Egypt’s FRA issues first license for Islamic microfinance activity
by:Fatma Salah, Daily News Egypt, 2022
Farid explained that issuing the new license adds a new dimension to the existing financing mechanisms in the local market in terms of innovating the “agency investment formula.”
The formula is a contract in which another person is authorised to invest an amount of money owned in favour of the investor in return for a specified fee or a sum or a percentage of the invested money.
He added that the authority is currently looking into the option of issuing the necessary approvals to allow using products based on other main forms of Islamic financing — including murabaha and all types of musharaka for other companies — to be applied for the first time with the non-banking micro-enterprise sector.
Farid highlighted the importance of diversifying the applications of financing formulas in general to finance micro-enterprises, adding that this would help accelerate the pace of addressing the problem of the informal economy through integrating new segments of micro-enterprise owners into the formal sector for the first time. This would eventually help with positive rates in achieving the objectives of the state’s strategy towards financial inclusion.
Activity statistics at the end of July 2022 indicate that the number of beneficiaries of microfinance services reached about 3.8m with a financing portfolio of about EGP 33.3bn, 60% of which — or 2.3 million beneficiaries — were women. Also, young people of both genders constituted 64% of the total beneficiaries.
It is worth noting that after Egyptian microfinance company Maksab obtained a new license to engage in microfinance activity based on the application of the agency financing by investment formula for its various financing products, the number of companies licensed by the authority to engage in microfinance activity in the country jumped to 19.
The investment agency can vary, as it can be classified as a general, private, absolute, restricted, temporary, non-temporary, paid, or unpaid agency.
This formula allows the finances of the funding bodies to be invested with clients with trustworthy creditworthiness (agents) in all economic activities. In return, the agent receives a sum of money, as the agreement between the two parties entail.
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