FRA amends controls for SMEs financing

Mohamed Farid, Chairman of the Financial Regulatory Authority issued a circular regarding enhancing the effectiveness of the controls for financing SMEs to ensure the safety of the process of granting and renewing financing, prohibiting supplementary financing, and the procedures that must be taken when applying the repayment option. 

The amendments is to confront default risks, within the framework of completing the authority’s role in developing non-banking financial markets while preserving the rights of all dealers in those markets.

Where it is noted that some companies, associations and civil institutions licensed to engage in the activities of financing small, medium and micro projects provide supplementary financing to their clients, providing new financing under different names, without taking into account the technical considerations necessary for the safety of granting financing.

Hence, the circular obligated the companies and entities licensed to engage in the activities of financing micro-enterprises and financing medium and small enterprises not to renew the financing granted to the customer except after verifying that the existing financing has actually been paid in full, and it is not permissible to pay any amounts due to the existing financing by obtaining new financing.