Egypt’s Khazna Secures $16M for Financial Super App Development and Expansion into Saudi Arabia
A significant segment of Egypt’s population remains without access to conventional banking services, compelling many to depend on cash transactions and informal lending. Khazna, a fintech startup launched in 2019, is addressing this challenge by providing financial solutions specifically designed for low- to middle-income workers. The company offers services such as salary advances, digital payments, and microloans, enabling employees and contractors to gain essential financial support.
Khazna recently raised $16 million in pre-Series B funding, increasing its total capital to over $63 million. This investment will aid in its expansion efforts as it moves towards applying for a digital banking license in Egypt and plans to grow its presence in Saudi Arabia.
When we last reported on the fintech in 2022, it had just secured $38 million in a pre-Series A round with a customer base exceeding 150,000. Currently, Khazna has scaled its user base to over 500,000; this figure is a significant portion of the targeted number for the end of 2022, as indicated by Saleh at that time.
The firm predominantly concentrates on individuals earning about three times less than Egypt’s minimum wage, offering them accessible financial tools. Approximately 100,000 users receive their wages via Khazna, allowing the company to seamlessly integrate financial services like loans and insurance into their payroll accounts.
For the remaining 400,000 users, Khazna provides lending options, aiding gig workers and pensioners in accessing credit. CEO Omar Saleh shared that the company initially prioritized payroll-backed credit and pension lending, which contributed to its recent break-even status last month.
“Over the past two and a half years, our focus has been on our primary product, which is credit offered to payroll and pension receivers, along with unsecured loans for gig workers,” co-founder and CEO Omar Saleh explained during a call with TechCrunch. “This has been our most profitable and core offering, and ensuring its success was crucial as it has enabled us to achieve profitability.”
On the Journey to Becoming a Digital Bank
Khazna also offers additional services, including bill payments, buy now pay later options, medical insurance, and a rent-to-own initiative. By embedding itself within both payroll and lending spheres, it strategically aims to evolve into a comprehensive digital bank catering to Egypt’s underserved communities.
However, a crucial component is missing: unlike traditional banks, Khazna, similar to many fintechs in Egypt, lacks access to customer deposits, making loan funding costly. To date, Khazna has depended on wholesale debt financing in both dollars (USD) and the Egyptian pound (EGP) for its lending activities.
In an effort to decrease borrowing costs and provide more affordable loans, Khazna is actively pursuing a deposit-taking license in Egypt. Acquiring this license would empower the startup to accept customer deposits, subsequently minimizing its funding costs.
“The key game changer for us is gaining access to user deposits. There’s a vast opportunity available for us to capture part of that market, significantly enhancing our funding costs and ultimately placing us in a notably distinct position,” he expressed.
Khazna aims to secure the banking license from Egypt’s Central Bank by mid-2026, which outlined its regulatory framework for digital banks in July 2024.
Simultaneously, as the six-year-old fintech embarks on this licensing process, it is also setting its sights on Saudi Arabia, where a rising demand for consumer finance solutions exists. Unlike BNPL players such as Tabby and Tamara that concentrate on short-term credit, Khazna seeks to distinguish itself through medium-term credit offerings, including earned wage access (EWA), payroll-backed lending, and pension-related credit.
Expansion Plans, Including a Potential IPO
An additional motivation for Khazna to prioritize Saudi Arabia is its robust ties to Egypt, Saleh points out. With nearly three million Egyptians residing in Saudi Arabia, the Egypt-Saudi remittance corridor stands as one of the largest globally, offering the opportunity to deliver cross-border financial services that combine credit with foreign exchange (FX) solutions.
In addition to market size and product alignment, the robustness of Saudi Arabia’s capital markets also influences Khazna’s decision, according to Saleh. Tadawul is among the region’s most liquid stock exchanges, characterized by a significant retail-investor presence and a series of IPOs launched in recent years.
Consequently, Khazna anticipates that 40-50% of its operations will originate from Saudi Arabia within the next four years, positioning it for a potential public listing on Tadawul. For early-stage investors who have supported the company for four to five years, Saleh indicates that this presents a clear pathway to a lucrative exit.
Indeed, Khazna plans to fund this expansion using the recently acquired growth capital. Nonetheless, the macroeconomic challenges in Egypt over the past two years have influenced the structure of this pre-Series B round.
Between 2022 and 2023, Egypt experienced currency devaluations and economic uncertainties, complicating fundraising efforts for startups and ventures. This resulted in an overall slowdown in deal flow as investors adopted a more cautious approach towards companies in Egypt. However, 2024 heralded a significant shift, with over $50 billion in foreign direct investment (FDI) entering the country, bolstered by economic reforms and a more adaptable exchange rate. Consequently, investor confidence has been revived, fostering renewed interest from both global and regional investors.
In this context, Khazna welcomed investments from both new and existing backers, including prominent global investors such as Quona and Speedinvest, as well as regional financial institutions and investment firms like SANAD Fund for MSME, anb Seed Fund (managed by anb Capital), Aljazira Capital (the investment arm of Bank Aljazira in Saudi Arabia), Tibas Ventures (the venture capital arm of İşbank in Turkey), Khwarizmi Ventures, Nclude (the fintech fund initiated by Egypt’s largest national banks), and ICU Ventures.