Egypt FRA greenlights amendment to securitization bonds, sukuk regulations

FRA greenlights amendment to securitization bonds, sukuk regulations

An employee counts Egyptian pounds in a bank in Cairo, Egypt, November 3, 2016.

An employee counts Egyptian pounds in a bank in Cairo, Egypt, November 3, 2016.

REUTERS/Mohamed Abd El Ghany

ArabFinance: The Financial Regulatory Authority (FRA) approved a draft amendment to some provisions of the rules regulating bonds, securitization bonds, and sukuk in the Capital Market Law No. 95 of 1992, according to a statement by the authority.

The amendments added four new financing tools in the capital market: social bonds, sustainable development bonds, environmental social and governance bonds, and gender equality and women’s empowerment bonds.

Mohamed Omran, FRA Chairperson, explained that the draft amendment adopted the application of the same provisions and principles applicable to the five types related to the areas of sustainable development on securitization bonds and sukuk if they are directed to financing or refinancing projects related to achieving sustainable development goals or goals with a social dimension and women’s empowerment issues.

Additionally, the securitization bonds must take into account that the assigning companies’ policies are consistent with the principles of sustainable development or that they meet standards related to the sustainable development goals, or that the transferred financial rights are linked to projects whose purpose is to achieve the goals of sustainability, and this also applies to the beneficiaries of financing resulting from Issuance of instruments.

The board of directors of the FRA agreed to grant a 50% reduction in fees for examining and studying requests for issuing and offering bonds, including securitization bonds and sukuk in cases related to achieving sustainable development goals or goals with a social dimension.

Omran stressed that the board’s determination to move forward towards offering new financing tools and issuing controls, rules, and conditions for new financing tools immediately after the issuance of the Prime Minister’s decision with the proposed amendments to meet the challenges of climate change and the transition towards a green economy and environmentally friendly projects.

He also approved the board’s approval on the possibility of licensing funds to practice three types of sustainable development, women empowerment, and environmental activities by unlocking the private equity funds or specialized private equity funds that allow direct investment in financing or refinancing these projects.

This is in addition to debt funds that enable indirect investment in bonds, securitization, and sukuk that finance sustainable projects, along with charitable funds that invest in securities related to sustainability. All three funds will be granted a discount of 50% on the fees paid to inspect, review, and study their investment requests.

Earlier, the authority revealed that the sukuk offerings expected for the year 2021 will amount to about EGP 7.5 billion, but the Egyptian capital market has so far witnessed only one sukuk offering of EGP 2.5 billion

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