More
    HomeGovernance, Policy & Regulations ForumPolicy & Regulations ForumNew Robo-advisors Rules in Egypt Open Opportunities for Digital Investment Startups

    New Robo-advisors Rules in Egypt Open Opportunities for Digital Investment Startups

    Published on

    spot_img

    The Egyptian Financial Regulatory Authority (FRA) , led by Dr. Mohamed Farid, has issued Resolution №57 of 2024. This landmark decision creates a framework for the use of “Robo-advisors” in the capital market in Egypt for the first time. Robo-advisors are automated investment platforms that use algorithms to provide financial advice and manage investment portfolios.

    What are Robo-advisors?

    Robo-advisors are digital platforms that utilize artificial intelligence (AI) to analyze an investor’s financial goals, risk tolerance, and investment time horizon. Based on this information, the platform recommends an investment portfolio and may even automate the buying and selling of securities.

    The New Regulatory Landscape

    The new regulations establish guidelines for companies seeking to offer Robo-advisor services in Egypt. Key requirements include:

    • Minimum Capital: Companies must have a minimum issued and paid-up capital of EGP 15 million (around USD 760,000).
    • Cybersecurity Insurance: The company must be insured against cybersecurity risks by a licensed insurer.
    • Algorithmic Transparency: The AI technology used must be transparent and auditable, with clear documentation and oversight procedures.
    • Human Oversight: Human oversight remains crucial. Companies must have a qualified team with expertise in both algorithmic methodology and the technological aspects of the service.

    Client Protections

    The regulations prioritize client protection. Key features include:

    • Client Suitability Assessments: Robo-advisors must assess a client’s suitability for specific investments based on their risk tolerance and financial situation.
    • Client Education: Clients must be informed of the potential risks associated with investing through Robo-advisors and have the right to discontinue automated transactions at any time.
    • Contractual Clarity: The contract between the company and the client must be clear and written in Arabic. It should outline the scope of services, fees, and dispute resolution mechanisms.

    Benefits

    The introduction of Robo-advisors is expected to benefit both investors and the capital market in Egypt.

    • Increased Financial Inclusion: Robo-advisors can potentially make investing more accessible to a wider range of Egyptians by offering lower minimum investment amounts and simplified investment processes.
    • Enhanced Market Competitiveness: The introduction of Robo-advisors injects new competition and innovation into the Egyptian capital market, potentially leading to a wider variety of investment products and services.
    • Growth of Fintech Startups: These regulations pave the way for the growth of Egyptian Fintech startups specializing in Robo-advisor technology. Cairo-based Bokra, providing similar investment offerings, recently secured a $4.6 million pre-Seed round led by DisrupTech Ventures and SS Capital, among other investors.

    Dr. Mohamed Farid, Chairman of the FRA, stated, “The issuance of these controls opens the door for providing automated investment advisor services for the first time in Egypt. This paves the way for companies to apply after meeting the necessary requirements.”

    The regulations represent a significant step towards digitizing Egypt’s non-banking financial sector and expanding access to investment opportunities for all Egyptians.

    Latest articles

    Mobility Startup Zeelo Exits South Africa, Hands Reins to Ride-Sharing Rival LULA

    Zeelo, a US-based company that launched its South African operations in 2019, has decided to exit the market to focus on its core markets in the US, UK, and Ireland.

    Egypt’s dopay Secures $13.5M to Expand Digital Payroll Solutions for Underbanked Workers

    dopay’s expansion plans include the development of a self-financing lending model in collaboration with partner banks, which will leverage deposited funds to create a sustainable lending portfolio

    d.light Secures $176 Million to Expand Solar Access in East Africa

    The company’s PayGo model allows customers to pay for solar products in installments using mobile money.

    New US Parole Program Offers 5-Year Visa to African Startups with $260K+ Raised

    To qualify, entrepreneur must have a significant ownership stake (at least 10%) in a U.S.-based startup that was formed within the last five years.

    More like this

    Mobility Startup Zeelo Exits South Africa, Hands Reins to Ride-Sharing Rival LULA

    Zeelo, a US-based company that launched its South African operations in 2019, has decided to exit the market to focus on its core markets in the US, UK, and Ireland.

    Egypt’s dopay Secures $13.5M to Expand Digital Payroll Solutions for Underbanked Workers

    dopay’s expansion plans include the development of a self-financing lending model in collaboration with partner banks, which will leverage deposited funds to create a sustainable lending portfolio

    d.light Secures $176 Million to Expand Solar Access in East Africa

    The company’s PayGo model allows customers to pay for solar products in installments using mobile money.