Circular dated September 6, 2018 regarding financing controls for installment sales services companies

Cairo: 6 September 2018

Dear Sir / Chairman of the Board of Directors,

Greetings,

With regard to installment sales companies that provide services to individuals for the purpose of purchasing consumer goods, and given that these companies are not subject to any regulatory oversight which may result in increased risk rates and higher default rates, the Board of Directors of the Central Bank decided at its meeting held on August 15, 2018, to issue the following controls that banks must comply with when dealing with companies operating in the field of installment sales financing in any of the aspects of investments:

• 1. Financing for these companies must be in local currency only, taking into account the tenors of these companies' portfolios to avoid maturity mismatches.
• 2. Amendment of Item Two of Instruction No. 6 issued on March 22, 2016, regarding the ratio of the value of due installments to monthly income, to read as follows:
     "Banks must ensure that commercial establishments / retail outlets / companies operating in the field of installment sales financing that grant their customers payment facilities to purchase consumer goods, as well as car companies, apply the fixed rate of 35% in their dealings with their customers, in case of dealing with these entities in any aspect of investments."
• 3. Banks obtaining certified reports from the company's Certified Public Accountant as follows:
  • An annual report confirming the existence of clear and effective policies within the company to calculate and monitor the value of installments due to individual monthly income.
  • A quarterly report clarifying the extent of the company's compliance with the maximum limit for the ratio of the value of installments to individual monthly income prescribed by the Central Bank (currently 35%, reaching 40% in the case of granting mortgages for personal housing).
• 4. Banks including clauses in contracts concluded between them and companies operating in the field of installment sales financing to ensure that they review the credit data contained in the report from the Egyptian Credit Information Company (Credit Score) to analyze and evaluate the customer's repayment behavior, in addition to the companies declaring the credit behavior of their customers to the Egyptian Credit Information Company.
• 5. Providing the Central Bank with a quarterly statement comprising the total credit facilities (granted/used/under review) and the tenors of these facilities, with respect to companies operating in the field of installment sales financing.

Please be kind enough to alert regarding taking the necessary action to implement the aforementioned decision.

Yours faithfully,

Gamal Nagm