Law No. 301 of 2020 Amending Certain Provisions of Law No. 141 of 2014 Regulating Microfinance Activities

Official Gazette - No. 41 (Duplicate) on October 11, 2020

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Law No. 301 of 2020

Amending Certain Provisions of Law No. 141 of 2014 Regulating Microfinance Activities

In the Name of the People

The President of the Republic

The House of Representatives has decided the following law, and we hereby enact it:

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(Article One)

The title "Law Regulating the Practice of Medium, Small, and Micro-Enterprise Financing" is replaced with the title "Law Regulating Microfinance Activities", and the phrase "financing of medium, small, and micro-enterprises" is replaced with the phrase "microfinance" wherever it appears in Law No. 141 of 2014 Regulating Microfinance Activities, or in any other law.

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(Article Two)

The following texts are substituted for the texts of Articles:
(1) first paragraph, 2, 3/third paragraph, 5 / item: 3, (6) first paragraph, 7 / first paragraph, 13 / items: "2", "20", 26 / first paragraph of the Article and item A, (24) second paragraph (of Law No. 141 of 2014, referred to above), with the following texts:

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Article (1) / First Paragraph:

Without prejudice to the provisions of the law organizing the Central Bank and the banking sector, and the law for 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.

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Article (2)

In the application of the provisions of this Law, the following words and phrases shall have the meanings indicated alongside each of them:

• 1 - Financing of medium, small, and micro-enterprises: Any financing for economic, productive, service, or commercial purposes for the medium, small, and micro-enterprises specified in the aforementioned law for the development of medium, small, and micro-enterprises, provided that the value of financing for a micro-enterprise does not exceed two hundred thousand Egyptian pounds per single project.
  The Board of Directors of the Authority may increase the maximum limit for financing a single micro-enterprise project or a single natural person by up to (10%) annually in accordance with economic conditions.

• 2 - The Authority: The Financial Regulatory Authority.

• 3 - The Company: The company licensed to finance any of the medium, small, or micro-enterprises in accordance with the provisions of this Law.

• 4 - The Association or Civil Institution: The association or civil institution licensed to finance any of the medium, small, or micro-enterprises in accordance with the provisions of this Law.

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Article (3) / Third Paragraph:

The provisions of this Law shall not apply to the Micro and Small Enterprises Development Agency or banks subject to the supervision of the Central Bank.

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Article (5) / Item 3:

• 3 - Its issued and paid-up capital shall not be less than the limit approved by the Board of Directors of the Authority,
  and if it is not less than twenty million Egyptian pounds for companies financing medium and small enterprises, and five million Egyptian pounds for companies financing micro-enterprises. Companies wishing to engage in both financing medium and small enterprises and financing micro-enterprises simultaneously must meet the minimum issued and paid-up capital limit approved by the Board of Directors of the Authority for each activity as indicated in this item.

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Article (6) / First Paragraph:

The company shall submit a request for a license to engage in financing medium and small enterprises, or financing micro-enterprises, or both activities simultaneously, to the Authority, on the form prepared for this purpose, and the Board of Directors of the Authority shall determine the rules and procedures for licensing and its fees, not exceeding (1%) of the company's paid-up capital, payable by payment methods approved by the Authority.

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Article (7) / First Paragraph:

The Board of Directors of the Authority, in coordination with the Micro and Small Enterprises Development Agency, shall establish rules and regulations for engaging in financing medium and small enterprises, rules and regulations for engaging in financing micro-enterprises, or rules and regulations for engaging in both activities simultaneously, as well as the financial solvency standards that companies must adhere to according to their licensed activity, and the rules for supervision and oversight over them, particularly as follows:

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Article (13) / Items: 2, 20

• 1 - Establishing the conditions for obtaining a license to engage in financing medium and small enterprises, the conditions for obtaining a license to engage in financing micro-enterprises,
  and the conditions for associations and civil institutions to obtain such licenses.

• 2 - Establishing the necessary rules and standards for associations and civil institutions to engage in financing medium and small enterprises and managing associated risks, and the necessary rules and standards for engaging in financing micro-enterprises and managing associated risks, or the necessary rules and standards for engaging in financing medium, small, and micro-enterprises and managing associated risks.

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Article (20)

Without prejudice to any harsher penalty stipulated in any other law, anyone who engages in any of the activities subject to the provisions of this Law without being licensed to do so shall be punished with imprisonment for a period of not less than six months, and a fine of not less than two hundred thousand Egyptian pounds and not exceeding one million Egyptian pounds, or with one of these two penalties.

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Article (21) / First Paragraph of the Article, and Item "2"

Anyone who commits the following acts shall be punished with a fine of not less than five thousand Egyptian pounds and not exceeding five hundred thousand Egyptian pounds:

(a) Violates any of the provisions of Articles (8, 13 bis, 14) of this Law.

