Answer ... (a) Crowdfunding, peer-to-peer lending
In general, under the Banking Law and several judgments of the Egyptian Economic Court, no natural or legal person can conduct banking activities in Egypt without being licensed by and registered with the Central Bank of Egypt (CBE).
The Banking Law defines ‘banking activities’ as:
- receiving deposits;
- providing refinancing, loans or similar facilities;
- contributing to the share capital of local companies; and
- any other activities that are considered to constitute banking activities by custom, conducted on a regular basis and as the main business activities of the party conducting them.
This definition is also confirmed in the Trade Code. Under the Banking Law, any party that violates this provisions shall be subject to a penalty of imprisonment for between 24 hours and three years, and/or a fine of between EGP 5,000 and EGP 50,000 noting that this fine was increased under the new draft Banking Law to be between EGP 100,000 to EGP 1,000,000. The licensing requirement applies where:
- the banking activities are carried out on a regular basis; and
- the banking activities are the main activities of the party conducting them, whether that be a natural or legal person.
In light of the above, crowdfunding and peer-to-peer lending are permissible only as long as these two main conditions are not met.
The Egyptian government itself has used crowdfunding to fund public utility projects. For example, crowdfunding was used in 2014 to fund the development of the New Suez Canal, which cost around EGP 30 billion (approximately $1.9 billion). As another example, Presidential Decree 139/2014 established a private fund called the Tahya Misr Fund to assist the Egyptian government in establishing development and service projects, the development of slums and micro-small projects, among other things.
(b) Online lending and other forms of alternative finance
According to a circular issued by the CBE in 2014, no bank registered with the CBE can provide internet banking solutions, including online lending, without prior authorisation from the CBE. All banks registered with the CBE must meet specific legal requirements, including providing the CBE with a penetration test report.
(c) Payment services (including marketplaces that route payments from customers to suppliers (eg, Uber and AirBnb)
A specific regulation governs any solution provided by technical payment aggregators or payment facilitators, which provides that services agreement must be subject to specific know-your-customer and anti-money-laundering checks, and must include specific terms and conditions for these services, including a restriction on subcontracting, unless certain conditions are being met.
The Consumer Finance Law, issued on 16 March 2020, governs any activity aimed at the financing or purchase of products or services by consumers, as long as this activity is carried out on a regular basis. Such activities include financing through payment cards or any other means decided by the CBE.
Consumer finance activities may not be carried out in Egypt without a licence from the Financial Regulatory Authority (FRA), and may be carried out only by joint stock companies with an issued capital of at least EGP 10 million (approximately $633,649).
It is worth noting that oo one is now allowed under the new draft Banking Law to carry out any activity of operating payment system or providing payment system unless a prior license is obtained by CBE. This new restriction is applied to all persons, whether natural or juristic persons, carrying out such activity inside Egypt or providing such services abroad to any residents in Egypt except for Stock Exchanges, Futures Exchanges, Securities Settlement Systems, licensed Central Clearing, Depository and Registry Systems, Custodian Banks, internal systems of the Egyptian Ministry of Finance that does not include payment, collection, set off or clearance of payment.
Forex is regulated by the Banking Law and its Executive Regulation. All banks registered with the CBE and licensed forex companies are allowed to exchange foreign currencies.
For a company to qualify for a forex licence, it must be incorporated in the form of a joint stock company with a minimum paid-up capital of EGP 5 million (approximately $318,400) and its business activities must be limited to forex. Furthermore, the entire capital of a forex company must be owned by Egyptian nationals.
The minimum paid-up capital will be increased under the new draft Banking Law to EGP 50 million (approximately $3.17 million).
Online trading is subject to a specific regulation which requires brokerage companies to satisfy certain conditions and requirements in order to provide trading solutions online. These conditions and requirements include specific technical requirements and conditions relating to the IT infrastructure of the company.
(f) Investment and asset management
There is a specific regulation governing investment and asset management services that use technology or technology solutions from third-party providers.
(g) Risk management
Certain regulations must be satisfied to use risk management technology.
There is no specific regulation on roboadvice in Egypt. However, the FRA has been following international trends with a view to regulating roboadvice.
A specific regulation governs insurtech in Egypt, which provides that certain conditions must be met by the relevant insurance company, including taking all measurements to prevent any fraudulent acts.