Navigating Regulatory Changes in Egypt’s Fintech Sector

The Financial Regulatory Authority (the “FRA”) issued a new decision, No. 268 of 2023 (the “Decision”), on Monday, 8 January 2024. This marks the fourth in a row and and comes almost two years after the issuance of Law No. 5 of 2022 Regulating and Developing the Use of Financial Technology in Non-Banking Financial Activities (“Fintech Law”), with the aim of enforcing said law. The newly issued Decision serves as a new digital era for fintech startups rendering non-banking financial services.

The Decision sets out the rules and procedures for the incorporation and licensing of startups rendering their non-banking financial services using technology. These provisions apply to all fintech startups wishing to engage in one or more non-banking financing activity regulated by the FRA, namely mortgage finance, SMEs and micro finance, financial leasing, factoring, and consumer finance. The decision specifies the conditions that must be met by fintech startups, most significant of which are the following:

1. The company must take the form of a joint stock company.
2. The company’s activity must be limited to one or more of the activities referred to above (i.e., mortgage finance, SMEs and micro finance, financial leasing, factoring, and consumer finance).
3. The company’s issued and paid-up capital must not be less than EGP 15 million for each activity or its equivalent in any foreign currency.
4. At least 25% of the company’s capital must be held by specialists in the field of technology or financial technology, whether natural and/or legal persons. Moreover, the founders of the company shall undertake to maintain said shareholders structure without any amendment thereto unless the minimum capital requirement for each activity has been satisfied.
5. The company must submit a technical and economic feasibility study to the FRA.
6. The managing director of the company must have an appropriate high academic qualification, meet the experience requirements required for each activity, and/or pass the tests/interviews specified by the FRA.
7. The company must be financed by venture capital companies or funds (either incorporated in Egypt or abroad provided that it is regulated by an equivalent regulator to the FRA or the CBE).
8. The company must acknowledge that it will be electronically connected with the FRA.

Furthermore, the decision stipulates that applications for establishing the fintech startups must be submitted on the digital form through one of the agents registered at the FRA via the electronic portal designated for that purpose or any other means specified by the FRA.

The decision also mandates fintech startups to start their actual operations within two months from the date of issuing the license by the FRA. The license period for a fintech startup shall be two years within which the company will be obliged to complete the final licensing requirements and increase its issued and paid-up capital in accordance with the provisions of the decisions regulating each activity, or otherwise the granted license will be withdrawn by the FRA.

How can we help?

At Al Tamimi & Company, we stand ready to assist you in navigating the intricacies of FRA’s recent Decision No. 268 of 2023. Our expert legal team is well-versed in Egyptian fintech regulations and can provide tailored guidance on compliance, licensing, and incorporation processes as outlined in the decision. For more information, please contact one of our key contacts.