Funding flows to fintechs wooing Egypt’s eager borrowers

Alamy via Reuters

• Egyptian startups raise $185m in July
• Consumers can borrow against homes
• Apps becoming ‘very popular’

Egyptian financial technology entrepreneurs bagged the highest amount of funding in the Middle East and North Africa in July, as they targeted untapped opportunities among the country’s massive unbanked population.

Egyptian startups as a whole raised $185 million across seven deals in July, a huge surge from $15 million raised through four deals the month before. The bulk of the financing – $157.5 million – was taken up by local fintech MNT-Halan. 

The deal resulted in overall Mena startup funding soaring 206 percent month on month to $355 million in July, up 260 percent year on year, according to research by Wamda.

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The fintech sector remains dominant among Egypt’s fundraisers, and in May newly launched consumer finance app MNZL raised $3.5 million in a seed funding round led by P1 Ventures, Localglobe and Ingressive Capital. 

The company, which allows customers to borrow the equivalent of up to $50,000 in Egyptian pounds using their home or car as collateral, joins a growing number of consumer finance apps in Egypt. 

Since the launch of the 2020 Consumer Credit Law, the Financial Regulatory Authority has licensed 42 consumer finance companies to lend money outside the banking system.

This number continues to grow as new companies enter the scene competing to lend to Egypt’s increasingly credit-hungry consumers.

MNZL claims to be the first company in the Middle East and Africa that allows people to borrow against their vehicle without a bank account, giving unbanked customers a way to borrow money at an affordable rate. 

“If you can borrow money from the assets that you already have, this is the cheapest money you can get,” said Sameh Saleh, founder and CEO of the company.

Saleh first made his name on the Mena startup scene with the dating app Harmonica (later “Hawaya”), which he founded in 2017 before it was acquired by the international market leader Match Group two years later. MNZL has been in the development stage for a couple of years before it was launched in late April.

The motivation behind MNZL, he said, was to find a way to lend to a country in which 92 percent of consumers have little to no access to credit, while 70 percent of people own property. 

“If you own a home or a car, then you download our app, you upload those assets, and then we help you convert those assets into credit that you could use for whatever you need,” he said. 

In its first two months of operations, people downloaded the MNZL app over 30,000 times and the company lent out money to over 100 people. The group is targeting a new funding round by the end of next year.

“It's quite interesting that the appetite of people to obtain loans or finances is still high even with the increase in interest rates,” said Mostafa Lotayef, a counsel at Baker McKenzie member firm Helmy, Hamza & Partners. He said a common reason people approach MNZL for a loan is to pay school tuition fees. 

According to a recent Financial Regulatory Authority report, the amount of money disbursed by consumer finance companies in the first five months of 2024 rose 18.2 percent compared to the first five months of the previous year, from EGP16.87 billion to EGP19.94 billion. 

Almost a third of loans were taken out for vehicle purchases, whilst just over a quarter was to pay for electrical appliances and electronics. Industry insiders say that the recent economic uncertainty has only increased consumers’ appetites to borrow money.

“It's becoming very, very popular in Egypt,” said Lotayef. “People are now buying basic commodities and goods like air conditioning.” Whereas 10 years ago, Lotayef said, consumers felt more constrained in their purchasing power, the last few years have seen “a shift in market behaviour”, with more people buying now and paying later.

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Among 42 licensed companies, the market leader is Valu, a buy-now-pay-later app that offers up to EGP 70 million in credit.

According to senior director of strategy and market expansion at Valu, Habiba Naguib, Valu controls 22 percent of the market in Egypt and claims to be the fastest growing consumer finance provider in the country. 

It facilitated 1.1 million transactions in 2022, 1.9 million last year, and in just the first half of 2024, oversaw 1.3 million transactions worth EGP 5.9 billion.

The company initially launched in 2017 to serve the unbanked market but it has since pivoted, marketing itself to borrowers based on its speed and convenience.

“We grant instant decisions to consumers in less than five minutes,” said Naguib. 

Valu expects to expand into Jordan by early next year and is looking at other small markets in the region, such as Iraq and Morocco. 

Saleh said MNZL plans to scale out of Egypt “this year or next year” in the hope of eventually reaching one million customers. “That’s the long term vision”, he said.