Business hub – cairo
To complement the efforts to maximize the development impact of all activities that comprise the non-banking financial sector, which would facilitate the access of economic entities operating in various activities and productive sectors to financing services and products, Dr. Mohamed Farid, head of the Financial Supervisory Authority, revealed that the authority issued the first license to a financial institution that allows it to engage in the activity of financing micro-projects in the non-banking financial sector according to Islamic financing formulas.
Dr. Farid explained that the issuance of the new license adds a new dimension to the existing financing mechanisms in the local market in terms of his innovation of the “Wakala by Investment” formula. Which is defined as a contract whereby another person is authorized to invest a sum of money owned in favor of the principal in return for a specified fee of a lump sum or a percentage of the invested money.
He added that the authority is currently looking into the possibility of issuing the necessary approvals to allow the use of products that rely on other main forms of Islamic finance, including Murabaha and all types of musharaka for other companies. To be applied for the first time with the non-banking micro-enterprise sector.
Dr. Farid pointed out the importance of a diversity in the applications of financing formulas in general in financing micro-enterprises. This will help accelerate the pace of addressing the problem of the informal economy through its ability to integrate new segments of micro-entrepreneurs into the formal sector for the first time. Which contributes at positive rates to achieving the goals of the state’s strategy towards achieving financial inclusion based on diversification of financing products and their suitability to the needs and desires of all segments of society.
Activity statistics at the end of July 2022 indicate that the number of beneficiaries of microfinance services reached about 3.8 million. With a financing portfolio of about 33.3 billion pounds, The share of women among them is about 60%, with 2.3 million beneficiaries. The share of young people of both sexes and beneficiaries of activity services reached about 64%.
It is worth noting that after the “Egyptian Microfinance Company – Maksab” obtained a new license to practice microfinance activity based on the application of the “Agency Financing by Investment” formula for its various financing products, The number of companies licensed by the Authority to engage in microfinance activity within the Egyptian community has increased to (19) companies.
The Investment Agency is diversified according to different considerations. Where it can be classified as a public agency and a private agency, Absolute agency and restricted agency, temporary agency and non-temporary agency, Agency with pay and agency without pay, The application of the “Wakala by Investment” formula allows the ability to invest the funds of the financing agencies (the principal) with clients who are trustworthy in their creditworthiness (the agents) in all economic activities. In return for what the principal specifies of the expected profit for the agency contract, The advantage in this case is that what exceeds the expected profit is owed to the agent (client). As an incentive to perform well, This is in addition to the agent’s known fee.