Saudi startup Erad secures $16m to fund small businesses

Erad, a Riyadh-based fintech startup, has secured $16 million in pre-Series A funding to fuel its expansion, according to a press release.

Erad provides Sharia-compliant financial services to small and medium-sized enterprises (SMEs).

It has so far raised funding of SAR 100 million ($27 million) in Saudi Arabia and the UAE.

The round was backed by YCombinator, a Silicon Valley startup accelerator, alongside local funders.

Gulf SMEs face a $250 billion credit gap, Deloitte estimates.

Erad aims to tap into this demand for funding using data-driven applications to decide which applicants receive money.

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Financing for micro and SME companies in Saudi Arabia is growing rapidly, but is still dominated by banks. 

Credit extended to micro, small and medium enterprises in the kingdom grew by 28 percent year-on-year in 2024, for a total of SAR 352 billion ($94 billion), according to data from the Saudi Central Bank. Of this, 95 percent was from banks with the remainder from finance companies.

The kingdom is trying to encourage lenders to provide more cash to SMEs — which made up around 29 percent of the country’s GDP in 2023, according to Statista — by providing guarantees of up to 80 percent to lenders via the state agency Monsha’at.