Highlights

On 6 January 2026, the Financial Regulatory Authority (the “FRA”) issued regulatory decree no. 318 of 2025 (the “Decree”), introducing new controls governing the provision of non-banking financing in foreign currency.

The Decree applies to companies licensed to conduct small and medium enterprise (“SMEs”) financing, financial leasing, and factoring activities. It introduces detailed conditions aimed at ensuring that foreign currency financing is strictly linked to foreign currency–generating activities, while strengthening credit risk management and due diligence requirements.

The Decree further regulates the sources of foreign currency funding that may be used by licensed entities and establishes specific requirements for international factoring transactions, including the involvement of Factors Chain International (the “FCI”) members.

Scope of Application

The Decree applies to all companies and entities licensed by the FRA to engage in:

• SMEs financing activities;
• financial leasing; and
• factoring.

Licensed entities are prohibited from extending foreign currency financing to their clients except in accordance with the requirements and conditions expressly set out in the Decree.

Key Requirements

1. Foreign Currency Financing by SME Financing and Financial Leasing Entities:

Entities engaged in the provision of SMEs financing and financial lease activities in foreign currency must ensure that:

1. the financing is granted in connection with an import transaction falling within the scope of the client’s business activities;
2. the import transaction is supported by appropriate documentary credits opened with banks, or equivalent documentary or electronic instruments; and
3. enhanced credit assessment and due diligence is conducted, including verification of:
   • the purpose of the financing;
   • the client’s business activity and track record;
   • the client’s financial position; and
   • the availability of sufficient foreign currency resources to service the financing from the proceeds of the relevant activity.

Clients operating in free zones are exempt from the requirement to present the relevant import documentation.

2. Foreign Currency in International Factoring:

Factoring companies may conduct factoring operations in foreign currency through international factoring transactions, subject to compliance with the following conditions:

1. the factoring transaction must involve an external party through the assignment of financial rights or debts;
2. the assigned receivables must arise from export and import transactions, or be directly linked to the sale of financial rights or debts;
3. the factoring company must retain a right of recourse against the seller in the event of non-payment by the debtor;
4. the transaction must involve exporter and importer factoring companies that are members of the Factors Chain International (FCI); and
5. appropriate due diligence must be conducted on the debtor or seller, including verification of their financial position and foreign currency repayment capacity.

Permitted Sources of Foreign Currency

The Decree requires that foreign currency used to finance clients be sourced exclusively from one (1) of the following:

• the entity’s own resources, provided that its capital is denominated in foreign currency;
• banks registered with the Central Bank of Egypt, or other entities licensed to deal in foreign currency; or
• foreign entities approved by the FRA, subject to obtaining such approval prior to entering into the financing agreement.

Implications

The Decree aims to:

• limit foreign currency financing to clearly defined, foreign currency-generating activities;
• enhance credit discipline and risk management among non-banking financial institutions;
• reduce foreign exchange risk by ensuring alignment between financing currency and revenue streams; and
• strengthen regulatory oversight of foreign currency exposure within the non-banking financial sector.

Conclusion

The Decree reflects the FRA’s continued focus on safeguarding financial stability and ensuring prudent foreign currency exposure within the non-banking financial sector. By imposing strict eligibility, documentation, and funding source requirements, the Decree seeks to ensure that foreign currency financing is provided only within clear parameters. In practice, licensed entities should review and update their credit policies, due diligence procedures, and funding structures to ensure compliance with the new requirements. Entities engaged in international factoring should also confirm alignment with the FCI-related structural and documentation standards to avoid regulatory exposure.

The contributors to this article are Hossam Gramon, Partner - Head of Banking and Project Finance, and Nour Osama, Associate.