MICROCAPITAL BRIEF: Egypt Approves Microfinance Law in Effort to Expand Access to Microcredit, Bring Microenterprises into Formal Economy

The government of Egypt reportedly has approved a new law that will expand informal businesses’ access to loans of up to EGP 100,000 (USD 13,985) by enabling non-bank microfinance institutions (MFIs) to enter the formal microfinance sector, which had been restricted to banks and NGOs. In order to implement the law and oversee the microfinance sector, a new unit would be established within the Egyptian Financial Supervisory Authority (EFSA). An additional objective of the law is to encourage informal microenterprises to enter the formal economy.

According to a statement attributed to Mounir Fakhry, the investment minister of Egypt, the new law allows the cabinet to raise the cap on microcredit loans by 5 percent per year from the existing maximum of LE [EGP] 100,000 [USD 13,985].

The 16 Egyptian MFIs reporting data to the US-based nonprofit Microfinance Information Exchange (MIX) between 2005 and 2012 served 1 million active borrowers with an aggregate microcredit portfolio of approximately USD 266 million. None of these institutions accept deposits.

By Alíz Crowley, Research Associate

About Egyptian Financial Supervisory Authority

The Egyptian Financial Supervisory Authority (EFSA) was established in 2009 with the aim of supervising and regulating the financial services sector, including non-bank financial markets in Egypt. EFSA supervises capital markets, insurance services, mortgages, leasing, factoring and securitization. EFSA is also responsible for licensing non-banking financial services, as well as for the inspection of licensed institutions.

Sources and Additional Resources

[1] AhramOnline, Companies to provide microcredit for the first time in Egypt

MicroCapital, March 25, 2014, European Union, European Bank for Reconstruction and Development (EBRD) Support 100 Small, Medium-sized Enterprises (SMEs) in Egypt

MicroCapital, July 10, 2013, European Bank for Reconstruction and Development (EBRD), European Union Launch $3m “Small Business Support” Facility to Bring Technical Assistance to Firms in Egypt

MicroCapital, October 15, 2009, Egypt Government to Draft Legislation Regulating Microfinance and Microinsurance Providers

MicroCapital Universe Profile: Egyptian Financial Supervisory Authority

Do you know that MicroCapital publishes the MicroCapital Monitor newspaper each month? Find out more at https://www.microcapital.org/products-page/ 

 

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