Highlights

In September 2026, the Central Bank of Egypt (the “CBE”) issued a Circular addressed to credit guarantee companies (the “Company” and, collectively, the “Companies”) operating or wishing to operate in Egypt (the “Circular”), establishing the rules governing the licensing regulations and supervision of the Companies.

The Circular was issued pursuant to law no. 194 of 2020 (the “CBE Law”), under which the Companies are subject to the regulation and supervision of the CBE. The Circular aims to establish effective supervisory frameworks and controls governing the business of the Companies, in a manner that preserves their financial soundness and stability and supports their ability to continue performing their role efficiently.

Scope of Application

The Circular applies to the Companies operating in Egypt, whose purpose is to support individuals and micro, small and medium enterprises by covering part of the risks associated with their financing, through:

1. providing guarantees to banks and other financial entities licensed to grant credit; and
2. undertaking to pay a percentage of the credit facility in the event of the borrower’s default, in accordance with the terms of the relevant contract.

Credit guarantee companies whose business model differs from the above scope must obtain the necessary license from the CBE, subject to the CBE’s study of the scope of their activities, and subsequently, the issuance of any instructions and supervisory requirements, as may be necessary.

The requirements provided under the Circular address the licensing and registration of the Companies, the ownership of their share capital, their key officials, corporate governance, internal control, cybersecurity, prudential ratios and sanctions.

Key Requirements

I. Licensing

A. Licensing Conditions

Companies seeking to obtain a license to carry out credit guarantee activities must satisfy a number of conditions, including but not limited to:

• taking the form of an Egyptian joint stock company;
• having an issued and paid-up capital of not less than EGP 50,000,000 (fifty million Egyptian pounds);
• having a clear ownership structure, enabling the identification of the ultimate beneficial owner and the verification of the legitimacy of the source of funds;
• submitting a sound financial and economic feasibility study, including a market study demonstrating the company’s ability to attract resources and absorb potential losses, the targeted sectors, and the methods for measuring and hedging the associated risks;
• ensuring the integrity, good reputation, financial solvency and appropriate experience of the founders, ultimate beneficial owners and key officials;
• having an adequate and clear strategy, as well as adequate internal control, risk management, governance and outsourcing systems; and
• appointing a qualified and experienced assessor to evaluate the technical requirements relating to the company’s infrastructure, technological systems and information security.

B. Licensing Procedures

The licensing process is conducted in two stages:

1. preliminary approval, which is decided upon by the CBE’s Board of Directors (the “BoD”) within ninety (90) days from the submission of a complete application. The incorporation procedures must then be completed within one (1) year, subject to extension for a similar period, from the notification of the preliminary approval. Failure to incorporate within the specified timeframe shall render the approval void.
2. final approval, which must be applied for within the same one-year period following the CBE’s inspection of the Company’s head office and branches, and which is decided upon by the BoD within ninety (90) days from the completion of the required documents. The licensing decision is then published in the Official Gazette at the Company’s expense, and the Company is registered in the CBE’s register of credit guarantee companies.

Companies may not commence their activities before being notified of the final approval and their registration. Notably, licensed Companies must commence their activities within one (1) year, subject to extension for a similar period, from the date of the final approval, failure of the latter shall render the license void.

Finally, the CBE must be notified at least one (1) week prior to the actual commencement of activities.

C. Applicable Fees

Companies are subject to the following fees during the licensing period:

1. annual supervision fee of EGP 100,000 (one hundred thousand Egyptian pounds), payable in January of each year;
2. headquarter inspection fee of EGP 100,000 (one hundred thousand Egyptian pounds), one-time payment during the licensing procedures; and
3. branch inspection fee of EGP 50,000 (fifty thousand Egyptian pounds), one-time payment during the licensing procedures.

II.        Ownership of Share Capital in the Companies

Egyptians and non-Egyptians may own shares in the capital of credit guarantee companies, subject to the following thresholds:

1. ownership of more than 10% (ten per cent) and up to 20% (twenty per cent) of the Company’s share capital is subject to a notification to the CBE fifteen (15) days prior to completion of the ownership;
2. ownership of more than 20% (twenty per cent) of the Company’s share capital or any percentage that may lead to actual control of the Company, is subject to prior approval from the CBE at least sixty (60) days before completion; and
3. share capital ownership by banks is at all times subject to the prior approval of the CBE.

In addition:

• the 20% (twenty per cent) threshold is calculated on a given party, whether natural or legal, together with their associations thereon, and the prior approval of the CBE is also required upon each subsequent increase beyond the approved percentage;
• where the 20% (twenty per cent) threshold is exceeded for involuntary reasons, such as inheritance, bequest, public subscription, merger, acquisition or division, an application to continue the ownership must be submitted to the CBE within thirty (30) days from becoming aware of such increase;
• in the event of a violation, the voting rights and dividends attached to the shares exceeding the permitted percentage shall be suspended, and such shares must be disposed of within six (6) months; and
• the Companies must notify the CBE within fifteen (15) days of any person, together with its related parties, holding more than 10% (ten per cent) of their issued capital or voting rights, of each subsequent increase or decrease of 5% (five per cent), and of any change in the ultimate beneficial owner, and must provide the CBE with their shareholding structure on a semi-annual basis.

III. Sanctions

In the event of any violation of the CBE Law or the rules set out in the Circular, the CBE may take the measures it deems appropriate, including sanctions and corrective measures in accordance with Articles 144 and 145 of the CBE Law.

IV. Grace Period

The Companies are granted a grace period of one (1) year to align their position with the requirements of the Circular, which is extended to two (2) years with respect to information security and cybersecurity procedures and controls, as well as the prudential ratios. Companies must also provide the CBE’s Supervision Sector, within three (3) months from the date of the Circular, with a specific timeline for the implementation of the Circular, including the existing gaps.

Implications

The Circular aims to:

• establish a comprehensive licensing and supervisory regime for the Companies, in line with the CBE Law;
• set clear activity requirements, including a minimum issued and paid-up capital and a two-stage licensing process;
• enhance ownership transparency through notification and prior approval thresholds and the identification of ultimate beneficial owners;
• strengthen corporate governance and internal control through board composition requirements, mandatory board committees and independent control functions; and
• enhance operational resilience and data protection through cybersecurity requirements and the requirement to retain databases within Egypt.

The Circular further regulates, among other things, the incorporation and licensing of branches, cessation of activity and liquidation, mergers and acquisitions of the Companies, revocation of license, and the criteria for key officials.

Conclusion

The Circular establishes a comprehensive licensing and supervisory framework governing the Companies, combining clear licensing, ownership and fit-and-proper requirements with enhanced governance and internal control standards, cybersecurity requirements and prudential ratios.

The Circular is expected to strengthen the financial soundness and stability of credit guarantee companies, while supporting their role in facilitating access to finance for individuals and micro, small and medium enterprises.

The contributors to this article are Hossam Gramon, Senior Partner – Head of Banking and Project Finance; and Karim Madian, Junior Associate.