Egyptian capital market developments: regulatory reforms and financing innovation

Egypt’s capital markets have entered a period of structural transformation, driven by coordinated regulatory reform and the state’s push to deepen non-banking financial activity. The renewed interest in developing Egypt’s capital markets stems not only from the need to mobilise long-term domestic investment but also from a broader strategy to anchor fiscal stability and diversify financing tools for both public and private sector actors.

With macroeconomic pressures reshaping investor behaviour across emerging markets, Egypt’s approach has been to strengthen its capital market architecture through developing the three interconnected pillars that comprise the Egyptian capital market in the following ways:

• The expansion of capital market operations;

• The growth of non-banking financial services such as leasing, factoring, and securitisation; and

• A regulatory overhaul of market participants, ranging from fintech platforms and payment service providers to licensed intermediaries trading on the Egyptian Exchange (EGX).

Within this evolving landscape, new products such as green bonds, sukuk, and securitised instruments are gaining traction, while developments in corporate governance, digital onboarding, and sustainable finance are gradually aligning Egypt with global market standards.

Over the past five years, Egypt’s capital markets have undergone a deliberate and layered regulatory overhaul aimed at expanding market participation. At the centre of this transformation is the Financial Regulatory Authority (FRA), which has adopted a phased approach to modernising the legislative framework governing traditional capital market operations and emerging non-banking financial services.

The foundational legislation underpinning the sector is Capital Market Law No. 95 of 1992 (the Capital Market Law), which has seen multiple amendments to address gaps in product diversity and governance. Most notably, Law No. 17 of 2018 introduced significant amendments to the Capital Market Law, including detailed provisions for the governance of sukuk, while subsequent executive decrees by the FRA have expanded the legal recognition of new financial instruments.

Moreover, Prime Ministerial Decree No. 1760 of 2020 amended the Executive Regulations of the Capital Market Law by expanding the range of permissible sukuk contract types. Specifically, it added five new structures to the four previously recognised sukuk contract types, among other amendments. As a result, the regulatory framework now permits a total of nine distinct sukuk structures – istisna’a, investment agency, salam, muzaraa, musaqat, murabaha, ijara, musharaka, and mudaraba – enhancing flexibility for issuers and aligning Egypt’s sukuk regime more closely with that of international Islamic finance practices.

Furthermore, the issuance of sovereign sukuk in Egypt is now governed by a dedicated legal framework aimed at expanding access to shariah-compliant financing instruments. Sovereign Sukuk Law No. 138 of 2021 clarifies permissible sukuk structures, disclosure requirements, and the oversight role of the Shariah Supervisory Committee, paving the way for the issuance of Egypt’s first sovereign sukuk in 2023 and creating a parallel funding avenue for private issuers.

Alongside the growth of debt capital instruments, the FRA has issued a series of decrees supporting non-banking financial services, such as leasing, factoring, consumer finance, and securitisation. In particular, Law No. 13 of 2022 introduced the concept of future cash flow securitisation in Egypt, allowing securitisation companies to issue tradable bonds backed by expected receivables, thereby expanding financing options for entities without large portfolios of current assets. This provides an alternative to traditional bank financing, especially for micro-, small, and medium-sized enterprises, and sectors such as telecoms, education, and healthcare.

The FRA’s Decree No. 115 of 2022 sets out conditions for such issuances, including FRA approval, restrictions on third-party claims, and detailed disclosure obligations for the originator, such as audited projections and a minimum credit rating of BBB-. Unlike traditional securitisation, which relies on tangible existing receivables, this structure monetises projected income streams. While the framework enhances capital market access, it also introduces risks, particularly performance risk (if projected key performance indicators are unmet) and bankruptcy risk (if the originator becomes insolvent).

On the institutional side, the EGX has worked closely with the FRA to roll out reforms around listing rules, corporate disclosure, and digital onboarding, such as the FRA’s introduction of Decree No. 172 of 2021, developing the laws on the listing and delisting of securities on the EGX. As the FRA continues to update its regulations to reflect regional and international best practices, market participants are expected to play a more active role in shaping Egypt’s capital market trajectory.

