Egyptian fintech startup Khazna has received final approval from the Central Bank of Egypt (CBE) for its Khazna card, a Meeza prepaid card launched in partnership with the Abu Dhabi Islamic Bank (ADIB) that will provide unbanked users access to the fintech startup’s financial services, according to a press statement released by the company
CBE Governor Tarek Amer
Khazna cardholders that are unbanked will be able to make withdrawals and deposits, as well as online and in-store purchases and bill payments. It will also provide users with prior access to their income, allowing them to better manage their short-term cash flow concerns between paychecks in the meantime.
Through its salary advance app, Khazna provides online financial services to Egyptians who do not necessarily have a bank account, such as those who are self-employed. The Cairo-based firm, which was founded in April 2019, received an undisclosed amount of seed money in early 2020 from a group of investors led by Algebra Ventures. Khazna raised around USD 38 million in equity and debt in a Series A headed by Quona Capital, with participation from Nclude, the high-profile bank-backed fund managed by Global Ventures in the United Arab Emirates.
Charles Rapulu Udoh is a Lagos-based lawyer, who has several years of experience working in Africa’s burgeoning tech startup industry. He has closed multi-million dollar deals bordering on venture capital, private equity, intellectual property (trademark, patent or design, etc.), mergers and acquisitions, in countries such as in the Delaware, New York, UK, Singapore, British Virgin Islands, South Africa, Nigeria etc. He’s also a corporate governance and cross-border data privacy and tax expert. As an award-winning writer and researcher, he is passionate about telling the African startup story, and is one of the continent’s pioneers in this regard. You can book a session and speak with him using the link: https://insightsbyexperts.com/view_expert/charles-rapulu-udoh
Dayra, a Cairo-based fintech, has joined Y Combinator and raised $3 million in a pre-seed round that involves a combination of equity and debt funding. The fintech is part of YC’s ongoing Winter 2021 (YC W21) batch and has secured the standard $125,000 investment from the accelerator.
“We are thrilled to be part of YC’s W21 batch and to close our pre-seed round. This is a key milestone in realizing our vision of providing the most accessible financial services solution in MENA, and delivering digital financial services to millions of financially excluded individuals, leveraging on our strategic partnership with EFG Hermes, starting with Egypt,” Omar Ekram, the founder and CEO of Dayra in a statement, said.
Investors in this round include Tanmiya Capital Ventures, EFG EV, EFG Hermes, and a host of angel investors. Much of the investment in Dayra occurred last year, with the close of the round achieved by Y Combinator ’s latest investment.
Y Combinator takes 7% of any venture that goes through its accelerator programme.
Omar Ekram is the founder and CEO of Dayra
Why The Investors Invested
Investment in Dayra was partly influenced by founder and CEO Omar, who previously served as the Managing Partner of Tanmiya Capital Ventures, which participated in this round. However, according to him, Tanmiya’s participation is not more than 10 percent of the entire round.
“We are exceptionally proud to be the first institutional investor partnering with Dayra, in whom we see vast potential due to their disruptive and relevant business model as Egypt works to build financial inclusion and intermediation. Today, EFG Hermes has a number of key facilities on offer to empower companies with great ideas such as Dayra to come in and fill essential gaps in the market,” Walid Hassouna, the CEO of the NBFI Platform at EFG Hermes and Group Head of Debt Capital Markets, said.
“We have funneled key investment capital in the company through EFG EV Fintech and also offered a bespoke, multi-million financing facility by way of our factoring and leasing arm EFG Hermes CorpSolutions. We are confident that Dayra has the tools in place to make the impact it hopes to see in the market, and we’re proud to be helping them get there,” he added.
The investment from Y Combinator and other investors will assist Dayra in its expansion plans.
Dayra, created in early 2020 by Omar Ekram, a former private equity investor, allows businesses of all sizes to provide financial services to their employees through APIs and a mobile app. Omar is a self-taught programmer who has been coding since the age of five. He not only led the business, but he also wrote the MVP’s code.
“Only 30 percent of 105 million Egyptians are banked, leaving the majority of the country unbanked and reliant on cash transactions. Requirements such as proof of income by the banking sector make it hard for gig-workers and micro-business owners to open bank accounts,” noted a statement by Dayra.
Dayra began by concentrating on gig workers and micro-businesses who work as independent contractors for online platforms (think ride-hailing drivers, food delivery app couriers, and so on). Since the bulk of Egypt’s gig staff are unbanked, it’s difficult for the digital channels in which they operate to pay them for their services. To make it work, they must rely on cash or multiple third-parties, as well as a lot of manual labour. That’s where Dayra comes in handy.
These platforms may use Dayra’s APIs to incorporate financial services into their own applications or make gig employees access them via Dayra’s app. Dayra is in charge of making payments to gig staff (or micro-business owners, as the case may be). Digital bank accounts, prepaid cards, and credit access are among the services offered.
Dayra’s main business is lending, even though virtual bank accounts and payments are the first touchpoints for consumers. Traditional micro-lenders charge high rates and have lengthy processes for Egypt’s unbanked population, which includes gig workers and micro-business owners. A substantial number of them even takes out loans from loan sharks on unfavourable terms. Dayra’s lending facilities make it simple for this section to receive credit.
