Fintech in Egypt: An overview

Coming from a background in finance, fintech is always close to our hearts. This month we took a look at the emerging fintech sector in Egypt.

Egypt’s a fascinating country and has a startup scene we closely monitor from the GCC. With over 95 million people there’s a huge pool for innovation. Egypt’s fintech sector is especially interesting, providing solutions for billing, payments, lending, and more.

Here’s the lowdown:

• 95 million people
• Largely unbanked population (only 14% of adults have an account, World Bank 2014)
• Debit cards mostly used for payroll, and cash is king
• High rate of mobile phone ownership

The struggle

Startups offering products and services to the public face issues when it comes to collecting payments since credit card and debit card penetration is very low. Similar to e-commerce businesses in the GCC, many have to rely on cash on delivery. Banking itself is an issue for the startups as setting up bank accounts in the early stages is difficult to impossible with their small budgets.

The big G

Like other markets, any banking activities require authorization of the Central Bank of Egypt. A wide array of regulatory frameworks exist for non-banking financial services such as real estate financing, leasing, insurance and microfinance, but setting up fintech companies is no piece of cake. The Egyptian government and Central Bank realize the importance of progressing towards a cashless economy, and are supporting fintech startups to help make that move. Their efforts have even included running national tv commercials to encourage use of mobile wallets.

In 2016, the Central Bank of Egypt issued new regulations for cashless payments using smartphones, which enabled customers to transfer money and pay bills. Although only licensed banks are allowed to provide mobile wallets, fintech companies can partner with them and provide the technology framework. In addition, a National Payment Council was established in 2017 to encourage the move to cashless payments.

Fintech specific support

Egypt has local fintech accelerators such as 1864, by Barclays bank and Flat6Labs as well as AUC’s venture lab fintech accelerator, built in collaboration with Commercial International Bank. Earlier this year, Nile University launched Egypt’s first blockchain focused incubator at NU Tech Space.

The players

The most advanced fintech players in the Egyptian market are the payment service providers and mobile wallets and both have been widely adopted by banks and telecom providers. The payments category includes prominent players such as Fawry, which facilitates payments to many business partners including mobile telecoms, utility companies, and government sectors. In micro savings, 7aweshly offers unbanked customers a tool to save small amounts. Two local players Shekra and Yomken offer different ways to support local innovation with their crowdfunding platforms. In the financing category, MoneyFellows digitizes the existing local savings concept of money circles. Under insurance, Carsurance provides insurance quotes. Lastly, in the financial management category, Enotta offers cash management tools for companies.

Untapped

These are the segments of the sector that have many large players in the global markets, but are not yet fully exploited in the Egyptian market, likely due to regulations and lack of support. Although there are companies that offer some of the functionalities listed in the Untapped box, we are still not seeing single players dominating these categories and it would be interesting to see how they evolve.

You can learn more about Egypt’s tech startup ecosystem in this guide by MENAbytes.

This article was published as part of Arzan VC’s August 2018 newsletter. You can subscribe to it here.