Law No. 141 of 2014 Regulating the Activity of Financing Medium, Small, and Micro Enterprises (Updated 2022)

Decision of the President of the Arab Republic of Egypt by Law No. 141 of 2014 Regulating the activity of financing medium, small, and micro enterprises

President of the Republic

Having reviewed the Constitution;
And the Civil Code;
And the Commercial Code;
And the Stamp Duty Law issued by Law No. 111 of 1980; And the Law on Joint Stock Companies, Commandite Companies, and Limited Liability Companies issued by Law No. 159 of 1981; And the Anti-Money Laundering Law issued by Law No. 80 of 2002; And the Law on Associations and Charitable Institutions issued by Law No. 84 of 2002; And the Law on the Central Bank, the Banking System, and Currency issued by Law No. 88 of 2003; And the Law on the Development of Small Enterprises issued by Law No. 141 of 2004; And the Income Tax Law issued by Law No. 91 of 2005; And the Law on the Establishment of Economic Courts issued by Law No. 120 of 2008; And Law No. 10 of 2009 on Regulating Supervision over Markets and Non-Banking Financial Instruments; And after approval by the Council of Ministers; And based on the opinion of the State Council; Decided:
The following Law is enacted:

Article 1
Without prejudice to the provisions of the law organizing the Central Bank and the Banking System, and the Law on the Development of Medium, Small, and Micro Enterprises issued by Law No. 152 of 2020, the provisions of this Law shall apply to the activity of financing medium, small, and micro enterprises. The activity of financing medium, small, and micro enterprises is considered a non-banking financial instrument for the application of the provisions of Law No. 10 of 2009 on Regulating Supervision over Markets and Non-Banking Financial Instruments. No person other than the entities specified in Article (3) of this Law shall practice the activity of financing medium, small, and micro enterprises. *Amended by Law No. 201 of 2020. Text of the Article before amendment:
Without prejudice to the provisions of the Law on the Central Bank, the Banking System, and Currency issued by Law No. 88 of 2003 and the Law on the Development of Small Enterprises issued by Law No. 141 of 2004 referred to therein, the provisions of this Law shall apply to the activity of microfinance.

The activity of microfinance is considered a non-banking financial instrument for the application of the provisions of Law No. 10 of 2009 on Regulating Supervision over Markets and Non-Banking Financial Instruments. No person other than the entities specified in Article (3) of this Law shall practice the activity of microfinance. The name of the law was also amended from "Microfinance Law" to "Law Regulating the Practice of Financing Medium, Small, and Micro Enterprises."

Article 2
For the application of the provisions of this Law, the following words and expressions shall have the meanings indicated opposite each of them:
1 - Financing of medium, small, and micro enterprises: Any financing for productive, service, or commercial economic purposes for medium, small, and micro enterprises as specified in the Law on the Development of Medium, Small, and Micro Enterprises referred to therein, provided that the value of financing for a micro enterprise does not exceed two hundred thousand Egyptian pounds for a single project. The Board of Directors of the Authority may increase the maximum limit for financing a micro enterprise for a single project or a single natural person by up to 10% annually according to economic conditions. 2 - The Authority: The General Authority for Financial Supervision. 3 - The Company: The company licensed to finance any of medium, small, or micro enterprises in accordance with the provisions of this Law. 4 - The Association or Charitable Institution: The association or charitable institution licensed to finance any of medium, small, or micro enterprises in accordance with the provisions of this Law. 5 - Intermediation in granting or obtaining financing:
An activity practiced by a legal entity that prepares and equips the client's file to submit it to the company, association, or charitable institution to obtain financing, informs them of financing risks, provides technical advice, or collects financing installments and repays them to the financing entity. 6 - Guarantee for a fee:
A contract under which a person guarantees the fulfillment of a medium, small, and micro enterprise financing client's obligation by undertaking to the company, association, or charitable institution to fulfill this obligation if the client themselves does not, in exchange for a fee. *Items (5, 6) added by Law No. 155 of 2022. *Amended by Law No. 201 of 2020. Text of the Article before amendment:
For the application of the provisions of this Law, the following words and expressions shall have the meanings indicated opposite each of them:
Microfinance: Any financing for productive, service, or commercial economic purposes in the fields and values determined by the Board of Directors of the Authority, not exceeding one hundred thousand pounds, and the maximum limit may be increased by up to 5% annually by a decision of the Prime Minister based on a proposal from the Board of Directors of the Authority according to economic conditions and market requirements. The Authority: The General Authority for Financial Supervision. The Company: Companies licensed to practice the activity of microfinance in accordance with the provisions of this Law.