Egypt’s debt capital markets (DCM) have emerged as a focal point of policy innovation in recent years, as the state seeks to diversify funding sources, ease pressure on public finances, and promote new private-sector debt instruments. A strategic blend of sovereign issuances, multilateral-backed financing, and legal reform has helped to gradually build market depth across conventional and shariah-compliant products.

At the sovereign level, Egypt has actively pursued local and international debt markets to manage liquidity and attract foreign capital. Notably, Egypt issued its first sovereign green bond in 2020, raising $750 million with a five-year maturity to finance environmentally sustainable public projects. This was followed by the issuance of Africa’s first ‘panda bond’ in 2023, which was a CNY 3.5 billion issuance backed by a framework agreement with Chinese authorities and guaranteed in part by African and multilateral institutions. In 2023, Egypt also issued its first sovereign sukuk, raising $1.5 billion in a landmark debut that drew strong demand from Gulf Cooperation Council and Southeast Asian investors.

Private sector DCM activity has also expanded, aided by the Green Financing Framework (2020) and recent FRA guidelines on ESG-linked debt. Large corporates and infrastructure players have begun tapping into non-bank debt, including securitised bonds backed by lease, factoring, or utility receivables. Multilateral institutions such as the European Bank for Reconstruction and Development (EBRD), the International Finance Corporation, and the Islamic Development Bank have played an active role in structuring blended-finance facilities and co-investing in local currency bond issuances.

On the legislative front, the FRA has actively supported the development of a shariah-compliant debt market through new sukuk legislation, helping to unlock previously untapped segments of liquidity, and has paved the way for future cash flow securitisation by clarifying its treatment under the new securitisation law and removing restrictions that previously limited the scope of eligible cash flows. Together, these developments reflect a clear intention by policymakers to transition from bank-dominated lending models to a broader, capital market-based financing ecosystem.

ESG considerations have steadily gained prominence in Egypt’s capital markets, driven by investor interest and the country’s broader commitment to sustainable development. As climate-related risk and disclosure become central to capital allocation decisions, Egypt is seeking to align its domestic frameworks with international sustainability reporting standards while building out its green finance infrastructure.

The turning point came in 2020, when Egypt became the first country in the MENA region to issue the previously mentioned sovereign green bond, raising $750 million to fund environmentally beneficial public sector projects in transport, energy, and water. The issuance was underpinned by Egypt’s Green Financing Framework, which set eligibility criteria and transparency standards for green bond proceeds and helped to establish a benchmark for subsequent ESG-labelled instruments in the market.

In parallel, the FRA has introduced a series of guidelines and decrees aimed at integrating ESG principles into capital market regulation. In July 2021, the FRA issued decrees No. 107 and 108 of 2021, introducing mandatory ESG and climate-related financial disclosure reporting for companies listed on the EGX and those engaged in non-banking financial services.

These resolutions represent a significant shift in Egypt’s regulatory approach towards sustainability and climate accountability. Companies with issued capital or net equity exceeding EGP 500 million are required to disclose climate-related financial risks in their annual board reports, while all addressed companies must submit annual ESG reports and quarterly updates to the FRA on their implementation progress.

The ESG disclosure requirements span a broad range of indicators, including carbon emissions, waste management, workplace gender diversity, wage equity, anti-harassment compliance, and adherence to labour and data protection laws.

These developments follow Egypt’s growing commitment to climate action, reflected in its 2050 climate strategy and the successful issuance of green bonds to fund clean energy projects. A grace period for full compliance was granted to the end of 2022, allowing companies time to align with performance metrics. The overarching aim is to embed sustainability into financial reporting and enhance investor transparency, positioning Egypt as a regional leader in ESG regulation.

On the debt side, interest in green and sustainability-linked bonds is gradually expanding beyond the sovereign level. A handful of local corporates – including real estate developers, utility providers, and infrastructure companies – have explored ESG-linked instruments, supported in part by technical assistance from institutions such as the EBRD and the Green Climate Fund. However, the secondary market for these instruments remains shallow, and disclosure practices are still uneven among issuers.

As Egypt positions itself as a green finance hub in the region, particularly following its hosting of COP27 in Sharm El Sheikh, market participants expect further integration of ESG criteria into listing rules, fund management guidelines, and rating agency methodologies. The regulatory shift signals a broader intention to embed sustainability at the core of Egypt’s capital markets and attract long-term institutional capital aligned with ESG priorities.

