Legislative Revolution in the Field of Non-Banking Financial Services in Egypt

The Financial Regulatory Authority (FRA) has issued a series of executive decisions to activate Law No. 5 of 2022, which supports the usage and utilization of financial technology. These decisions aim to support Egypt's vision to achieve financial inclusion and digital transformation.?

The decisions include Decree No. 58 of 2022 which defines the requirements and procedures to establish companies that engage in non-banking financial activities using financial technology, Decree No. 135 of 2022 that regulates the formation of the Grievances Committee of the administrative decisions, in addition to? Decree No. 139 of 2023, which outlines the requirements for equipment, technological infrastructure, information systems, means of protection, and insurance; Decree No. 140 of 2023, which establishes the criteria for creating digital identities, and Decree No. 141 of 2023, which allows for the establishment of a registry for outsourcing service providers.

Furthermore, the decisions open the door for companies that wish to obtain licenses to practice non-banking financial activities using financial technology. In this article, we will answer some of the frequently asked questions from companies regarding the changes:?

1 - What are the objectives of the decisions issued by the Egyptian government?

1. Licensing the establishment of new companies that engage in non-banking financial activities using financial technology.
2. Promoting the adoption of digital identification, records, contracts, and accounts by businesses to facilitate electronic non-banking financial transactions.?
3. Developing a digital document known as the outsourcing record for the purpose of enrolling financial technology service providers engaged in non-banking financial activities.?
4. Regulating the formation of the Grievances Committee of the administrative decisions to settle any dispute that may arise in the implementing of the provision of law No.5 of 2022.?

2 - What are the areas of using financial technology to engage in non-banking financial activities?

The (FRA) has outlined the essential domains for the utilization of financial technology in carrying out non-banking financial activities. The involved parties are obligated to adhere to the provisions of these decisions, which encompass the following areas:?

1. Electronic identification, verification and authentication.
2. Electronic customer identification procedures.?
3. Electronic contract formation for non-banking financial products.

3 - Which companies are targeted by these decisions?

1. Companies that are willing to obtain a new license to provide non-banking financial services using financial technology.
2. Companies that are already licensed by the FRA to practice non-banking financial activities under other laws and are willing to get the FRA’s approval to utilize financial technology, whether by themselves or through an outsourcing entity under Law No.5 of 2022.?
3. Companies that are willing to provide non-banking financial activities using financial technology.?

4 - What technical requirements must companies meet in order to obtain approval to participate in non-banking financial activities utilizing financial technology?

1. Providing means of protection and insurance (bringing out the essential setups to be connected to FRA automatically).
2. Providing basic server equipment (database server, application server, webserver).
3. Providing information security controls (coding data, protection and risk prevention, firewalls, antivirus, security isolation, security incidents).
4. Companies shall have client databases in Egypt.
5. Companies shall provide data and customer service centres.?

5 - What are the legal requirements that companies must meet in order to secure approval to participate in non-banking financial activities utilizing financial technology?

1. The company is required to commit to transforming its legal structure into a joint-stock company within a 12-month period starting from the date of its registration.
2. The company’s capital should not be less than the minimum limit defined by the law that regulates the activity.?
3. ?The company should meet the Financial Regulatory Authority’s expertise requirements.?
4. The company must possess the appropriate governance regulations and implement them effectively to maintain a secure internal control environment.
5. The company must have the essential technological capabilities to safeguard customer data and promptly address any performance deficiencies.
6. The company must commit to providing insurance against any technological risk.
7. The company must pay 25,000 EGP for registration in each field.
8. Juridical persons shall own at least 50% of the capital, and financial institutions shall own at least 25% of the capital.?
9. The scope of work shall be limited to the licensed activities.?

To sum up, the Financial Regulatory Authority has released a series of executive decisions to support the utilization of financial technology. Let us know what you think about these changes and if you have any questions, leave them below or contact us at www.linksandgain.com?