Article 3
Companies licensed in accordance with the provisions of this Law shall practice the activity of financing medium, small, and micro enterprises. Associations and charitable institutions whose objectives include providing financing to others according to their statutes may practice the activity of financing medium, small, and micro enterprises after obtaining a license from the Authority to practice this activity. Associations and charitable institutions may also establish or participate in the capital of companies financing medium, small, and micro enterprises. The provisions of this Law do not apply to the Medium, Small, and Micro Enterprises Development Agency and banks subject to the supervision of the Central Bank. *Amended by Law No. 201 of 2020. Text of the Article before amendment:
Companies licensed in accordance with the provisions of this Law shall practice the activity of microfinance. Associations and charitable institutions whose objectives include providing financing to others according to their statutes may practice the activity of microfinance after obtaining a license from the Authority to practice this activity. Associations and charitable institutions may also establish or participate in the capital of microfinance companies. The provisions of this Law do not apply to banks subject to the supervision of the Central Bank and the Social Fund for Development.

Article 4
The Authority alone is competent to grant licenses to practice the activity for companies subject to the application of the provisions of this Law.
Companies financing medium, small, and micro enterprises are considered companies operating in the field of markets and non-banking financial instruments in accordance with the provisions of Law No. 10 of 2009 referred to therein.
In all cases, it is prohibited for companies licensed to practice the activity of financing medium, small, and micro enterprises to receive deposits or engage in any other activity other than that for which the license or approval was issued.
*Amended by Law No. 201 of 2020. Text of the Article before amendment:
The Authority alone is competent to grant licenses to practice the activity for companies subject to the application of the provisions of this Law.
Microfinance companies are considered companies operating in the field of markets and non-banking financial instruments in accordance with the provisions of Law No. 10 of 2009 referred to therein.
In all cases, it is prohibited for companies licensed to practice the activity of microfinance to receive deposits or engage in any other activity other than that for which the license or approval was issued.

Article 5
The following conditions must be met by companies wishing to practice the activity of financing medium, small, and micro enterprises:
1 - They must take the form of an Egyptian joint-stock company.
2 - Their activity must be limited to practicing the activity of financing medium, small, and micro enterprises.
3 - Their issued and paid-up capital must not be less than the limit determined by the Board of Directors of the Authority, and not less than twenty million pounds for companies financing medium and small enterprises, and five million pounds for companies financing micro enterprises. Companies wishing to practice both the activity of financing medium and small enterprises and the activity of financing micro enterprises must meet the minimum issued and paid-up capital limit determined by the Board of Directors of the Authority for each activity as indicated in this item. 4 - They must have technical capabilities, information systems, risk management, fund collection, monitoring of financing operations, and a customer complaint inspection system in accordance with the rules issued by a decision of the Board of Directors of the Authority. 5 - Appropriate experience and good reputation must be available in the Chairman and Board of Directors members, the Managing Director, and the Directors responsible for financing and risk, in accordance with the controls determined by the Board of Directors of the Authority. *Amended by Law No. 201 of 2020. Text of the Article before amendment:
The following conditions must be met by companies wishing to practice the activity of microfinance:
1 - They must take the form of an Egyptian joint-stock company.
2 - Their activity must be limited to practicing the activity of microfinance.
3 - Their issued and paid-up capital must not be less than the limit determined by the Board of Directors of the Authority, and not less than five million pounds.
4 - They must have technical capabilities, information systems, risk management, fund collection, monitoring of financing operations, and a customer complaint inspection system in accordance with the rules issued by a decision of the Board of Directors of the Authority. 5 - Appropriate experience and good reputation must be available in the Chairman and Board of Directors members, the Managing Director, and the Directors responsible for financing and risk, in accordance with the controls determined by the Board of Directors of the Authority.

Article 6
The company shall submit an application for a license to practice the activity of financing medium and small enterprises or the activity of financing micro enterprises or both to the Authority on the form prepared for this purpose. The Board of Directors of the Authority shall determine the rules and procedures for licensing and its fees, not exceeding 1% of the paid-up capital of the company, payable by the payment methods prescribed by the Authority. The Authority shall issue the applicant for the license a certificate of receipt of the submitted documents or a statement of other documents required to be submitted. The Authority shall rule on the license application based on the market's need for new company licenses, and it may reject it in the following cases:

