A new report has found that in the last ten years, Middle East and North Africa (MENA) fintech startups have raised $100 million, with estimates that this figure could double by 2020.
The report, The State of Fintech, by business support organization Wamda and online payment gateway Payfort, states that a sharp increase in funding activity will be expected this year with MENA startups aiming to raise $50 million in 2017. This is a significant rise from the $18 million it raised last year and a clear indicator that the region is keen to provide greater visibility to the sector.
The growth of the industry can already be seen. From 2012 to 2015, the number of fintech startups in the MENA region doubled from 46 to 105, with half of that number having been launched since 2012. This was driven by the fact that 86 percent of the MENA adult population don’t have access to a bank account. It’s projected that by 2020 there will be 250 fintech startups with the UAE placed among Asia’s most promising financial technology hubs.
According to the report, almost three in four fintech companies are based in four countries. It found that four out of 12 countries host 73 percent of all MENA fintech startups. The UAE leads with 30 startups followed by Egypt with 17, and Jordan and Lebanon both of which have 15.
Payments Remain the Biggest Sector
Across all MENA countries, payment startups remain the most prominent industry with payments and lending startups representating 84 percent of the MENA fintech market.
Unfortunately, one of the barriers that fintech companies are experiencing in the Middle East and North African countries is the fact that they lack the trust that banks already have.
Not only that, but a lack of awareness of financial technology services or an understanding among the banked population means companies are losing out on the untapped potential market waiting for them.
Plans for Expansion
Of those surveyed, 98 percent (or 40 out of 41) fintech startups in MENA have said that they plan to enter new markets in the next two years. While the UAE remains a popular location, Jordan, Egypt and Saudi Arabia are expected to become the next populous ones.
However, according to Faisal al Bitar, assistant investment manager at Oasis500, in Jordan:
One of the key challenges in Jordan is the lack of a fintech sandbox.
Supporters argue a national sandbox for Lebanon, Jordan and Egypt would benefit not only startups, but also banks and policymakers cautious about the impact of fintech on the stability of the financial system.
Featured image from Shutterstock.