Official Gazette - Issue 252, Part (A) on November 9, 2016

General Authority for Financial Supervision

Board of Directors Decision

No. 123 of 2016 dated 2016/10/16

Issuing the Client Protection Guide for Companies, Associations, or Civil Institutions Engaging in Microfinance Activities

The Board of Directors of the General Authority for Financial Supervision

Having reviewed 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. 197 of 2009 issuing the Statute of the General Authority for Financial Supervision:

And Board Decision No. 173 of 2014 regarding rules and regulations for companies conducting microfinance activities:

And Board Decision No. 31 of 2015 regarding rules and standards for associations and civil institutions conducting microfinance activities:

And the Memorandum issued by the Central Microfinance Administration dated 2016/10/11:

And the Board's briefing at its meeting held on 2016/10/16:

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Decided:

(Article One)

Approval is hereby granted to issue the attached guide concerning the protection of clients of companies, associations, or civil institutions engaging in microfinance activities.

(Article Two)

Companies, associations, and civil institutions engaging in microfinance activities are required to complete compliance with items (a, b, c, d) of Principle Five of the attached guide by no later than 2016/12/31.

(Article Three)

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

Chairman of the Board
Sherif Samy

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Client Protection Guide

for Companies, Associations, or Civil Institutions Engaging in Microfinance Activities

Issued on October 16, 2016

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Official Gazette - Issue 252, Part (A) on November 9, 2016

Client Protection Guide

for Companies, Associations, or Civil Institutions Engaging in Microfinance Activities

Page Number	Content
6	Preamble
9	Principle One: Objectivity in Advertising and Marketing of Provided Services
10	Principle Two: Disclosure and Transparency
11	Principle Three: Sound Agreements for Providing Financing
13	Principle Four: Integrated Financing Granting Policies Considering Clients' Financial Conditions
16	Principle Five: Observing Professional and Ethical Considerations in Dealing with Clients
17	Principle Six: Facilitating Installment Repayment
18	Principle Seven: Effective Handling of Client Complaints

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Official Gazette - Issue 252, Part (A) on November 9, 2016

Preamble

Law No. 141 of 2014 was issued to regulate microfinance activities for economic, productive, service, or commercial purposes in fields and values determined by the Board of Directors, not exceeding one hundred thousand Egyptian pounds. The law aims to achieve the following:

• Regulating microfinance activities to ensure the interests of all parties and supervise companies conducting this activity to guarantee efficiency, transparency, and risk management that may be exposed.

• Developing professional standards for microfinance activities to elevate them and their workforce to match international standards.

• Attracting more entities willing to provide microfinance from major financial institutions by enabling financing for micro-entrepreneurs, thereby contributing to reducing the gap between them.

• Expanding financial services for micro-enterprises and targeted client groups to reduce the financing gap in this sector.

• Ensuring transparency in pricing all financial products and defining their terms, and working with clients to avoid borrowing beyond their repayment capacity and not using financial products for purposes other than intended.

• The Authority works to ensure the safety and stability of non-banking financial markets, regulate and consolidate them, balance the rights of participants therein, and also promotes messages, systems, and issues readings that ensure the efficiency of these markets and transparency of activities conducted therein.

• To achieve its objectives, the Authority shall, in particular, undertake the following:

  • Licensing non-banking financial activities.
  • Supervising the provision and dissemination of information related to non-banking financial markets.

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Official Gazette - Issue 252, Part (A) on November 9, 2016

Ensuring competition and transparency in providing non-banking financial services during market supervision.

Protecting the rights of participants in non-banking financial markets and taking necessary measures to limit manipulation and fraud in those markets.

In this framework, the General Authority for Financial Supervision has issued several decisions regulating microfinance activities, the most important of which are as follows:

1. Board Decision No. (173) of 2014 regarding rules and regulations for companies conducting microfinance activities.

2. Board Decision No. (31) of 2015 regarding rules and standards for associations and civil institutions conducting microfinance activities.

3. Board Decision No. (161) of 2014 regarding compliance, continued compliance, and delisting rules in the account monitoring register for microfinance companies and licensed associations/civil institutions.

4. Authority Chairman Decision No. (489) of 2015 regarding rules for preparing and presenting financial statements for licensed associations/civil institutions conducting microfinance activities.

The implementation of these decisions requires that licensed service providers conducting microfinance activities establish and apply ethical practice standards in client treatment, and provide clients with a means to express complaints, enabling the service provider to assist them more effectively. Microfinance must also ensure client data privacy and protect clients, projects, and the industry as a whole.

The conduct of microfinance activities is based on fundamental client protection principles that help financing institutions meet requirements for sound professional practices and behavior. Client protection principles also cover the minimum standards that microfinance institutions must adhere to in treating their clients.

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Official Gazette - Issue 252, Part (A) on November 9, 2016

In applying the provisions of this guide, the following terms are intended:

• Service Provider: An association, civil institution, or company licensed to conduct microfinance activities.

• Client: Any natural or legal person obtaining microfinance services.

• Guarantor (if any) and any person bearing obligations toward the client.

• Objective of the Guide:
  The Authority works to develop non-banking financial institutions to enhance their products or develop new instruments, and to protect clients of these institutions.

Among the Authority's strategic objectives is working to ensure the protection of participants dealing with licensed microfinance service providers, securing fair treatment for them, and ensuring they receive financial services and products easily, transparently, honestly, and at a reasonable cost and high quality that aligns with the client's side and needs.

• Scope of the Guide:
  This guide is directed at service providers conducting microfinance activities. It serves as a primary reference for companies or associations engaged in microfinance to provide necessary client protection through adherence to fundamental principles:

• Principle One: Objectivity in Advertising and Marketing of Provided Services.

• Principle Two: Disclosure and Transparency.

• Principle Three: Sound Agreements for Providing Financing.

• Principle Four: Integrated Financing Granting Policies Considering Clients' Financial Conditions.

• Principle Five: Observing Professional and Ethical Considerations in Dealing with Clients.

• Principle Six: Facilitating Installment Repayment.

• Principle Seven: Effective Handling of Client Complaints.

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Official Gazette - Issue 252, Part (A) on November 9, 2016

Principle One: Objectivity in Advertising and Marketing of Provided Services

The rules and standards for conducting activities by licensed companies, associations, and civil institutions include regulations for advertising services in microfinance. In this framework, the service provider is committed to this principle by ensuring the provision of complete information published or circulated through any audio, visual, written, printed, electronic, or other means.

The service provider is also committed to providing information and adhering to the following:

(a) That the advertising truthfully and accurately covers microfinance financial products.

(b) Prohibiting the omission of any facts or material information that could affect the soundness of clients' decision-making.

In this framework, the service provider is committed to the following:

1. Presenting data clearly and correctly to enable the public to understand the advertisement and evaluate its subject matter.

2. Emphasizing the accuracy of data or statements issued by service providers.

3. Not concealing names or descriptions of financial products available through service providers in a manner that misleads or hides the nature of the granted financing, repayment period, burdens borne, or scheduled installments.

4. Emphasizing that advertising does not disparage competitors or the products they offer.

5. Or how they conduct their activities or the available dispute resolution mechanisms in microfinance.

6. Emphasizing that advertising does not include misleading or false data regarding the financial standing of companies, associations, or civil institutions, or issuing incorrect statements about other entities operating in the same activity that harm their reputation.

7. Not including in advertising anything that in any way indicates that the provided financing is considered a special or free offer for a specific duration of individuals or through a certain period, unless this is the actual reality of this type of financing.