1 - Failure to meet the conditions specified in this Law or the decisions issued in implementation thereof.
2 - Lack of the standards determined by the Board of Directors of the Authority regarding professional experience and competence in the company's managers.
3 - A judgment declaring the bankruptcy of any of the founders of the company applying for the license within the five years preceding the submission of the application, unless their reputation has been restored.
4 - A final judgment against any of the founders of the company applying for the license, its managers, or any of its Board of Directors members within the five years preceding the submission of the license application for a felony or misdemeanor punishment in a crime involving moral turpitude or dishonesty, unless their reputation has been restored. *Amended by Law No. 201 of 2020. Text of the Article before amendment:
The company shall submit an application for a license to the Authority on the form prepared for this purpose. The Board of Directors of the Authority shall determine the rules and procedures for licensing and its fees, not exceeding 1% of the paid-up capital of the company. The Authority shall issue the applicant for the license a certificate of receipt of the submitted documents or a statement of other documents required to be submitted. The Authority shall rule on the license application based on the market's need for new company licenses, and it may reject it in the following cases:
1 - Failure to meet the conditions specified in this Law or the decisions issued in implementation thereof.
2 - Lack of the standards determined by the Board of Directors of the Authority regarding professional experience and competence in the company's managers.
3 - A judgment declaring the bankruptcy of any of the founders of the company applying for the license within the five years preceding the submission of the application, unless their reputation has been restored.
4 - A final judgment against any of the founders of the company applying for the license, its managers, or any of its Board of Directors members within the five years preceding the submission of the license application for a felony or misdemeanor punishment in a crime involving moral turpitude or dishonesty, unless their reputation has been restored.

Article 7
The Board of Directors of the Authority, after coordination with the Medium, Small, and Micro Enterprises Development Agency, shall establish rules and controls for practicing the activity of financing medium and small enterprises, rules and controls for practicing the activity of financing micro enterprises, or rules and controls for practicing both activities, as well as financial solvency standards that companies must adhere to according to the activity they are licensed for. It shall also establish rules for supervision and oversight, specifically including:

• Rules necessary to ensure the proper conduct of the company's business and to protect the rights of creditors and clients.

• Controls on owning 50% or more of the issued share capital of the company.

• Licensing conditions and controls for those managing the company and those responsible for credit and financing.

• The maximum value of transactions with a single client.

• Financing controls and limits and other services the company may provide to its employees.

• Bases for calculating provisions based on credit, financing, and operational risks.

• Disclosure rules and data to be published and the method of publication.

• Rules for advertising financial services and products and the consequences of violating the obligations they create.

• Rules for participation in the credit information system.

• Conditions and procedures necessary to conclude crowdfunding contracts with multiple clients jointly liable for financing repayment.

• Governance rules that the company must adhere to.
  In all cases, members of the Board of Directors, those managing the company, those responsible for credit and financing, and their relatives up to the second degree are prohibited from obtaining financing from the company or any services and activities related to it. *Amended by Law No. 201 of 2020. Text of the Article before amendment:
  The Board of Directors of the Authority shall establish rules and controls for practicing the activity of microfinance and financial solvency standards that licensed companies must follow, as well as rules for supervision and oversight, specifically including:
  Rules necessary to ensure the proper conduct of the company's business and to protect the rights of creditors and clients. Controls on owning 50% or more of the issued share capital of the company. Licensing conditions and controls for those managing the company and those responsible for credit and financing. The maximum value of transactions with a single client. Financing controls and limits and other services the company may provide to its employees. Bases for calculating provisions based on credit, financing, and operational risks. Disclosure rules and data to be published and the method of publication. Rules for advertising financial services and products and the consequences of violating the obligations they create. Rules for participation in the credit information system. Conditions and procedures necessary to conclude crowdfunding contracts with multiple clients jointly liable for financing repayment. Governance rules that the company must adhere to. In all cases, members of the Board of Directors, those managing the company, those responsible for credit and financing, and their relatives up to the second degree are prohibited from obtaining financing from the company or any services and activities related to it.

Article 8
The company is obliged to obtain the Authority's approval for the activities, services, products, and instruments it intends to deal with and the types of guarantees associated with them. It is also obliged to disclose to clients in every contract the details of services or financial products, financing costs, prices of other services provided, and the risks of dealing that clients may be exposed to, as well as their current and future obligations, in accordance with the disclosure rules established by the Board of Directors of the Authority. The company is not allowed to open branches, merge with or be merged into another entity, cease activity, liquidate its assets or the majority thereof, or transfer its credit portfolio except after obtaining prior written approval from the Authority in accordance with the conditions and procedures established by the Board of Directors of the Authority. Each licensed company is obliged to pay the Authority supervision and oversight costs at a rate of half a percent of the average financing balance provided to the company's clients, calculated and paid every quarter.

