FRA aims to increase financing for non-banking financial activities to EGP 820bn by 2026

Fatma Salah
5 Min Read

The Financial Regulatory Authority (FRA) has finished discussing a number of market parties’ proposals about their future vision. This step is in preparation for including the outputs of its community dialogue into the draft of the second phase of its comprehensive strategy for non-banking financial activities (2026-2022), which is considered as a road map that paves the way for the FRA in the next four years to become a leading financial regulatory body and the most influential regionally and globally. This is expected to happen through the rich diversity of the activities of the non-banking financial sector, allowing the increase of non-traditional financing granted to EGP 820bn by 2026 compared to EGP 370bn in 2021, and only about EGP 159bn in 2017.

The FRA amended the second phase of its draft strategy (2026-2022) to include only five main axes: enhancing the use of financial technology and accelerating digital transformation, achieving financial inclusion and deepening levels of sustainability, managing risks and building an effective early warning system, developing the legislative structure, and enhancing financial culture and capacity building.

Mohamed Omran, Chairperson of FRA, said that the experience of the past four years confirmed that a comprehensive strategy for the non-banking financial sector (2022-2018) contributed to creating more focus more on the procedures, controls and initiatives that made the financial sector non-banking more successful. It also enabled the authority’s management to overcome many challenges and difficult situations, and allowed the authority’s management to explore weaknesses to strengthen them and exploit the opportunities available to the non-banking financial sector.

He stressed that finding the relationship between plans and time programs in the future and targets has become a crucial issue for FRA to support financial inclusion for sustainable financing and enhance levels non-banking financial knowledge and culture, as well as building non-banking financial control based on Risk-Based Supervision (RBS), and what this entails for activating early warning systems to manage risks.

During the second phase of its strategy, the Authority seeks to provide an investment-attractive environment characterized by fairness, efficiency and transparency, in which multiple investment channels are available to serve all categories of investors. Diversifying investment products in the financial market is a basic pillar to attract, preserve and develop local and foreign capital. The second stage will focus on financial innovation to increase the depth of markets to avoid the possibility of recession stages if innovative tools are not relied upon.

Omran said that the capital market activity – in the second phase of the Authority’s strategy – has a major role to play in advancing the investment inside the country. It encourages turning accumulated savings into investments in new projects that achieve economic development and accommodate thousands of job opportunities annually. The total issuance of shares not listed in the stock exchange is expected to reach 43% of the total value of the targeted financing from non-banking financial activities, making the issuances of shares not listed on the stock exchange its main component, equivalent to about EGP 350bn, followed by the total value of financial lease contracts, which is expected to represent about 18% of the total targeted funding to be granted from non-banking financial activities, with an expected value of up to EGP 150bn.

In third place comes the total value of securities issuances that are not stocks (bonds and sukuk), which is targeted to reach 10% of the total targeted financing from non-banking financial activities, with an expected value of EGP 80bn. It is followed by consumer financing by 7% with an expected value of EGP 60bn, followed by microfinance balances at 6%, with a value of EGP 50bn. Then comes the total value of issues of shares listed on the stock exchange and the total volume of discounted securities at 5% for each, equivalent to an expected value of EGP 40bn each.

Financing balances for medium and small enterprises will reach about 4% of the total financing targeted to be granted from non-banking financial activities, with an expected value of up to EGP 30bn, while the contribution of real estate financing activity is from the total volume of financing targeted to be granted from non-bank financial activities is 2% with an expected value of EGP 20bn.

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