Until now, we’ve never invested in any Egyptian companies at Accion Venture Lab, but we’ve been watching for promising fintechs. After all, there’s a real opportunity to make a difference in the country. Only one-third of Egyptian adults have bank accounts, according to the World Bank’s Global Findex. That means the majority of Egyptians have to pay every bill in cash and turn to family and friends for emergency funds or when they need a loan. Without cards and savings accounts, people are left living paycheck-to-paycheck, and managing life expenses is a struggle. But there’s hope that technology can change that since millions of underserved Egyptians are already actively using smartphones. By developing an easy-to-use mobile app, we believe our first investment in Egypt, Khazna, can bring accessible credit and savings products to financially excluded Egyptians.

Khazna is a fintech company developing a holistic, app-based banking solution, including savings, loans, insurance, and access to a pre-paid card, for the underserved. Khazna is looking to provide an affordable alternative to credit while helping Egyptians save and manage their longer-term financing needs. Its first product is an earned salary cash advance, which works through an employer partnership model. Today, the company partners with small, medium, and large enterprises to reach their employees and provide an alternative short-term loan for these individuals.

Venture Lab is excited to support the Khazna team at this early stage and to have them as our first investment in Egypt. While we see a tremendous opportunity in the financial inclusion space in Egypt, we were particularly interested in investing in Khazna for the following reasons:

Large, unaddressed, and digitally native population ripe for digital financial services: We believe that early-stage fintech businesses are primed to address Egypt’s financial inclusion challenges. In addition to being one of the most populous countries in the region, it’s also one of the youngest countries in Africa, with an average age of 24 years old. The World Bank estimates that just 10-15 percent of Egyptians have bank accounts, which is one of the lowest penetration rates in the world. At the same time, Egypt has one of the most digitally native and active consumer bases across Africa. This creates a unique opportunity because the population has access to smartphones and the internet and has experience using digital platforms, such as Careem, Swivl, Halan, and Uber. Given these market dynamics, we believe that Egypt is a prime environment for digital financial services.

“New asset lending” as an alternative to traditional consumer loans: Credit penetration rates in Egypt are strikingly low, with just 6 percent of adults having borrowed from a formal institution. Khazna enables low- and middle-income customers with little to no credit history to access funds to help manage day-to-day needs and emergency expenses. Customers’ paychecks don’t always cover everything they need, so having access to credit via income streaming for bills, family expenses, and medical emergencies allows them to avoid taking out expensive debt, going into collections, and paying late fees. It also gives them greater financial flexibility. Khazna credit products are more affordable than informal lenders and target underserved customers. Khazna focuses its solution on employers that work with lower and middle-income workers to help these populations gain access to services. Additionally, the tier-based fee model allows borrowers to select loan amounts according to what they can afford, and pricing is communicated clearly upfront.

Leveraging business partnerships to de-risk lending operations and reach scale: Khazna is targeting both businesses and end consumers with its products, starting with businesses first. While selling to businesses can be a long process, Khazna is leveraging strong partnerships to deploy their solution into one large enterprise to access their employee population. We’ve heard in several of our markets that employees often demand an advance on their salary, and employers don’t want to provide it themselves, which makes this issue a pain point for both employers and employees. This is a critical need for those employees who are trying to manage financial shocks but are unable to access formal credit. While many startups, including in Venture Lab’s portfolio, have struggled to sell into employer channels, we believe that the Khazna team has a unique ability to connect with decision-makers within established businesses. We believe by leveraging the employer channel, Khazna will be able to de-risk their lending portfolio, develop relationships with customers, and reach scale more quickly.

As is the case for all of our seed investments, Khazna is early in its journey. However, as investors in the company and advocates for a more financially inclusive world, we couldn’t be more excited to support Khazna’s growth and ensure that more Egyptians gain access to critical financial services so they can manage their financial needs and improve their lives.

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