Over the upcoming period, the Egyptian market is expected to see an interest in launching charity investment funds after the Ministry of Finance approved controls that organise the launch of funds in the Executive Regulations of the capital market.
In the beginning of February, Al-Thamarat Charity Association announced its plans to launch a charity investment fund in partnership with Mubasher Financial Services (MFS), in the order for the latter to manage assets. The step is a try to the open door for more donations.
Investment experts and asset managers expect the capital market to witness demand from financial and national institutions following the launch of charity funds, in light of the growing donations in Egypt. Moreover these funds are directly monitored by donators.
Experts also stressed that charity funds will revive the Awkaf system with a new vision that depends on utilising modern investment methods that guarantee the sustainability of charity funds. Awkaf is based on some citizens sparing funds for charitable purposes that serve society, like education and health for example, through coordination with concerned parties.
Executive regulations define charity funds as private property funds or a real estate investment funds whose profits are used for social purposes or charitable purposes by national associations or institutions, governmental parties, or parties generally related to charitable activities.
Charity funds will play an effective role in enabling charity associations to maximise the volume of donations they receives, managing director of MFS and chairman of Al Thamarat Ehab Rashad said.
Rashad said there are two main factors for that. Funds are directly monitored by donators by holding an annual General Assembly in order to discuss aspects of money spending and to evaluate the performance of investment manager of the fund, and the right to change it.
The fund works under the supervision of the Egyptian Financial Supervisory Authority (EFSA) and the annual declaration of the financial statements of the fund. It assures donours of following the fund’s expenditure and guarantees that it is not exploited for political purposes or any purpose other than charity.
Rashad said the second factor is the sustainability of donations because the fund keeps the assets of donations for investment. The investment’s yield is used in charity.
Investment charity funds do not conform to investment in specific instruments because they can invest in income instruments such as bonds, treasury bills or deposits, as well as stocks.
Rashad said the new charity funds differ from the fund launched by the Misr El Kheir Foundation nearly six years ago. The holders of investment documents in charity funds do not have the right to receive yields, contrary to the Misr El Kheir Foundation.
In light of these controls that govern the work of charity funds, there will be a rebirth of the endowments system with an investment vision and under the control of both the state agencies and the donors themselves.
He ruled out that the asset management companies will benefit from the charity funds managed by them. He said these companies will manage the funds for free as a part of their social responsibility, stressing that Mubasher will manage the charity fund, which Al Thamrat Charity Association intends to issue, for free.
Chairman of EFSA Sherif Samy told Daily News Egypt the statute of charity investment funds would require the participation of experienced financial institutions with at least 2% of the fund. It also stipulates that the minimum capital of the fund will be EGP 5m similar to the rules regulating the rest of the investment funds.
Head of Asset Management at HC Securities and Investment Company Omar Radwan expected that Egypt will witness the launch of a number of charity funds in the upcoming period. These funds can acquire the confidence of donours, whether institutions or individuals, due to its strict supervision system and being managed by a professional investment funds managing director.