Al-Journal Al-Eqtisady:

Participants in the third session of the 4th edition of the “Non-Banking Financial Instruments Forum,” which was held yesterday with the participation of the Chairman of the Financial Regulatory Authority (FRA), emphasized the crucial role of mortgage finance and factoring in supporting investment and economic development in the current stage.

Mohamed El-Kahky, Managing Director of Tamweel Mortgage Finance, said that financing under-construction projects is one of the most important factors in revitalizing Egypt’s real estate industry.

He called on decision-makers to implement measures that would allow financing opportunities for real estate projects under construction, noting that this model is commonly followed in the United States and Canada.

El-Kahky stressed that most banks and companies do not finance this phase of real estate development, despite it being a vital stage that requires financial support.

He noted that recent amendments aimed at simplifying property registration and lowering interest rates will support the sector’s performance in the near term. Mortgage finance, he added, is based on long-term funding, which helps stabilize the market.

He also said that securitization and bond issuance are viable alternatives for mortgage finance companies to diversify funding sources. Currently, companies are mainly financing clients in two stages: resale by developers and the handover phase.

Nagy Fahmy: The Sector Is Limited But Improving

Nagy Fahmy, Chairman of the Egyptian Mortgage Finance Federation, stated that the mortgage finance sector remains very limited in Egypt due to high financing costs. He noted that developers have been offering installment plans up to 14 years to boost sales amid declining demand. However, with Egypt’s improving economy, he expects this gap to narrow and mortgage companies to take on a larger role while developers focus on project execution.

He added that the sector has overcome several historical issues such as income verification, repayment, and property registration by introducing mechanisms that make it easier for clients to qualify for loans. The focus, he said, is on serving the middle class, which represents high demand.

Fahmy also mentioned that although banks offer cheaper financing, mortgage companies have an edge in terms of faster processing and more flexible procedures. He emphasized that the Central Bank’s mortgage initiative helped sustain the market during challenging times.

He highlighted a recent surge in demand for retail banking products, spurred by falling interest rates, which will likely further increase demand in the coming period.

Tamer Sadeq: Factoring Needs More Bank Support and Insurance Integration

Tamer Sadeq, Managing Director of Cairo Factoring, called for greater cooperation between the FRA and the Central Bank to enhance bank financing for factoring companies. He noted that despite their heavy involvement with SMEs and micro-enterprises—accounting for about 85% of Egypt’s business base—banks still do not provide sufficient funding to factoring companies.

Sadeq emphasized the importance of partnerships with insurance companies to manage default risks. He pointed to a recent cooperation protocol between the Egyptian Factoring Association and the Egyptian Credit Bureau (I-Score) for a guaranteed letters registry.

He noted that factoring is still in its early stages in Egypt, with only eight companies registered with the FRA, compared to other countries where the sector contributes up to 10% of GDP.

He explained that current awareness efforts—including conference participation—aim to promote the sector, which was heavily impacted by the Central Bank’s SME finance initiatives at 5% and 11%. The short-term nature of factoring makes it less sensitive to interest rates, but accessing eligible clients remains a major challenge.

Sadeq added that the sector is ready to finance all segments—industrial, commercial, service, educational, and agricultural—based on future receivables, with payment ratios between 80% and 90%.

Regarding securitization, he said that it’s still in the early stages for factoring firms but will become a key focus for the Egyptian Factoring Association, which is expected to dissolve by year-end.

He also noted that establishing factoring companies is straightforward, with steps available on the FRA’s website. The sector still needs more players to reach its full potential.

Ahmed Osama: Financial Solvency Rules Improved the Sector

Ahmed Osama, Managing Director of Drive Factoring, said recent solvency regulations have improved performance across the industry. He noted that the new rules helped companies expand, enhancing their contribution to GDP.

He explained that while leasing and factoring are closely related, they differ in financial solvency standards. He stressed the importance of having the insurance sector act as a safety net for factoring, due to its involvement in many other sectors.

Osama stated that factoring generally avoids high-risk projects and focuses on three main areas:

1. SME Factoring, which is characterized by fast processing, low cost, and minimal risk.

2. International Factoring, which supports Egypt’s GDP by facilitating export activities across global markets.