The financial sector include banking and non-banking financial sectors, which includes capital market, insurance, mortgage finance, micro finance, financial leasing, and factoring.
· Capital markets:
Capital markets are considered a reflection of the overall national economy's performance. They also represent a significant tool for pricing financial assets and determining the impact of the development of economy on those assets. Capital markets are an efficient mean in directing savings to investment channels. The more efficient this function is in terms of availability of offerings that address various investors' needs and their timely issuance, the best allocation of resources is accomplished.
- Insurance sector is one of the most important non-banking financial activities, as it supports and maintains its stability for playing a vital role in supporting the Egyptian economy and developing national investments. It provides financial protection for individuals and projects against various risks. It is also a major channel for collecting national savings and using these savings in financing national investments and development plans, creating new job opportunity and reducing inflation. In addition, optional pension funds provide supplementary pension to the participants.
- In spite of challenges faced by the Egyptian economy in the last three years, the Egyptian insurance market has achieved remarkable success in providing insurance coverage, this reflects the fast response of the insurance market to the new requirements and that it is keeping pace with new events and developing many existing coverage.
- FRA has made significant progress in achieving an effective supervision through applying international norms and standards.
· Mortgage finance:
- Real estate investment sector in Egypt is one of the most important sectors affecting the Egyptian economy. Real estate activity affects and is linked to many services and financial instruments such as mortgage finance, leasing, securitization and registration of real estate companies in the stock market as well as real estate investment funds.
- The laws regulating the real estate market are of paramount importance because they constitute the legal framework regulating the market. The most important law that regulate the real estate market is Mortgage Finance Law No. 148 of 2001 and it's Executive Regulations, which have been amended by ministerial decree No. (465) of 2005 that added many facilitations to the dealers in the market regarding all that is related to ways of proving investor's income, identifying beneficiaries of mortgage finance fund, standards for the accreditation of brokers and valuation experts. The purpose from activating mortgage finance law is not only putting an end for the recession and providing housing units but the main purpose in the first place is maintaining a process of correction and rebalancing of development process.
- Micro-finance is offering finance for economic productivity, service, and commercial purposes with the value set by FRA's Board of Directors. Microfinance is encouraging the contribution of low-income groups in the economy. In this respect, granting different means of finance for individuals and owners of micro-enterprises will reduce unemployment and will improve the incomes of the poorest families. Besides, it will increase investments and contribute in the national economy.
- On 13th November, Presidential Decree no.141 of 2014 on regulating microfinance activity was published in the Egyptian Gazette (issue no. 46). Then, the Authority begins to prepare related executive decisions and rules necessary to regulate the activity and determine licensing requirements for the companies and NGOs.
· Financial leasing:
- Financial leasing is one of the finance tools that plays a substantial role in financing investments, especially those related to small and medium industries planning to purchase equipment, machinery and related inputs for industrial activities. Financing such needs is spread over several years to cut down startup costs.
- Under the leasing agreement, the right to use a specific asset owned by the lessor is transferred to the lessee according to a contract between the two parties, entitling one party (lessee) to use an asset owned by the other party (lessor) for periodic installments to be paid over a specific period of time. At the end of such period, the lessee may purchase the asset from the lessor.
- Factoring is set of integrated services that include querying the potential buyer (debtor) and evaluating his financial and business conditions as well as managing future accounts and collecting outstanding balances on time or speeding up its payment.
- It is a contract between the company and vendor under which the company buys the rights of short-term cash from the seller without returning to him once more that is in case of the debtor bankruptcy. This activity is an international activity if one of the parties deals from abroad.