Article 9
The licensed company is obliged to prepare quarterly financial statements in accordance with Egyptian accounting standards and observing the rules established by the Authority in this regard. These statements must be audited in accordance with Egyptian auditing standards and observing the audit guide issued by the Authority. The audit of its accounts shall be conducted by an auditor at least among those whose names are registered in the register maintained by the Authority for this purpose. The Board of Directors of the Authority shall establish the conditions and terms for the registration and removal of accountants in this register.

Article 10
The following are considered deductible expenses when determining net income subject to tax in accordance with the provisions of the Income Tax Law referred to therein:
1 - Interest paid by the company on loans and other financing means.
2 - Provisions calculated by the company on doubtful financing in accordance with the standards established by the Authority and approved by the company's auditor.
3 - Debts that the company's Board of Directors decides to write off based on the auditor's report and which exceed the aforementioned provisions, after taking serious measures to collect them in accordance with the controls and procedures established by the Board of Directors of the Authority. Balances of loans and any form of financing provided by the company to its clients in accordance with the provisions of this Law are exempt from stamp duty and other taxes and fees.

Article 11
The Board of Directors of the Authority may, to ensure market stability or protect the rights of persons dealing with the company, or in case the company faces financial conditions affecting its financial position, oblige the company to increase its paid-up capital, funds allocated for working capital, or its solvency ratio according to a specified timeline. The Board may also, in case the company violates the provisions of this Law or decisions issued in implementation thereof, or loses a licensing condition, or engages in acts that threaten market stability or the interests of its shareholders, members, or persons dealing with it, take one or more of the following measures:
1 - Issuing a warning to the company to remove the violation within the period and conditions specified in the warning.
2 - Requesting the Chairman of its Board to convene the Board or the General Assembly to consider the alleged violations and take necessary action to remove them.
3 - Prohibiting the practice of all or some of the licensed activities for a specific period or prohibiting dealing with new clients.
4 - Dissolving the company's Board of Directors and appointing a commissioner to manage it until a new Board is appointed by the prescribed legal instrument.
5 - Issuing a decision to merge the company into another company, subject to the approval of the merged company.
6 - Revoking the license to practice all or some of the licensed activities.
The measures specified in items (1 and 2) may be taken by the Chairman of the Authority. The Chairman may also take any of the measures specified in item (3) of this Article if the aforementioned threat causes damage that cannot be remedied, for a maximum period of one month or until submission to the Board of Directors of the Authority, whichever is sooner.

Article 12
An independent unit with a special character for supervising the activity of financing medium, small, and micro enterprises from associations and charitable institutions shall be established within the General Authority for Financial Supervision. This unit shall have a board of trustees representing the concerned ministries and entities. Its formation shall be issued by a decision of the Board of Directors of the Authority, and the financial treatment of its members shall be determined. It shall exercise the competencies specified in this Law. The Board of Directors of the Authority shall issue a decision on the statute, financial and administrative regulations, employee affairs, and the organizational structure of the unit without being bound by the systems and rules applicable in the government, public sector, and public business sector.

*Amended by Law No. 201 of 2020. Text of the Article before amendment:
An independent unit with a special character for supervising the activity of microfinance from associations and charitable institutions shall be established within the General Authority for Financial Supervision. This unit shall have a board of trustees representing the concerned ministries and entities. Its formation shall be issued by a decision of the Board of Directors of the Authority, and the financial treatment of its members shall be determined. It shall exercise the competencies specified in this Law. The Board of Directors of the Authority shall issue a decision on the statute, financial and administrative regulations, employee affairs, and the organizational structure of the unit without being bound by the systems and rules applicable in the government, public sector, and public business sector.

