In context of the Central Bank of Egypt’s endeavors, to promote the FinTech industry and provide a full-fledged understanding of the developments witnessed in this vital sector. FinTech Egypt -an initiative powered by CBE- is releasing the first report of its kind that provides a comprehensive and holistic overview of the unprecedented growth that Egypt has witnessed in Financial Technology industry over the last few years.
The report sheds light on the local FinTech & FinTech-enabled startups and entrepreneurs; in addition to FinTech Ecosystem stakeholders such as incubators, accelerators, investors, and supporting organizations. The purpose of the report is to deliver a holistic overview of their capabilities and needs as well as identify potential areas for support, collaboration, and partnership among FinTech ecosystem stakeholders.
The report revealed that FinTech in Egypt has grown at a rapid pace over the last few years. As per the report, there has been a tremendous growth in venture capital investments over the last 5 years from around USD 1M raised in 3 FinTech deals in 2017, to reach what exceeds USD 159 M, only in 2021 with 32 FinTech deals. Investments have soared by more than 300% during only the last 12 months, indicating the development & the expansion of mature and scaled FinTech & FinTech-enabled startups.
In the same context, FinTech & FinTech-enabled startups operating in this field have been steadily growing, as they increased from only 2 startups in 2014, to reach 112 by the end of 2021, in more than 14 innovative sub-sectors as payments and remittance, B2B Marketplaces, lending and alternative finance, etc.
The report had diligently shed light on the Egyptian young calibers and talented youth across all fields, especially in FinTech. The report also indicated that the majority of Egyptian FinTech startups were established by the youth, whose ages ranged between 25 and 35 years. Moreover, the report highlighted the role played by the young talents who founded these startups, as they represent promising investments for the future towards achieving multiple benefits for the Egyptian market, as 24 startups have expanded in this field at the regional and international levels; while enjoying significant presence in the MENA region, GCC Countries, and Europe.
Mr. Rami Abulnaga, Deputy Governor of the Central Bank of Egypt, stated that: “The FinTech Landscape Report 2021 comes in line with the efforts exerted by the Central Bank to promote the FinTech industry, since the launch of its FinTech and Innovation Strategy in 2019, in accordance with the directives of H.E. President Abdel Fattah El-Sisi to achieve the digital transformation goals of the Egyptian state as part of Egypt’s Vision 2030, in light of which, the FinTech regulatory sandbox was launched, a series of market here2hear roundtable discussions was conducted to pinpoint market demand areas, and promotion of FinTech talents through dedicated educational programs”.
Eng. Ayman Hussein, First Sub-Governor of the Central Bank for the Information Technology Sector, also declared: “Efforts to endorse the FinTech industry have yielded in the creation of an optimistic future for a promising pool of Egyptian FinTech & FinTech-enabled startups and investments, which is expected to prosper in the Year 2022 by the launch of FinTech & Innovation Hub (Grid), in addition to the FinTech fund that was established by the 3 banks (National Bank of Egypt, Banque Misr, and Banque du Caire) worth of more than EGP 1.3 billion, which is aspired to become the largest FinTech focused fund in the region.”
Dr. Rasha Negm, Assistant Sub-Governor of the Central Bank for Financial Technology and Innovation, added: “This report acts as an initial step to provide a comprehensive view for all the FinTech ecosystem stakeholders in Egypt, as well as highlight the unprecedented growth that Egypt has witnessed in the field of financial technology over the last few years. This report is stemmed from surveys that included primary data received from 112 FinTech & FinTech-enabled startups, and 18 of ecosystem facilitators including incubators, accelerators, investors, and supporting organizations. This report is expected to be a catalyst for future innovation, and support for cooperation between all stakeholders of the FinTech ecosystem.”
Key Findings :
Key Demand Findings:
As the largest market in the MENA region, accounting for 23% of the MENA population, and third largest in Africa, Egypt holds the opportunity to grow into a vibrant local FinTech ecosystem and a regional FinTech leader. Egypt holds a vast market with unbanked populations of almost 50%, limited technology savviness, 57.3% mobile internet users as a percentage of total population, and limited trust in digital financial services, and the aforementioned remain barriers to FinTech adoption. Yet, FinTech in Egypt today plays a critical role in resolving nation-wide challenges across multiple segments for retail consumers and MSME’s, providing tailored solutions to cater for the dynamics of the Egyptian market, making digital financial services more attainable to the Egyptian community than ever before.
Key Talent Findings:
A talent reservoir of estimate 3.4 million students exists in Egypt. With a median age of 24.7 and several enablers already in place to support FinTech entrepreneurs, it gives a promising view of the rise of innovative FinTech startups in the upcoming years. Not only that, tech savvy and business focused calibers are the key factors to ensure sustainable growth of any startup, and more specifically the growth of leading FinTech solutions. CBE has led various initiatives to develop FinTech talents as well as digital financial awareness during the last few years, including incorporating FinTech projects to university students, integrating FinTech curricula, providing upskill training programs and others.
