Financing Medium, Small, and Micro Enterprises

Economic Projects play an essential role in developing and supporting the national economy, which reflects the economic strength of the state. The Egyptian State is developing and supporting the enterprise’s sector by taking one of the most important decisions in this field which is the financing of medium, small, and micro enterprises by setting the working mechanism and trading on it.

Financing of Medium, Small and Micro Enterprises (MSMEs)

According to the development of medium, small, and micro enterprises law no. 152 of 2020, the activity of financing such enterprises is any financing for commercial, productive, or service economic purposes of medium, small, and micro enterprises, which is a major means of encouraging the contribution of the financially excluded to economic activity.

The Egyptian Financial Regulatory Authority (FRA), in tandem with the Medium, Small and Micro Enterprises Development Agency (MSMEDA), are responsible for monitoring, developing, operating, and organizing the financing activity of SMEs and Micro Enterprises in accordance with law no. 141 of 2014 and its amendment by law no. 201 of 2020 which regulates the financing activity of SMEs and Micro Enterprises in the Non-Banking Financial sector.

Definition of Medium, Small and Micro Enterprises (MSMEs)

• Medium-sized Enterprises

Any existing enterprises with an annual turnover of 50 million Egyptian pounds and not exceeding 200 Million Egyptian pounds.

Or any newly established Industrial Enterprise with a paid-up capital or invested capital – according to the circumstances – of 5 Million Egyptian pounds and not exceeding 15 million Egyptian pounds.

Or any newly established Non-industrial Enterprise has a paid-up capital or invested capital – according to the circumstances – of 3 Million Egyptian pounds and not exceeding 5 Million Egyptian pounds.

• Small Enterprises

Any existing enterprises with an annual turnover of one million Egyptian pounds and less than 50 Million Egyptian pounds.

Or any newly established Industrial Enterprise with a paid-up capital or invested capital – according to the circumstances – of 50 thousand Egyptian pounds and less than 5 Million Egyptian pounds.

Or any newly established Non-industrial Enterprise with a paid-up capital or invested capital – according to the circumstances – of 50 Thousand Egyptian pounds and less than 3 Million Egyptian pounds.

• Micro Enterprises

Any existing enterprises with an annual turnover of less than One Million Egyptian pounds.

Or any newly established enterprise with a capital.

Or investment capital – according to the circumstances – of less than 50 Thousand Egyptian pounds.

• A newly established enterprise

Any enterprise that have not been established, registered, or operated for more than two years.

Medium, Small, and Micro Enterprises Development Agency (MSMEDA)

The MSMEDA was established by the decision of the Prime Minister No. 947 of 2017 and it’s amendments by the decision No.2370 of 2018. MSMEDA replaced the Social Development Fund which has been established in 1991 and MSMEDA is considered the product of 25 years of comprehensive developmental experiences in various fields.

MSMEDA is the competent authority for the development of Medium, Small, and Micro Enterprises and entrepreneurship also coordinates and unifies the efforts of all competent authorities, Non-Governmental Organizations (NGOs), and initiatives such works in this field.

The agency aims to set a national program for evolving and development of enterprises and also create the necessary climate to encourage such enterprises.

The agency is operating through regional network across the governorates with 33 branches including an Operational Support System (OSS) which is considered the executive arm of the agency, in addition to the partnership with about 600 NGOs concerned with the development of Micro-Enterprises, 1800 banks branches across all governorates of Egypt and also a lot of local development partners.

Financing amounts for Medium, Small, and Micro-Enterprises

For Medium and Small-sized Enterprises, there is no maximum financing amount, which could be determined by the project needs and the client credit assessment, however, the financing amount for Micro-Enterprises shall not exceed Two Hundred Thousand Egyptian pounds per project.

However, FRA board of directors may increase the financing amount for Micro-Enterprises by no more than 10% per year for a single project or a single individual according to the economic conditions.

Financing service provider for Medium, Small, and Micro Enterprises in the Non-Banking Financial Sector

Egyptian Joint Stock companies licensed to engage in financing MSMEs and/or financing the Micro-Enterprises in accordance with the provision of law no. 141 of 2014 and its amendments.

NGOs recognized in accordance with law No. 84 of 2002 and amended the by Law No. 149 of 2019 – which organizes the civil services – and authorized finance MSEs and/or Micro-Enterprises in accordance with the provisions of law No. 141 of 2014 and its amendments.

Financing Medium, Small, and Micro Enterprises’ rules and standards

These rules were issued by FRA board of directors for the licensed companies and NGOs to engage the business of financing Medium, Small, and Micro Enterprises, and these rules and standards included advertising of provided services in the field of financing MSEs and Micro-Enterprises.

It also included the discipline queries about the customers, a credit inquiry system, and service provider’s obligation to set funding grant policies and implement approved policies.

The financing provider of the Medium, Small, and Micro enterprises’(MSMEs) shall provide information and pursuit the following:

1. The financial products advertisement shall be truthful and accurate and also shall have a confirmation on the data or statements accuracy of the service providers.
2. Showing the data in a clear accurate way which allows the public to understand and evaluate the subject.
3. Service providers are prohibited from concealing any information or facts that could affect the integrity of customer decisions, not putting names or descriptions on the financial products offered that would mislead or deceive customers about the nature of the financing granted, the charges, the premiums, or the repayment period.
4. The declaration shall not include misleading or fake information about the funding provider’s financial situation, and also not offend or make false statements about competitors or the products advertised.
5. Not to indicate in any way that the provided financing is a special offer or only available to a limited number of individuals or for a certain period of time unless it is the actual reality of the provided financing.

Clients’ rights in the regard of financing the Medium, Small and Micro Enterprises (MSMEs)

1. The client’s personal information is confidential and may only be disclosed with the client’s permission.
2. Customers shall be treated fairly and disciplined and shall have the right to express their opinions about the offered products and services.
3. Clients should not be given financing beyond their paying ability, and also all the potential risks, the interest rates and costs or fees they will have to pay should be explained.
4. The client is entitled to a copy of the financing agreement and a clarification of all terms and understanding the various contractual terms, including the terms and conditions of the financing, its burdens, timing and value of premiums.
5. The service provider’s obligation to provide a clear complaint mechanism and to make it clear to the customer.