Article 13
The unit is competent to organize, supervise, and follow up on the activity of financing medium, small, and micro enterprises. For this purpose, it shall have, in particular, the following competencies:
1 - Establishing conditions for obtaining a license to practice the activity of financing medium and small enterprises, conditions for obtaining a license to practice the activity of financing micro enterprises, and conditions for associations and charitable institutions to obtain such licenses. 2 - Establishing the rules and standards necessary for associations and charitable institutions to practice the activity of financing medium and small enterprises and manage associated risks, and the rules and standards necessary for them to practice the activity of financing micro enterprises and manage associated risks, or the rules and standards necessary for practicing both activities and managing associated risks. 3 - Obtaining data and information about the activity practiced by associations and charitable institutions, preparing related studies, and issuing reports and statistics regarding it. 4 - Monitoring the performance of associations and charitable institutions practicing this activity and taking necessary measures to verify their compliance with the provisions of this Law and the rules and standards established by the unit. 5 - Establishing inspection and supervision rules for associations and charitable institutions in the field of practicing the activity of financing medium, small, and micro enterprises. 6 - Submitting follow-up reports to the Chairman of the Authority, including necessary recommendations regarding associations and charitable institutions violating the provisions of this Law or not complying with the rules and standards of practicing the activity. 7 - Coordinating with concerned entities to contribute to the development of the activity of financing medium, small, and micro enterprises and managing associated risks, and working to harmonize the rules and controls for practicing the activity between companies and associations and charitable institutions practicing the activity. *Amended by Law No. 201 of 2020. Text of the Article before amendment:
The unit is competent to organize, supervise, and follow up on the activity of microfinance. For this purpose, it shall have, in particular, the following competencies:
1 - Establishing conditions for obtaining a license to practice the activity of microfinance for associations and charitable institutions.
2 - Establishing the rules and standards necessary for associations and charitable institutions to practice the referred activity and manage associated risks.
3 - Establishing controls on the participation of charitable associations in companies working in the field of microfinance.
4 - Obtaining data and information about the activity practiced by associations and charitable institutions, preparing related studies, and issuing reports and statistics regarding it.
5 - Monitoring the performance of associations and charitable institutions practicing this activity and taking necessary measures to verify their compliance with the provisions of this Law and the rules and standards established by the unit.
6 - Establishing inspection and supervision rules for associations and charitable institutions in the field of practicing the activity of microfinance.
7 - Submitting follow-up reports to the Chairman of the Authority, including necessary recommendations regarding associations and charitable institutions violating the provisions of this Law or not complying with the rules and standards of practicing the activity. 8 - Coordinating with concerned entities to contribute to the development of the activity of microfinance and managing associated risks, and working to harmonize the rules and controls for practicing the activity between companies and associations and charitable institutions practicing the activity.

Article 13 bis
Associations or charitable institutions licensed to practice any of the activities of financing medium and small enterprises or financing micro enterprises are not allowed to provide financing or any of the services and activities related to it, licensed by the Authority, to members of their Board of Directors or Board of Trustees, those managing them, their employees, or their relatives up to the second degree, except in accordance with the following controls:
1 - The total financing granted to the sum of these categories must not exceed 5% of the financing portfolio continuously.
2 - Financing and services and activities related to it must be granted in accordance with the same controls for granting financing applied to other clients of the association or charitable institution.
3 - Disclosure in the notes to the financial statements, whether annual or quarterly, of the total volume of financing granted to the aforementioned categories and the total arrears associated with them.
Controls for the proposed system for granting financing and licensed services to these categories shall be issued by a decision of the Board of Directors of the Authority, after obtaining the opinion of the unit.
*Added by Law No. 201 of 2020.

Article 13 bis 1
Without prejudice to cases requiring a court judgment, the Board of Directors of the Authority may, in case an association or charitable institution licensed to practice the activity of financing medium, small, and micro enterprises violates the provisions of this Law or decisions issued in implementation thereof, or loses a licensing condition, or engages in acts that threaten market stability or the interests of its members or persons dealing with it, take one or more of the following measures:
1 - Issuing a warning to the association or charitable institution to remove the violation within the period and conditions specified in the warning.
2 - Prohibiting the practice of all or some of the licensed activities for a specific period, or prohibiting dealing with new clients.
3 - Revoking the license to practice all or some of the licensed activities.
The Chairman of the Authority may take the measure specified in item (1) of this Article. The Chairman of the Board of Directors of the Authority may also take any of the measures specified in item (2) of this Article if the aforementioned threat causes damage that cannot be remedied, for a maximum period of one month or until submission to the Board of Directors of the Authority, whichever is sooner.

The taking of any of the aforementioned measures by the Authority does not affect the continued right of the association or charitable institution to collect its dues or transfer its portfolio to a bank or entity licensed by the Authority to practice the activity of financing medium, small, and micro enterprises in accordance with the prescribed rules. *Added by Law No. 201 of 2020.

Article 13 bis 2
Without prejudice to cases requiring a court judgment or decision, the Board of Directors of the Authority may suspend any activity subject to the provisions of this Law if it is practiced without a license. The suspension decision may include closing the place where the activity is practiced. *Added by Law No. 201 of 2020.

Article 13 bis 3
Companies, associations, and charitable institutions licensed by the Authority to practice the activity of financing medium and small enterprises may practice activities