financial Institution must establish a Risk Management Unit (Unit Management Risk) or appoint a Risk Officer (Officer Risk) according to the size and nature of its operations.
2. The Financial Institution must prepare a risk management framework suitable for the services to be provided, including at least the following: a - Policies, procedures, regulations, and controls necessary for managing risks associated with the service categories to be provided, including those related to risk identification, monitoring, and mitigation. b - Human and technical resources allocated for risk management.

Article 13 - Commencement of Operations:

1. The Financial Institution must commence its operations in accordance with the submitted Business Plan within a period of six months from the date of issuance of the listing decision, under penalty of delisting.
2. Due to exceptional or emergency circumstances, this period may be extended by an additional six months upon a reasoned request, with the decision returned to the Central Council.

Article 14 - Cessation of Operations: If a Financial Institution ceases to conduct its operations for six consecutive months, it becomes subject to delisting from the list issued by the Bank of Lebanon.

Section III Ongoing Requirements

Article 15 - General Conditions for Operational Continuity:

1. The Financial Institution must comply with the submitted Business Plan, which is evaluated annually, particularly regarding compliance with the services to be provided, under penalty of delisting from the list issued by the Bank of Lebanon.
2. The Financial Institution must pay an annual fee to the Bank of Lebanon amounting to 3,000,000,000 LBP (three billion Lebanese Lira) for each category. This fee is paid for the first time upon obtaining the license and subsequently before January 31 of each year, under penalty of revocation of the license pertaining to this category. Currently listed Financial Institutions on the list issued by the Bank of Lebanon must pay the aforementioned fee before June 30, 2026, under penalty of delisting from this list.
3. The Financial Institution must comply with the provisions of Basic Decision No. 10227 dated August 21, 2009 (concerning Business Continuity Plan during and after disaster occurrence) (Plan Continuity Business).
4. The Financial Institution must comply with compliance requirements and anti-money laundering and counter-terrorism financing procedures according to regulatory texts issued by the Bank of Lebanon, particularly Basic Decision No. 7818 dated May 18, 2001.
5. The Financial Institution must comply with regulatory requirements issued by the Bank of Lebanon, Banking Control Commission, and supervisory authorities.
6. The Financial Institution must provide the Bank of Lebanon and/or Banking Control Commission with any documents either may request.

Article 16 - Consumer Lending Requirements (Lending Consumer): The Financial Institution is prohibited from obtaining, as collateral for consumer loans, real estate mortgages or non-removable/irrevocable guarantees directly or indirectly.

Article 17 - Lending Limits: The Financial Institution must comply with the obligations stipulated in items (3) and (4) of Article 152, item (1) of Article 154, and Articles 153, 156, 160, 161, 164, and 165 of the Monetary and Banking Law. The maximum limit for facilities granted by any Financial Institution operating in Lebanon to one person, natural or legal, or belonging to a related group of debtors is:

• Ten percent (10%) of the Financial Institution's own funds for resident persons.
• Five percent (5%) of the Financial Institution's own funds for non-resident persons, provided that the total facilities granted to non-residents do not exceed twenty-five percent (25%) of these funds. The aforementioned limit applies to granted or utilized facilities, whichever is greater, whether direct or indirect, after deducting provisions made by the Financial Institution for them, if any.

Article 18 - Governance Requirements:

1. The Board of Directors must approve the general strategy and internal control framework, including policies and procedures related to the Financial Institution's operations, and bears responsibility for understanding the risks faced by the institution and closely supervising management's work and following up diligently to ensure they fully perform their duties.
2. The Financial Institution must notify the Bank of Lebanon and Banking Control Commission in detail about lawsuits filed against it, its shareholders, and its executives immediately upon their occurrence.

Article 19 - External Audit Requirements:

1. The Financial Institution must contract an independent supervisory auditor who meets at least the conditions stipulated in Decree No. 1983 dated September 25, 1971, and is affiliated to a foreign audit firm with extensive and specialized experience in financial auditing and IT systems auditing (Audit IT).
2. The Central Council of the Bank of Lebanon and Banking Control Commission have the right to object to the appointment of the supervisory auditor, and this objection is binding on the institution.

