The Financial Regulatory Authority (FRA) has introduced a new type of investment funds specialising in transferred values, according to FRA Chairperson Mohamed Omran.
The new fund will see the transfer of all or part of its future financial rights portfolio from non-bank financing activity regulated, so it can obtain the present value of instalments due on its customers. It represents a financing alternative to real estate finance, financial leasing, consumer finance, factoring, and microfinance companies.
Omran said the step aims to achieve integration between non-bank financial activities subject to the authority’s control, and provide diversification of funding sources to non-bank financing companies.
It will allow companies to find non-traditional financing alternatives, as these types of funds are eligible to collect savings for investment in the non-banking financial sector according to a clear investment policy.
The move will help overcome the problem of low capacity in generating capital for economic development. The new fund will also add the productive assets necessary to raise the rate of production and growth in all areas of economic activity.
Omran stressed the credit policy will include identifying the risks associated with the activity’s practices, such as credit and concentration risks as well as liquidity risks. At the same time, it will specify the obligations of the assignor, or the non-bank financing companies, and the assignee, or the investment fund.
There will also be a commitment to providing an electronic link between non-bank financing companies and a fund investment to promote the digital transformation.
The new rules also permit the non-bank financing company to assign future financial rights to the investment fund in collecting the instalments due from its clients to the investment fund account. The investment manager is responsible for following through with the automatic linking.
Private equity funds provide financing for non-bank financing companies and add new activity to investment funds. They also provide new financial tools for investors through subscriptions to investment securities issued by dealing funds in other transferred values.