The Jakpa to Saudi Trend: The Attraction 🧲for Egyptian Fintechs.
+ how African Fintechs are investing in Africa | Vol 41 | Sept 18th, 2023
In the last 9 months of 2023, at least 6 Egyptian Fintechs including powerhouses like Fawry have gotten licenses or moved part of their business to Saudi Arabia.
So basically, they are Jakpa-ing to Saudi Arabia.
In this newsletter, we unpack what could be responsible for this trend as well as the specific Fintechs and licenses involved + a look at another trend on the continent.
Don’t touch that dial 📺
But 1st… Who is The PaymentLogue❓
I’ve heard a few variants of our name - Payment-Lounge, and Payment-League are the most common. Last week, someone said they thought we were a blog😱
So this is a quick re-introduction.
The PaymentLogue is a Fintech Insights Company. We use dialogues and catalogues ( see where the Logue came from) in rich media, to enable a skilled Fintech ecosystem. Specifically….
Our School of Fintech provides structured learning for deep Fintech concepts
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Project Jakpa to Saudi - Who is on and why? 🧳
Who is moving to Saudi Arabia?
PayMob: PayMob secured Saudi’s Payment Technical Services Provider certification( PTSP) to offer its merchant services to the over 1.14 million MSMEs in Saudi Arabia that were registered in Q4 2022.
Fawry: Egypt's leading e-payments provider hasn’t moved yet but is in preliminary discussions with Saudi Payments, regarding licensing and certification opportunities in the market.
Yalla: Egyptian fintech Yalla has signed agreements with major financial companies and institutions to facilitate its expansion to Saudi Arabia.
Tabby: The Saudi Central Bank has given the buy-now-pay-later platform Tabby a permit to run post-paid payment activity.
Glamera: The beauty services booking platform Glamera has successfully obtained the fintech license “SoftPOS” from Saudi Payments and had their last funding led by Saudi-based VCs.
HEDG: HEDG hasn’t indicated a move to Saudi, but their last funding led by Saudi VCs indicates that a move in the future might not be out of place.
So 1 is happenstance. Twice is a coincidence. 6 times? This is definitely something to look closely at. Let’s unpack the macroeconomic considerations.
What are the Geo-political considerations?
First, the map below shows how close Saudi and Egypt are, separated by the Red Sea. Business-wise, they are all in the MENA Region made up of other powerhouses like Bahrain, Iran, Israel, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Türkiye, and the United Arab Emirates.
However, Saudi also belongs to a power circle inside the MENA called the GCC (The Gulf Cooperation Council). Haha, you thought only Africa was complex!😉
Some Stats
What else can be learned about Saudi Arabia and Egypt?
Saudi is the largest contributor to the economy of the GCC, contributing as much as 46% of the GDP in 2013, while Egypt is the most populous Arab country.
But why are Fintechs moving away from historic Egypt with all its tourist money and opportunities? Well, Egypt’s struggles with its economy and currency are well documented. The EGP plunged 40% against the dollar in 2022 and currently, its debts are about 92% of its GDP with inflation currently at 30.7%.
Why Saudi?
Saudi Arabia isn’t actually the richest Arab country. So why choose them?
This is the reason - They are laser-focused on diversifying their economy away from oil by 2030. Here are some of the strategies attracting Fintechs.
SME Growth: They have removed a lot of friction deterring the growth of SMEs and as a result have seen an increase in new businesses in line with their 2030 strategy for SMEs. See some recent data from their SME Monitor.
Financial Policies: You must have heard of the famed 2030 policy document which has the Financial Sector Development Program (FSDP) and subsequent FinTech Strategy Implementation Plan, both focused on making the Kingdom among the leading countries in FinTech. They aim to increase FinTech companies from 82 to 230 by 2025, and the share of digital transactions to 70% by the same year. Phew!!
Funding: There is also a surge in the Kingdom’s fintech investment pipeline. The Saudi fintech sector raised about $402.2M between September 2021 and August 2022. The sector has also witnessed 16 VC investments from January to August 2022, amounting to $157.2million compared to $7.8million in 2020.
Something tells me other African Fintech CEOs might start looking at Saudi after reading this 😅. Please run me my coins when you do.
The Rise of African Fintechs Investing in Africa 💼
Previously 100% of Fintech funding to Africa would come from external investors, perhaps with the exception of the AFDB.
But in the past 8 months, 3 African Fintechs have pledged to invest a combined $87 Million USD across 2 countries. Let’s take a look.
A. Nala: Nala, the East African fintech enabling payments to Africa, opened the investment floor in Feb 2023, announcing a $5m investment into Kenya focused on job creation and strengthening financial infrastructure via technology innovation. They recently expanded to Nigeria. Who knows, they might announce an investment there as well.
B. Network International: NI, a digital payments giant, has announced a whopping $32M USD investment to support Egypt’s payment ecosystem.
The investment will focus on 3 areas: The upgrade of its payment tech rails, 100,000 advanced POS machines, and the implementation of Network One - their state-of-the-art payments technology platform.
C. Flutterwave: The last and the biggest contributor on the list is Flutterwave, the Unicorn who has been in the news almost every week of this year. They announced a phased investment of $50M into Kenya ( again !) after they received a first-name approval from the CBK.
We’ve also seen Fintechs stepping into the funding ring and the acquisition arena. What Boss move do you think they’ll pull next? Buy a Bank? 🤔
Let us know your thoughts in the comments.
The Weekly Roundup
Finally, on today’s dashboard, these are 7 ways the ecosystem was redefined Last Week 🚀
There was a debt fund raised for expansion, to a slew of product launches, investments, and a growth milestone.
Some quick stats - a total of $7.4 Million dollars was raised in the Ecosystem last week. Interestingly, TymeBank also hit a milestone of 7.4 Million customers in a terrific 4-year growth spurt since they launched.
What’s with the 7.4 Million? 😉
And that is all for this week’s newsletter. If you found this informative, please subscribe, comment, and share in your Fintech circle. Have an awesome week!
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