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Law Regulating and Developing the Use of Financial Technology in Non-Banking Financial Activities

Law No. 5 of 2022

Non-banking financial markets and instruments are subject to the supervision and control of the Financial Regulatory Authority (“FRA”) are known as non-banking financial activities including capital markets, insurance activities, real estate financing, financial leasing, factoring, financing for medium, small, and micro-enterprises, and consumer financing.

Despite the state’s need for social, economic development and support for these activities, as they constitute a major role in financing outside the banking sector and creating many job opportunities, it has been stuck for decades without meaningful attention.

Since 2014 until today, the country has witnessed unprecedented leaps in the financial market, especially in non-banking financial activities. During that period, Egypt was elected as a member of the Board of Directors of the International Organization of Capital Markets Authorities (IOSCO) and joined the membership of the International Network of Financial Centers Concerned with Sustainability, in addition to being the second Arab country in the Sustainable Insurance Forum, as well as advancing 15 places in the most important investor protection assessment.

Recently, the non-banking financial activities sector occupied a prominent position among investment vessels and achieved remarkable returns in the field of consumer finance. Which made it a resort for many investment banks and investors. 

In the interest of the state to expand the base of beneficiaries of these activities, raise their efficiency, and reduce the costs necessary to benefit from them, Law No. 5 of 2022 was issued regarding the regulation and development of the use of financial technology in non-bank financial activities. The FRA has exclusively been authorized to apply the provisions of the law as a result of its supervisory role on the entities reporting to FRA, especially with regard to compliance with the standards of transparency and governance.

Also, The Financial Supervisory Authority has carried out all the procedures for establishing companies subject to the provisions of this law and granting the necessary licenses and approvals to carry out its activities, using artificial intelligence mechanisms to collect and verify data digitally and analyze its indicators through programs designed for this purpose, for many of the facts that constitute violations of the laws regulating non-bank financial activities, and suspected money laundering, in addition to early warning of risks related to liquidity, financing or other matters related to financial stability.

This is in addition to providing a license for such companies to practice four electronic applications, foremost among is the electronic applications of the financial advisor programs, which analyze clients’ data, their current financial status, and future financial goals to provide them with the necessary technical advice, in addition to electronic applications for microfinance, electronic applications for insurance, and consumer financing.

To conclude, this article aims to highlight the state’s concern to bring new financial instruments that could attract more investments and create diversity in the use of financial instruments circulating in Egypt, allowing the selection of the proper financing tool for each party in accordance with its financial policies.

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Written By

Mohamed Abd El Halim - Senior Partner / Noor Mahdy - Attorney at Law

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