The journey of a thousand miles begins with a single step! After twelve years of the startup journey, Cairo-headquartered fintech company Fawry has reached a unicorn status (that is, now worth over a billion dollar!), the first ever by any fintech startup in Egypt and the first ever by any African tech startup going through an IPO (Initial Public Offering) on African soil. Jumia, the Africa-focused ecommerce startup did this in 2019, but that was on the New York Stock Exchange. Interswitch, the Nigerian payment company, also did it last year, but it needed extra funding from VISA to make that happen.
CEO and co-founder Ashraf Sabry
This is a big win for the Egyptian-American Enterprise Fund (“EAEF”), Helios Investment Partners (“Helios”, acting on behalf of funds it advises) and the MENA Long-Term Value Fund (“MENA LTV”)which acquired 85 percent stake in Fawry in 2015 for approximately US$ 100 million.
Fawry Has Proven That African Startups Don’t Need To Look So Far Away For Their IPOs
Perhaps Fawry’s success on The Egyptian Exchange (EGX) would signal a new era for startups on the continent looking to exit through IPO. Jumia’s outing on the New York Stock Exchange still remains a subject of controversy, with Wall Street analysts painting very sad stories about the company, and Africa as a whole.
Fawry went public, last year, August, after monthsof hype, on The Egyptian Exchange (EGX) in first Egyptian IPO of the year. Fawry offered 36 percent (254.6 million) of its shares on The Egyptian Exchange to raise EGP 1.64 billion ($100 million). The offering also comprised of a secondary sale by Netherland Holding BV. The company’s shares that were listed at the price of EGP 6.46 soared 31 percent to close at EGP 8.48 on the first day of trading, which gave the company a market cap close to EGP 6 billion or $366 million. Since then, its stock price has increased by over 300 percent.
“The private placement was oversubscribed by 16 times and the IPO by 30 times. Egyptians represented 80.3% of the IPO and 50% of the private placement. Arabs & Foreigners represented 19.7% of the IPO and 49.3 of the private,” the Egyptian Exchange said in a statement during Fawry’s IPO in August, 2019.
The latest market cap of over $1 billion came as the company’s intraday trading saw its share price rise to EGP 22.69, resulting in a cap of EGP 16 billion or $1 billion (for the first time). This is remarkable because, with this, Fawry has become the first technology company in Egypt to get to the billion-dollar valuation as well as the first African tech startup to reach a unicorn status through IPO on African soil. Although, Fawry’s stock price fluctuated, the lowest it ever went was EGP 7 per share in March this year, following the outbreak of the coronavirus pandemic.
However, the coronavirus aided the company to achieve its latest status as demand for electronic payment services surged and Fawry being the leading player in Egypt led the gainers’ table. This is also evident from company’s just-announced financials for the second quarter of 2020.
The company reported that its revenue for the first half of 2020 increased by 47 percent (year-on-year) to EGP 549.26 million ($34.41 million) from EGP 373.33 million ($23.38 million) for the same period of 2019. During the said period, the company’s net profit in H1 2020 also increased by over 135 percent YoY to EGP 85.9 million ($5.38 million) from EGP 36.47 million ($2.29) in H1 2019.
A Deep Heave Of Relief For The 12 Year-old Company
Founded in 2008 by Ashraf Sabry & Mohamed Okasha, Fawry is the only technology company on The Egyptian Exchange and it currently offers over 250 electronic payment services through its network of over 105,000 service points across 300 cities in Egypt – that include ATMs, mobile wallets, retail shops, post offices, and little vendor kiosks.
The company also has its online payment gateway that allows online businesses to collect payments from their customers using different methods including cash, credit cards, and mobile wallet.
Fawry is, however, still working on entering the UAE market, which is expected to be completed by the end of 2020. This will be a breakthrough for the company, given that it will lead to accessing a lucrative payment infrastructure in the Gulf country.
“In 2008, I left my job and had limited time to convince investors that customers would trust paying their bills electronically at a grocery store. The challenge was establishing the company before my financial resources got depleted,” CEO and co-founder Ashraf Sabry said in an interview.
“Overcoming the challenge needed a thorough understanding of the business model, sharing experiences in other markets, committing to invest 80% of my personal financial resources in the same project and, finally, not giving up quickly. [This also involved] … trying to find new investors all the time, until I managed to convince the founder investors,” he added.
“The second challenge was convincing the first biller to join the network; I still remember, it was Vodafone,” he said. “The problem was that Vodafone had to allocate resources to develop the integration with their systems and had to introduce a new competitor to their valuable distribution network, so many of the stakeholders resisted the idea.
“I think I managed to overcome [that] … challenge by deciding to carry the cost of the implementation, to find a champion within Vodafone to support me, [putting together an] … appealing commercial deal and, most importantly, never giving up,” he further said.
“Other challenges include being almost bankrupt after three years, as well as attracting and retaining good people. I think the one factor in overcoming all challenges is, never give up and be persistent,” he concluded.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions. He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance. He is also an award-winning writer
