A Spotlight on Cairo’s Thriving Fintech Ecosystem

The opinions expressed in this article are the author’s own and do not necessarily reflect the views or position of Startup Genome.

In emerging venture markets, where Fintech consistently attracts more money than any other sector, Egypt’s ecosystem is surging on the twin waves of demographics and demand. Roughly two-thirds of the country’s 106 million people — the largest population in MENA — are unbanked. In a strong sign for technology adoption, more than half are younger than 25. Mobile penetration is almost total.

Egypt’s government, consequently, is counting on new digital services to replace the country’s cash culture, which is critical for poverty reduction. Toward that end it is reworking regulations to create a growth-friendly environment for Fintech startups, especially for consumer and small-business applications, and for embedded finance. Most recently, the Financial Regulatory Authority eased the way for fintech companies’ expansion into sectors including insurance, capital markets, and real-estate financing.  

Fostering Fintech Innovation

The Central Bank of Egypt (CBE) is an innovation catalyst. In 2019, CBE launched a Fintech sandbox: a regulatory safe space for startups to experiment with business models and technology. Its latest initiative, FinTech Hub, is planting the seeds of finance’s future in a symbol of finance’s past: gathering startups, investors, mentors, service providers, and other parts of the ecosystem in a CBE heritage building in central Cairo. Egypt’s commitment to the industry is manifest in FinTech Hub, which is positioned as the physical nexus for all parts of the ecosystem and a launchpad for startups serving all of MENA.

“For startups, working hand-in-hand with the Central Bank is very important,” says Tarek A. El Kady, founder and chairman of Alex Angels and the Mediterranean Angel Investors. “These companies are solving real problems and gaining traction. With government involvement they can move forward.”

Critical to that progress is digital banking, which CBE approved in 2020. Banque Misr — one of Egypt’s four major state-owned banks — responded quickly with the launch of Egypt’s first digital bank in 2021. Cairo startups also are playing in this space, including Telda, which landed a $5 million pre-seed round led by Sequoia in 2021. Banque Misr views collaboration with entrepreneurs as critical to the future of finance. It has created an innovation program for startups, a string of business-development centers targeting founders, and a brand-new accelerator.

The state isn’t only clearing roads for startups; it also is putting gas in their engines. In March 2022, Egypt’s three largest national banks, in partnership with VC firm Global Ventures, launched an $85 million fund supporting Fintech innovation. Several early investments squarely target the under- and unbanked, including Khazna, which provides services including buy now, pay later and bill payments to individuals, and Mozare3, which links smallholder farmers to food processors and buyers.

“The big state-run banks want to get in on these opportunities early,” says Loay Y. El-Shawaby, principal at El-Shawarby Attorneys at Law and a co-founder of the angel network Alex Angels. “The National Bank of Egypt advertises itself not only as a financial institution but also as an unbanked financial-technology institution.”

Egypt also is optimizing its infrastructure for digital onboarding. CBE recently launched an electronic know-your-customer system. And in March 2022, it adopted the Instant Payment Network — an inter-bank operating system — and the associated app InstaPay, which enables instant electronic transactions between banks and their customers. It also has plans for APIs allowing Fintech startups to connect to the open-banking infrastructure.

A Venture Magnet

With so much demand and support for Egyptian Fintech, private money also is converging on the sector, from local and international venture capital firms and at least five major angel networks. In the first half of 2022, Fintech startups reaped a record $167 million in 31 VC deals, with five clocking in above $10 million, according to FinTech Egypt, an initiative of CBE. That compares with $159 million raised during all of 2021.

More than half of these investors are Egypt-based, including Flat6Labs, which was ranked the second most active VC firm across emerging venture markets by Magnitt, a data platform for founders and investors. Roughly a quarter of investors hail from the larger MENA region, and almost a fifth from the United States. And those VCs are on a roll. A full 70% report plans for additional Fintech and Fintech-enabled investments in Egypt in the next three years.

Growth-stage funding dominates, with 90% of investments in Series A and later rounds. Payments and remittance make up 58% and lending and alternative finance 26%. But other sub-sectors, such as wealth management and savings and the B2B marketplace are climbing.

“You can see the market evolving in terms of products and services,” says Dr. Ayman Ismail, who holds the title of Abdul Latif Jameel endowed chair of entrepreneurship at the American University of Cairo and is founding director of the accelerator AUC Venture Lab. “The initial layer was getting digital payments in place. Now we’re seeing a second layer on top of that: extending credit to consumers and SMEs, stock trading, savings and digital banks.”

And Egyptian startups are exciting global tech titans. In May 2022, PayPal’s corporate venture arm led a $50 million Series B round in PayMob, which enables digital payments for SMEs. The same month, Amazon acquired 4% of ValU, a Cairo-based buy-now-pay-later startup, for $10 million.

While the PayMob investment is Egypt’s largest to date, other Cairo Fintechs have enjoyed strong raises this year, including Khazna at $38 million, Lucky (an app for credit products and cashback rewards) at $25 million, and online investment platform Thndr at $20 million.

As for exits, more than half of Egyptian Fintech investors and a quarter of startups view the stock market as an option. Fawry — Egypt’s first unicorn — set the precedent. The digital-payments company went public in 2019, and its IPO was oversubscribed by 30 times.

The Ace of Accelerators

Egypt also is both the birthplace and host of Techne Summit, the preeminent investment and entrepreneurship event in MENA. The eighth annual summit, scheduled for November 2022 in Alexandria, is expected to attract more than 30,000 attendees, including hundreds of investors and founders. One track is dedicated to Fintech.

Techne Summit’s support for founders extends to two other initiatives. One is a series of tours to connect, educate, and inspire entrepreneurs in Egyptian cities. The other is a pre-acceleration program in which startups partner with corporations to solve industry challenges.

Among Techne Summit’s partners is The American University in Cairo’s Venture Lab. That accelerator introduced Egypt’s first Fintech-dedicated program, in 2015. Roughly a third of the country’s Fintech startups have graduated from it. To stay on top of the rapidly evolving innovation landscape, AUC Venture Lab — named best accelerator in Africa by the Global Startup Awards — partners with major national and global organizations, including the Commercial International Bank, the International Finance Corporation, and Mastercard.

One graduate of Venture Lab is Ahmed Mahmoud. In 2018 Mahmoud launched ElGameya, a digital version of a rotational savings and credit association, in which a group of people save and borrow together. ElGameya, which also participated in the CBE sandbox, closed a six-figure pre-seed round with Cairo Angels and AUC Angels in 2021 and currently is pursuing a seven-figure raise.

Mahmoud says AUC Venture Lab was a turning point for both him and his business. He praises Cairo for its dense network of Fintech expertise on which startups like his can draw. “With all respect to Saudi Arabia and Dubai and other countries,” says Mahmoud, “Cairo has the best ecosystem and the biggest addressable market. We have everything.”