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FRA, CBE working on alternative financing law, expects market capital to reach EGP 2.6trn: FRA Head A prospective issuance to securitise future rights worth EGP 2bn in the works
Head of the Financial Regulatory Authority (FRA) Mohamed Omran said that the FRA is working with the Central Bank of Egypt (CBE) on an alternative financing law that will provide opportunities to grant consumer finance companies personal loans. He added that the CBE and the FRA are also working on clearing future contracts — the procedures of which are expected to be completed soon — as well as accelerating the processes of issuing digital identity controls known as EKYC technology, and sand box. Furthermore, Omran pointed out that the FRA is working on developing a stress test for non-banking financial activities with the German Sanda Fund. He added that the authority pays great attention to non-banking financial activities, explaining that the Unified Insurance Law is about to be approved by Parliament. He also stressed that the strategy includes developing the capital market and increasing its contributions to advancing the national economy by increasing the number of listed companies. Additionally, the FRA head said that a large part of the success of the Egyptian capital market is the presence of Egyptian government entities listed on the Egyptian Exchange (EGX), citing the example of offering Saudi Arabia's Aramco on the Saudi Tadawul Exchange. Omran expects that the markets will witness a period of stability, pointing out that the size of the market capital would not reach previously hoped-for figures, especially since the market capital of the EGX represents 16% of the GDP. He also pointed out that the market capital of the Tadawul Stock Exchange represents 100% of the GDP, and after Aramco's offering, it jumped to more than 110%. Furthermore, Omran mentioned the Qatar Stock Exchange, which includes about 45 listed companies — most of which are governmental — and its market capital represents more than 120% of the country's GDP. He stressed that the strategy includes developing the capital market and increasing its contributions to advancing the national economy by increasing the number of listed companies. Additionally, he expects the market capital of the EGX to reach EGP 1.6 trillion by 2026. Moreover, he added that if the government offers the targeted companies and the New Administrative Capital on the EGX, the market capital will jump to EGP 2.6 trillion, which means that the market capitalisation ratio to the GDP expected in 2026 will reach 24%. On another note, Omran said that the authority is currently studying the issuance of future securitisation rights worth EGP 2bn in the coming period for a private sector company. Shifting back, the strategy includes six main axes, the first of which is enhancing the use of fintech and accelerating digital transformation, as the emergence of the new generation of fintech start-ups supports financial institutions and digital solution providers and contributes to a revolution in the digitisation of the financial sector around the world. The FRA expects that fintech will contribute to the development of all economic sectors of the country, as this technology will help facilitate access to the information and data necessary to take financing and investment decisions, facilitate access to funding sources at the lowest cost, enhance financial inclusion for individuals and small- and medium-sized enterprises, and develop new technological methods. The authority also aims to restructure the non-banking financial sector by focusing on fintech and moving towards more digital transformation. The second axis is to achieve financial inclusion and deepen levels of sustainability, as financial inclusion enhances stability and helps provide financial services to all segments of society through the official economic channels, which contributes to improving the standard of living of the individual. The third axis is risk management and building an effective early warning system, as the need to manage the coronavirus pandemic after its spread and its impact on non-banking financial services activities was evident. The fourth axis is developing the legislative structure to constantly develop the services provided by the non-banking financial sector. Consequently, Omran, explained that the authority is developing legislation to regulate the sector's work. The fifth axis stipulates enhancing the levels of financial culture and capacity-building, as one of the necessities of financial inclusion in society is to spread financial awareness and culture in the community. The FRA has taking steps to pay attention to this culture and to achieve its goals, which include enhancing citizens' awareness of the basic principles and concepts of the non-banking financial field and increasing opportunities to benefit from sources, financial services, and financial facilities provided by institutions, in addition to expanding the base of financial inclusion and enhancing financial and economic stability. The sixth axis is market development, whereby the authority seeks to provide an investment-attractive environment characterised by fairness, efficiency, and transparency, in which multiple investment channels are available that serve all categories of investors. Hisham Ramadan — Assistant Head of the FRA — told Daily News Egypt that there are legislative amendments that will be made to the Consumer Finance Law that will allow refinancing activity through companies obtaining funds and facilities.