As part of its strategy to modernise Egypt’s financial ecosystem and expand access to capital markets, the FRA has accelerated the introduction of legal frameworks supporting fintech and alternative investment vehicles.

A key pillar of this transformation was the implementation of Egypt’s Fintech Law No. 5 of 2022 (the Fintech Law), which established a comprehensive legal framework for the use of financial technology in the non-banking financial services (NBFS) sector. It covers activities such as capital markets, leasing, factoring, consumer finance, and insurance, and designates the FRA as the sole licensing and supervisory body. The law requires fintech companies to meet capital, technological, and transparency standards, and introduces a regulatory sandbox for startups.

To operationalise the Fintech Law, the FRA issued decrees No. 139, 140, and 141 of 2023, which address digital identity verification, the legal recognition of click-to-accept and smart contracts, and the use of blockchain for e-signatures and automated contract enforcement. They also regulate outsourcing service providers, requiring them to register with the FRA and meet certain requirements.

Fintech providers can offer services through licensed outsourcing platforms, further supporting market scalability. Together, the Fintech Law and its relevant decrees mark a major step in Egypt’s digital financial inclusion strategy, positioning the NBFS sector for substantial growth.

Complementing this is the FRA’s ongoing push to simplify market entry and expand digital investor onboarding. A series of circulars issued in 2022–24 introduced e-KYC (know-your-customer) standards and enabled digital account opening for retail investors, reducing barriers to entry and boosting participation from underbanked and younger demographics. The EGX has worked in tandem with licensed brokers to integrate these tools into mobile trading platforms, reflecting a shift towards inclusive and tech-enabled market infrastructure.

Meanwhile, the regulatory framework for payment service providers, primarily governed by the Central Bank of Egypt (CBE) under Banking Law No. 194 of 2020, intersects with FRA-regulated activities in areas such as consumer finance and digital wallets. The boundaries between finance services and payment facilitation continue to evolve, prompting closer regulatory coordination between the FRA and CBE, particularly where hybrid platforms operate across both sectors.

Furthermore, early-stage regulatory developments around real estate investment trusts (REITs) and tokenised assets are drawing attention from market participants. Egypt does not recognise trusts under its civil law system, making the localisation of REIT structures legally complex. Nevertheless, the FRA has signalled its intent to adopt bespoke rules that align with the objectives of REIT regimes; namely, pooled real estate investment under regulated governance, with early consultation rounds already under way.

The FRA is also preparing the country’s first regulatory framework for real estate fractional ownership, aiming to diversify financing options and expand individual investor participation. Initially focused on real estate, the framework draws on global models and follows consultations with developers.

Separately, the FRA has introduced new rules allowing mortgage finance companies to partially purchase financial rights portfolios from developers, while reducing client downpayments from 20% to 10%.

These changes aim to ease financing, align long-term developer sales with short-term credit limits, and stimulate sector growth. Egypt’s real estate market is projected to reach $1.6 trillion by the end of 2025.

Looking ahead, Egypt’s capital markets are expected to continue evolving along three strategic fronts:

• Expanding the scope and sophistication of capital market instruments;

• Deepening non-banking financial services; and

• Refining the regulatory framework governing issuers, intermediaries, and emerging platforms.

In parallel, the FRA is working to introduce a tailored legal regime for real estate investment vehicles, which would replicate the economic function of REITs while conforming to Egypt’s civil law system in the absence of formal trust structures.

Digital asset innovation is also gaining traction. The FRA has launched early consultations on the tokenisation of real-world assets, including real estate, infrastructure, and invoice-backed debt. While still in a conceptual phase, the goal is to allow for regulated issuance and secondary trading of asset-backed tokens via licensed platforms. These proposals follow global trends in blockchain-based securities but will require coordination with the CBE to address regulatory overlap in payment settlement and digital custody.

Ultimately, the success of Egypt’s capital markets agenda will depend not only on legal reform but also on execution and regulatory coherence. Market stakeholders continue to call for greater clarity in enforcement and more streamlined interaction between the FRA, the EGX, and the CBE, particularly as platforms and products increasingly span multiple supervisory mandates.