"Your organization's policies do not allow you to share with these users" error when sharing an item

Hi,

I have a OneDrive folder that contains multiple subfolders. Each of these subfolders needs to be shared to different people and I would like those people to be able to share those folders as well without me having to add each new email address myself.

A person to whom I shared "folder A" with tried to share it with an external email address and got the following error: 

"Your organization's policies do not allow you to share with these users" error when sharing an item or site in SharePoint Online or OneDrive for Business"

I followed the steps provided in https://learn.microsoft.com/en-us/sharepoint/troubleshoot/sharing-and-permissions/organization-policies-do-not-allow-you-to-share-with-users-error but my organisation external sharing parameters were already set to "Anyone" as seen below. Does this mean that people in the organisation can not share folders that require a log in?

Thank you in advance for the help.

Pedro