Egypt’s regulator issues first comprehensive consumer finance rulebook
Egypt’s Financial Regulatory Authority (FRA) issued on Saturday its first comprehensive guide to the rules governing consumer finance companies, consolidating requirements for licensing, lending, disclosure, capital, risk management, and cybersecurity.
The guide is intended to help existing and prospective consumer finance companies understand and comply with regulatory requirements as the sector expands and financing products and channels become more diverse, the FRA said in a statement.
FRA Chairman Islam Azzam said protecting consumers’ rights and maintaining market stability were essential to the growth of consumer finance and its contribution to the Egyptian economy.
“The clarity and integration of the rules are essential to ensuring effective supervision,” Azzam said, adding that consolidating the requirements in a single reference would help companies identify their obligations and promote more consistent application across the market.
The guide is based on Egypt’s Consumer Finance Law No. 18 of 2020 and subsequent FRA decisions, circulars, and regulatory rules. It covers the operations of consumer finance companies from incorporation and licensing to capital requirements, shareholder structures, corporate governance, internal controls, financial solvency, financial statements, financing contracts, and branch registration.
It also sets requirements for marketing, advertising, and customer disclosures, including the presentation of financing terms, repayment schedules, costs, fees, benefits, and risks.
Consumer finance companies are prohibited from obtaining blank signed documents or trust receipts as collateral for financing, the FRA said.
The rules also cover anti-money laundering and counter-terrorism financing, customer due diligence, suspicious transaction reporting, and record keeping. Companies must report customers’ credit positions to credit information companies such as I-Score to improve the flow of credit information and lending risk assessments.
Companies must assess customers’ creditworthiness, review existing financing, monitor delinquent customers, and ensure financing is used for its stated purpose. The framework also allows for digital credit-scoring systems based on factors including repayment capacity and financial position.
The guide includes solvency requirements covering capital adequacy, leverage and liquidity ratios, as well as provisioning, concentration risks, stress testing, and periodic reporting.
The requirements are intended to strengthen companies’ ability to meet their obligations and manage credit, operational, and liquidity risks, the FRA said.
The framework also sets requirements for digital transformation and cybersecurity. Licensed companies must maintain the technology infrastructure and information systems needed for their activities, establish information technology governance and risk-management frameworks, and conduct periodic penetration tests. Compliance is a condition for maintaining a licence.
The FRA will also establish a register of debt-collection companies operating across non-bank financial activities. Financing companies and other non-bank financial institutions will be required to inform customers about their contracted collection agencies, how collectors’ identities can be verified, and official communication channels.
Companies must monitor complaints against collection firms and take corrective action where necessary.
Consumer finance companies must also provide insurance coverage for customers up to age 65 against death and permanent total disability, with the insured amount equal to the customer’s outstanding financing balance.
The guide also addresses advance cash financing and measures to detect and prevent the conversion of financing into cash, as well as violations and administrative measures that the FRA may impose.
Azzam said the FRA would continue to address practices that could harm consumers or undermine the stability of the non-bank financial sector, with ongoing monitoring and corrective or supervisory action against violations.
Rehab Taha, FRA assistant chairman for financing affairs, said the guide was designed as a practical tool to help companies review their internal frameworks and procedures and comply with the authority’s rules.
She said the FRA would continue to develop the regulatory framework for non-bank finance as business models and associated risks evolve, while maintaining safeguards for market stability and consumer protection.