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Article (24) / Second Paragraph:

The provisions stipulated in Law No. 10 of 2009 Regulating Supervision on Markets and Non-Banking Financial Instruments shall apply regarding taking investigation procedures, filing criminal lawsuits for the crimes stipulated in this Law, and reaching settlements.

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(Article Three)

New articles numbered (13 bis) are added to Law No. 141 of 2014, referred to above, with the following texts:

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Article (13 bis)

An association or civil institution licensed to engage in financing medium and small enterprises or financing micro-enterprises shall not provide loans or any of the associated services and activities to the Authority's Board of Directors members, Board of Trustees members, those managing it, its employees, or their relatives up to the second degree, except in accordance with the following regulations:

• 1 - The total financing granted to the aggregate of these categories shall not exceed (5%) of the financing continuously.

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Article (13 bis) / 2

• 2 - The financing, associated services, and activities shall be granted in accordance with the same financing grant regulations applied to the clients of the association or civil institution.

• 3 - Disclosure in the supplementary notes to financial statements, whether annual or quarterly, of the total volume of financing granted to the aforementioned categories and the total arrears associated with them.
  A decision shall be issued regarding these categories, after obtaining the opinion of the authorized unit.

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Article (13 bis) / 1

Without prejudice to cases requiring a court order, the Board of Directors of the Authority may, in case of violation by a licensed association or civil institution of the provisions of this Law or the executive decisions issued thereunder, or if it loses a licensing condition, or engages in acts likely to threaten market stability or the interests of its members or counterparties, take one or more of the following measures:

• 1 - Issuing a warning to the association or civil institution to rectify the violation within the period and under the conditions specified in the warning.

• 2 - Prohibiting the engagement in all or some of the licensed activities for a specified period,
  or prohibiting dealing with new clients.

• 3 - Revoking the license to engage in all or some of the licensed activities.

The Authority's President may take the measures stipulated in Article (1) of this item, and the Chairman of the Authority's Board of Directors may take any of the measures stipulated in item (2) of this Article, if the aforementioned threat is likely to result in damage beyond repair, for a maximum period of one month or until presented to the Board of Directors of the Authority. Taking any of the aforementioned measures by the Authority shall not prevent the association or civil institution from continuing to collect its dues or transferring its portfolio to a bank or entity licensed by the Authority to engage in financing medium, small, and micro-enterprises according to the established rules.

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Article (13 bis) / 2

Without prejudice to cases requiring a court order or a decision by the Authority's Board of Directors, the Authority may suspend any activity subject to the provisions of this Law if it is practiced without a license, and the suspension decision may include closing the premises where the activity is practiced.

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Article (13 bis) / 3

Companies, associations, and civil institutions licensed by the Authority to engage in financing medium, small, and micro-enterprises may engage in other non-banking financial activities, observing the laws governing these activities and in accordance with the regulations established by the Board of Directors of the Authority.

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Article (20 bis)

Without prejudice to any harsher penalty stipulated in any other law, anyone who commits any of the following acts shall be punished with a fine of not less than two hundred thousand Egyptian pounds and not exceeding one million Egyptian pounds:

• (a) Engages in financing medium, small, and micro-enterprises in violation of the provisions of this Law.

• (b) Provides inaccurate data or information to the Authority or the Unit in violation of the provisions of this Law and the executive decisions issued thereunder.

• (c) Provides inaccurate data in disclosure bulletins, financial statements, and attached reports that must be issued or published in accordance with the provisions of this Law and the executive decisions issued thereunder.

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(Article Four)

Articles (13 item 3, 23) of Law No. 141 of 2014, referred to above, are repealed.

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(Article Five)

The name of the "Egyptian Microfinance Union" established pursuant to Article (18) of Law No. 141 of 2014, referred to above, is amended to become the "Egyptian Union for Financing Medium, Small, and Micro-Enterprises", and its bylaws are amended to include entities working in the activity of financing medium and small enterprises.

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(Article Six)

The licenses granted to companies, associations, and civil institutions to engage in financing micro-enterprises shall remain valid unless revoked in accordance with the provisions of Law No. 141 of 2014, referred to above.

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(Article Seven)

This Law shall be published in the Official Gazette and shall take effect from the day following its publication.
This Law shall be sealed with the State seal and enforced as a law of the Republic.

Issued at the Presidency on 24 Safar 1442 AH
(Corresponding to October 11, 2020 AD)

Abdel Fattah El-Sisi

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Deposit No. at the National Library 2020/65
General Authority for Royal Printing Affairs 25298/2020/13 - 2020/12 - 2020/9-12