Article 20 - Outsourcing:

1. The Financial Institution is prohibited from contracting with a third party to assume risk management, compliance, internal audit, and customer protection functions.
2. The above prohibition is exempted for functions related to IT security, cyber risk management, and internal audit related to IT and its security, subject to prior approval from the Bank of Lebanon.

Article 21 - Branches:

1. The provisions of the system for opening and closing branches for banks operating in Lebanon, and determining reserves imposed on centers and branches attached to Basic Decision No. 7147 dated November 5, 1998, apply to Financial Institutions.
2. Each Lebanese Financial Institution wishing to open a branch in Lebanon must allocate within its own funds, exceeding the minimum capital, an additional amount of 15,000,000,000 LBP (fifteen billion Lebanese Lira) for each branch.
3. Each Lebanese Financial Institution wishing to open a branch abroad must allocate for this branch within its own funds, exceeding the minimum capital, an additional amount equal to three times the required reserves for opening a branch in Lebanon, in addition to the amount imposed by foreign authorities.

Article 22 - Special Conditions for Category “C”: Financial Institutions of Category “C” must comply with the following:

First: Minimum Own Funds: They must allocate within their own funds, exceeding the minimum capital, an additional amount of 3,750,000,000 LBP (three billion seven hundred fifty million Lebanese Lira) for each branch.

Second: Compliance and Verification Unit Rules:

1. The duties of the compliance department may be confined to the verification unit.
2. These Financial Institutions are exempted from the obligation of establishing two departments within the verification unit subject to Article 10 of the Implementing System for Monitoring Financial and Banking Operations against Money Laundering and Terrorism Financing attached to Basic Decision No. 7818 dated May 18, 2001.

Third: Staff Qualification and Training: Employees in these Financial Institutions are exempted from undergoing the examinations stipulated in Basic Decision No. 9286 dated March 9, 2006, subject to undergoing training courses in microfinance in collaboration with specialized microfinance networks and experienced specialists.

Fourth: Microloan Risk Management: These Financial Institutions must comply with the following:

1. Scoring and classification of "Microloans" (Scoring) in accordance with regulatory texts issued by the Bank of Lebanon.
2. Establishing provisions at 100% of "Microloan" balances immediately upon classifying them as doubtful, i.e., when overdue for more than 180 days.

Fifth: Opening Subsidiary Offices: These Financial Institutions may open subsidiary offices under the management and supervision of their headquarters or branches, provided that:

1. These offices are located at a distance of not less than 20 (twenty) kilometers from the headquarters and any branch.
2. The number of offices does not exceed 10 (ten) per branch, with this branch overseeing and monitoring the operations of the affiliated offices.
3. The duties of these offices are limited to: • Receiving "Microloan" applications. • Obtaining borrowers' and guarantors' signatures on contracts and documents. • Delivering checks to beneficiaries. • Sending signed applications and documents to the headquarters or relevant branch for review, approval, contract preparation, registration, and notarization. Borrowers are considered clients of the headquarters or relevant branch. These offices are prohibited from conducting any other activity, under penalty of the Financial Institution's delisting from the list issued by the Bank of Lebanon.

Sixth: Obligations for Opening Offices: This Financial Institution, when establishing subsidiary offices, must comply with the following:

1. Notifying both the Legal Affairs Department and the Non-Banking Financial Institutions Department at the Bank of Lebanon, as well as the Banking Control Commission, of the number and addresses of subsidiary offices for its branches, and any amendments to this information immediately upon occurrence.
2. Complying with the content of any objection from the Bank of Lebanon regarding any of these offices, under penalty of delisting from the Financial Institutions list.
3. Conducting continuous and effective supervision, at its responsibility, to verify that these offices do not conduct any activity contrary to applicable laws and regulations issued by the Bank of Lebanon, particularly regarding anti-money laundering and counter-terrorism financing.

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