Egyptian FinTech app Khazna raises $38m to fuel growth

Egyptian FinTech app Khazna has raised $38 million in equity and debt that will help it expand its reach to Egypt’s unbanked and underbanked population. The Series A equity funding round was led by US-based Quona Capital, followed by UAE-based Global Ventures’ Nclude, the new $85m FinTech fund financed by Egypt’s three largest banks, the company said.

Other participants included Austria-based Speedinvest, Saudi Arabia-based Khawarizmi Ventures, US-based Accion Venture Lab, AB Accelerator by Arab Bank, as well as Algebra Ventures, Disruptech and CVentures in Egypt. “We’re very proud of the investments that we have. It’s a mix of global leading FinTech investors, such as Quona Capital and Speedinvest, along with some of the strongest local national and private banks,” Khazna chief executive and co-founder Omar Saleh told The National.

Debt financing was provided by Lendable, which has disbursed more than $225m to FinTech companies in more than 14 countries. Arab Bank Egypt served as the security agent facilitating the transaction. In the Middle East and North Africa, Egypt stands second in terms of the number of venture capital deals, according to data platform Magnitt. Egyptian start-ups raised a record $491m last year across 147 deals and attracted the highest percentage of foreign investors in the Mena. FinTech led transactions activity was the trend in the region, representing 17 per cent of total deals closed in the country.

Egypt topped the chart in African deals last year and came third in total funding where the local start-ups secured 18 per cent of total capital deployed across the whole continent, according to Magnitt.

Founded in 2019, Khazna seeks to digitise cash transactions and cater to Egyptians who lack access to formal financial services, offering products such as general credit, salary advances, buy now pay later (BNPL) and bill payment to 150,000 active users.

Based on central bank figures, Khazna estimates that at least half of Egypt’s 70 million adults are unbanked with no access to a bank account, or underbanked with access limited to a pre-paid debit card. “In just two years, Khazna has scaled and monetised quickly and is already a market leader in the push for financial inclusion for the 35 million underbanked in Egypt,” said Monica Brand Engel, co-founder and managing partner at Quona.

“Empowering consumers and micro-businesses with Khazna’s convenient, user-centric and transparent financial super app can enable millions across Egypt to gain greater control over their financial lives.”

Khazna is Quona Capital’s second investment in Egypt, following B2B e-commerce start-up Capiter. The company was founded by Mr Saleh, chief technology officer Ahmed Wagueeh, chief operating officer Omar Salah and chief strategy officer Fatma El Shenawy.

Mr Saleh, a Stanford MBA graduate, had been the Mena head of cross-border digital payments service WorldRemit. Mr Wagueeh was previously with Valeo, Intel and IBM, while Ms El Shenawy came from Dubai-based investment banking firm Arqaam Capital.

“One of the main motivators for everyone working at Khazna is social impact, so it’s basically extending and offering banking and financial services that are usually available only for high-income brackets and provide those through a very simple mobile-based experience to the masses,” Mr Saleh said.

Khazna introduced its first earned wage access product in 2020, allowing partner employers to offer cash advances to their employees as a benefit. Consumers can also apply for a credit line or buy products on installments without interest or late payment fees, but Khazna does charge a fixed monthly app usage fee.

Four to five new products are in the pipeline that will be launched this year, Mr Saleh said. Khazna has benefited from the Central Bank of Egypt’s newly introduced regulations to help increase financial inclusion rates and accelerate the country’s digital transformation. Last week the bank launched a national Instant Payment Network and InstaPay mobile application that will allow customers to carry out electronic transfers instantly.

Nclude was approved by the central bank and backed by Banque Misr, National Bank of Egypt and Banque du Caire. The fund made its first undisclosed investments in four companies, including Khazna; consumer FinTech platform Lucky, which provides instalments, offers, cashback rewards and credit; Agri-FinTech platform Mozare3 for farmers; and electronic payment provider Paymob. “We were lucky enough to have tapped into a particular part of the market that is tremendous in terms of size…and at the same time, that is a major priority of the government and the country,” Mr Saleh said.

Along with the latest funding round, Khazna has raised a total of about $47m. Its undisclosed seed funding in March 2020 was led by Algebra Ventures and Accion Venture Lab. In April 2020, Abu Dhabi-based Shorooq Partners invested $50,000, and in August of the same year, Village Capital provided $45,000 in non-equity assistance.

Mr Saleh said Khazna will expand its product offerings based on user priorities and may expand in the long term into markets where there is a large underbanked population, high smartphone usage and regulator support. “We’d love to see Khazna grow to 5 to 10 million active users here in Egypt. Currently, we’re at 150,000. At the end of the year, we’ll be at a million. So we have a few more years fully focused on Egypt,” he said.