The committee of economic affairs of parliament continues to discuss the draft law on financial leasing and factoring this week. The draft law was referred by the government in February, according to MP Amr El-Gohary.
The committee has completed discussing nine articles of a total 84 articles of the draft law, according to El-Gohary who clarified that the law aims to provide financial resources to increase the growth of the Egyptian economy over the upcoming period.
Financial leasing is defined as a funding process of assets that takes place in accordance with a contractual relationship between the lessor and lessee during a specific period of time.
As for factoring, it is a financial transaction in which a company sells its debts to a third party called “the factor”, in exchange for obtaining immediate funds to carry out its work.
El-Gohary said that the first articles of the draft law are introductory, and there was no debate over them between the members of the committee, except for the sixth article which stipulated that financial leasing companies have a period of six months to settle their issues, with the Financial Regulatory Authority (FRA) given the right to renew the time limit twice for the same period.
“Some members of parliament have requested extending the settlement period, as six months are not enough, with the right given to the FRA to extend the period for six more months based on what it deems necessary,” El-Gohary explained.
He added, however, that this request was rejected.
Gamal Moharam, head of the Egyptian Association for Factoring, said that factoring is one of the most important financing activities, along with banks, to support small and medium enterprises (SMEs) obtain funds that enable them to continue and recycle their limited capital.
He added that factoring is rather new in Egypt, with the total value of its transactions last year reaching EGP 4bn with a growth of more than 30%. Despite this growth, the Central Bank of Egypt (CBE)’s initiative to provide EGP 200bn for the funding of SMEs with a 5% interest rate has limited this growth.