Paper
The Legal and Regulatory Environment for Microfinance in Egypt: Diagnostic Study with Focus on NGO-MFI Transformation Issues
Identifying and addressing legal barriers to microfinance growth
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This study is a diagnostic assessment of the legal and regulatory environment for microfinance in Egypt.
Successful Egyptian NGO-MFIs are keen to transform into microfinance companies (MFCs) so that they can provide a variety of services and increase their access to funding. Key legal and technical barriers to such transformation include:
- Uncertainty regarding NGOs right to own shares in a commercial company;
- Cost of transformation, time needed to complete the process and making changes in their institutional, operational and financial systems;
- Interest rate caps;
- Prohibition from acting as agents for banks and money transfer companies;
- Difficulties in accessing funds;
- Information gap due to non-participation of NGO-MFIs in the credit bureau system.
Donors need to support and assist NGOs interested in transformation. Recommendations include:
- Creating a path for transformation with Ministry of Social Solidarity (MSS) and Single Regulator consent and donor support;
- Exemption from interest rate caps;
- Permission for MFCs to act as agents for regulated financial institutions;
- Approval from Central Bank of Egypt for banks to extend credit facilities to NGO-MFIs and MFCs;
- Donor intermediation between NGO-MFIs and credit bureaus.
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