Egypt issues first-of-a-kind sharia-compliant micro-financing license to Maksab

Doaa A.Moneim , Tuesday 30 Aug 2022

Egypt’s Financial Regulatory Authority (FRA) issued on Tuesday a licence for the Egyptian company Maksab for micro-financing in compliance with Islamic law – the first of its kind in the non-banking system in Egypt.

 Mohamed Farid
FRA s chairman Mohamed Farid

This brings the total number of licenced micro-financing companies in the local market to 18.

FRA chairman Mohamed Farid said that this licence should boost the development of non-banking financial activities.

“This licence adopts the Wakala investment instrument, which is an investment contract done by an investment agency on behalf of the investor,” according to Farid.

Farid also revealed that the FRA is currently considering approving other financial products that adopt key principles of Islamic financing, including Murabaha and sharing financing tools, to be applied for the first time in Egypt, particularly in the macro-sized non-banking enterprises sector.

Diversifying micro-financing products will contribute to accelerating the pace of integrating these projects into the formal sector and will further the state’s financial inclusion policy, according to Farid.

According to the FRA’s latest figures, issued in July, the number of beneficiaries from micro-financing is 3.8 million with a financing portfolio estimated at EGP 33.3 billion. Women account for 60 percent of this portfolio, while 64 percent of young people benefit from it.

Egypt’s government is seeking to diversify its financing instruments to cover its debt, including preparing for Egypt’s sovereign sukuk.

On Monday, Minister of Finance Mohamed Maait said that the government plans to issue Islamic sukuk between $1.5 billion and $2 billion once the global capital market recovers from the effects of the war in Ukraine.

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