Key findings on funding and investments:
Evolution of Funding over the last 4 years:
A sum of almost $250 Million has been injected in Egyptian FinTech & FinTech-enabled startups in the last 5 years, from barely $0.9M in 2017 to $159M in 2021. What’s more, FinTech deals trended up by 10 times from 2017 to 2021 (Only 3 deals in 2017 to 32 deals in 2021), given that average funding per deal increased by 16 times from 2017 ($300K Average Ticket Size in 2018 to reach $5M in 2021), indicating a tremendous growth in scaled Egyptian startups
Funding Amounts Per Sector
FinTech investments to Egyptian startups during the last 5 years were directed to B2B marketplace, followed by Payments & Remittance, after which Payroll & Benefits then ROSCA. On the other hand, minimal investments were directed to innovative FinTech sectors as RegTech, Personal Finance Management & Financial Literacy, and Data Analytics & Artificial Intelligence, InsurTech and Agri-FinTech.
Startups by Funding Stage:
As reported by startups, the average time taken to grow from one stage to another is around 6 to 12 months. Most Egyptian FinTech startups are still looking for funding opportunities to either test their offerings or scale up their solutions locally and internationally. Close to half of FinTechs (43%) operating in Egypt are looking forward to raise seed funding, whilst 32% are still in pre-seed funding or bootstrapping stage. It is noticeable that the FinTech investments in Egypt is still emerging, given that only 14% is looking to raise Series A+ funding, while 11% requesting Series B+ funding. This can also be clear from the evolution of new FinTechs in Egypt, especially during the last 3 years.
Startups by Number of Funding Rounds
Around 16% of startups never raised any funds yet, while 40% of these startups have raised only once. On the other hand, almost half (44%) have raised 2 or more funding rounds.
Startups’ Revenue Model
The revenue model mostly chosen by more than half of FinTech startups (54%) is a blend of both having % of transactions as well as putting a flat fee or subscription fee. While, around 31% of startups take their revenues as % of transactions done and 15% take a flat fee or subscription fixed fee.
Key Findings with regards to FinTech Partnerships and Collaboration:
Preferred Partnership Model by Startups:
All surveyed startups view banks as an important partner
FinTech Ecosystem Facilitators:
A mapping exercise has been done to introduce the active investors, accelerators and incubators in the Egyptian FinTech Market, in which around 13 of those 18 ecosystem enablers (including Venture Capitals, Accelerators & Incubators as well as ecosystem enablers) surveyed have a dedicated strategy to FinTech, while only 5 implement FinTech support programs and activities, despite that their entity doesn’t have a formal FinTech strategy to follow.
Role of FinTech Ecosystem Facilitators in boosting the Egyptian FinTech ecosystem:
As elaborated below, most of the FinTech ecosystem facilitators either provide funding or capacity building. That highlights a lack in existing FinTech-focused incubators and accelerators to help incubate startups both on talent and funding aspects; especially at ideation phases
Most high-in demand FinTech & FinTech-enabled trends
The surveyed ecosystem facilitators have shown interest in Payments and Remittances, Alternative Financing and Digital Banking.
Over the last few years, Egypt’s FinTech ecosystem has witnessed an extensive growth, making Egypt from the top 4 African countries as well as 2nd in MENA region, when it comes to FinTech investments and concentration of FinTech startups, and more can always be done, making Egypt become home to a burgeoning FinTech landscape.
A promising pool of talent is emerging on the FinTech startups scene and can be noticeable with the rise of the number of FinTech & FinTech-enabled startups at a mind-blowing pace. In addition to that, there are various potential opportunities and Fintech trends that need to be deployed, so as to address the unsaturated FinTech market with the Egyptians’ financial needs and demand areas.
And in parallel, collaborative efforts between the public and private sectors are on the rise to ensure dedicated efforts in promoting the public financial and technological awareness as well as draw attention to the leading role FinTech brings, when it comes to raising financial wellbeing and making the financial world more accessible, seamless and guaranteed.
Gender equality is another crucial topic that CBE has put on the top of its agenda through various initiatives, with optimal goal of effective onboarding and usage of female customers, when compared to male customer. What’s more, incentivizing the female to be part of the FinTech startups’ employees and putting a goal to reach managerial levels or even unleashing their entrepreneurial FinTech potential.
In conclusion, this report aims to give a holistic view of the FinTech landscape in Egypt, a country of over 100 million inhabitants. This report sheds light on the evolution of the FinTech industry over the last few years as well as showcases the various measures and initiatives driven by CBE’s Fintech & Innovation strategy. Finally, this year and beyond will witness continuous growth and importance of the FinTech industry as a driver of innovation and growth for Egypt’s financial inclusion.