Egypt and Tunisia Forge Ahead in Non-Banking Microfinance Cooperation

Egypt's Financial Regulatory Authority (FRA) is actively seeking to bolster collaboration with Arab and African nations, with a strong emphasis on the exchange of expertise and knowledge. This initiative was highlighted by FRA Chairman Islam Azzam during a pivotal meeting with Mahmoud Montasser Mansour, the executive director-general and founder of Tunisia’s Microfinance Control Authority, and his delegation. The discussions centered on enhancing cooperation and sharing regulatory and supervisory insights within the non-banking finance sector. The meeting was also attended by FRA Assistant Chairman Rehab Taha.

The Tunisian delegation's visit was motivated by a desire to gain direct insight into Egypt's legislative and regulatory frameworks that govern financing for medium, small, and micro enterprises. This interest is particularly relevant given the parallel developments in regulatory frameworks within this sector in both countries. Mr. Azzam extended a warm welcome to the Tunisian officials, underscoring the significance of non-banking finance for enterprises as a key sector overseen by the FRA, due to its widespread impact on a substantial portion of the population.

He further elaborated that this sector is instrumental in advancing financial inclusion, a core objective of Egypt Vision 2030 and the government's broader economic development strategy. Additionally, it holds considerable potential for improving the quality of life for vulnerable groups and contributing to sustainable economic and social progress.

Mr. Azzam shared that in the second quarter of the current year, outstanding financing balances for medium, small, and micro enterprises in Egypt surpassed 101 billion Egyptian pounds. These funds benefited approximately 3.5 million individuals through nearly 4,400 outlets operated by licensed companies, associations, and institutions across the nation. He also noted the FRA's recent focus on enhancing the financing experience for beneficiaries, especially microenterprise owners. This includes more rigorous assessments of borrowers' repayment capabilities to mitigate defaults, ensuring transparency in information and data protection, and encouraging providers to innovate with products that cater to customer needs.

The authority is committed to ensuring that customers can effectively utilize available grievance and complaint mechanisms. Furthermore, it aims to assess the tangible impact of financing on individuals' livelihoods and economic activities. Mr. Azzam pointed to recent regulatory measures designed to strengthen oversight of debt collection practices, prevent abuses, enhance customer identity verification, improve the FRA's early risk detection capabilities, and reduce individual borrower defaults.

These measures also aim to bolster the financial solvency of licensed financing providers and promote the development of new products leveraging financial technology to adapt to market dynamics and evolving customer circumstances. The overarching goal is to broaden access to financing, particularly in underserved and remote regions, complemented by ongoing awareness campaigns conducted in partnership with various government entities.

Mr. Mansour provided an overview of the evolution of Tunisia's microfinance sector since its regulation began in 1999, initially encompassing associations. A significant restructuring in 2011 brought commercial microfinance institutions under regulatory supervision. He also detailed the authority's role since 2012 in regulating pricing and monitoring financing costs, alongside measures implemented last year, which included reviews of the pricing for specific products offered by seven licensed microfinance companies and 289 licensed microcredit associations.

Mr. Mansour stated that currently, over 856,000 clients in Tunisia benefit from microfinance services. Last year alone, financing amounting to approximately 2.7 billion Tunisian dinars, equivalent to 47.1 billion Egyptian pounds, was disbursed through more than 524,000 financing transactions, underscoring the sector's sustained growth. The meeting also touched upon the development of financial products, the diversification of financing instruments, and the experiences of both nations in digital transformation, financial technology applications, and the integration of artificial intelligence into supervisory tools. Participants also explored modern strategies for risk management, compliance, and consumer protection to enhance the effectiveness of the activities overseen by both authorities.