In a groundbreaking move to catalyze the growth of the fintech sector, Egypt's Financial Regulatory Authority (FRA) has introduced Decision No. 268 of 2023. This decision signifies a significant leap in the establishment and licensing procedures for fintech startups engaged in non-banking financial activities. Let's delve into the key components of this regulatory framework and its potential impact on fostering innovation and economic development.
Clear Regulations for Fintech Growth
Decision No. 268 is a pivotal step towards providing clear regulations and streamlined procedures for fintech startups. With a focus on non-banking financial activities, the decision aims to create an environment conducive to growth while ensuring financial stability and responsible business practices.
Minimum Capital Requirements
One of the fundamental aspects outlined in Decision No. 268 is the establishment of a minimum capital requirement of EGP 15 million for each activity that a fintech startup seeks to undertake. Notably, the decision underscores the importance of technological expertise by mandating that technology specialists hold at least 25% of the company's capital.
Alignment with Legislative Framework
Decision No. 268 aligns seamlessly with the provisions of Law No. 5 of 2022, which regulates and promotes the use of financial technology in non-banking financial activities. It also aligns with the FRA's Decision No. 58 of 2022, specifying the conditions and procedures for the establishment, licensing, and approval of companies engaging in non-banking financial activities through financial technology.
Scope of Application
This innovative decision applies to fintech startups seeking licenses for various non-banking financial activities. These activities include real estate financing, financing for medium and small projects, microfinance, leasing, factoring, and consumer finance. The expansive scope reflects a commitment to driving diversity and innovation within the sector.
Digital Application Process
Decision No. 268 introduces a digital application form for startup establishment, accessible through authorized agents or the FRA's dedicated portal. This digital approach aims to simplify the application process, eliminating unnecessary hurdles for potential entrants and fostering a more inclusive ecosystem.
Conditions and Procedures
The decision delineates specific conditions and procedures that fintech startups must adhere to in order to obtain a license for their activities. From commencing operations within two months of license issuance to obtaining approval for opening new branches, the regulatory framework sets a comprehensive guide for startups navigating the licensing landscape.
Viability and Growth Assessment
Startups will be granted an initial two-year license period, during which they must demonstrate their viability and growth potential. This includes meeting activity-specific regulations, ensuring compliance with obligations, and increasing their capital. Failure to do so may result in license revocation.
FRA's Commitment and Vision
Mohamed Farid, Chairman of the FRA, emphasizes the Authority's dedication to supporting startups, recognizing their pivotal role in economic development and job creation. The commitment extends to fostering a favorable regulatory environment, with recent improvements in Egyptian financial evaluation standards tailored to the unique characteristics of startups, facilitating their access to funding.
Decision No. 268 sets the stage for a transformative era in Egypt's fintech landscape. By providing a well-defined regulatory framework, the FRA aims to empower startups, drive innovation, and contribute to the broader economic ecosystem.