Egypt’s Khazna Secures $16M to Create Financial Super App and Expand into Saudi Arabia
A significant segment of Egypt’s population is without access to conventional banking services, forcing many to depend on cash transactions and informal lenders. 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 like salary advances, digital payment options, and microloans, enabling employees and contractors to obtain essential financial support.
In a recent development, Khazna raised $16 million in pre-Series B funding, increasing its total capital to over $63 million. This funding will facilitate its growth initiatives as the company aims to apply for a digital banking license in Egypt and expand its presence into Saudi Arabia.
In our last report on this fintech in 2022, Khazna had successfully raised $38 million in a pre-Series A funding round and was catering to over 150,000 customers. Currently, Khazna’s user base has expanded to more than 500,000, marking a substantial increase towards the target set for the end of 2022, as noted by Saleh at that time.
The company primarily targets individuals earning approximately three times below Egypt’s minimum wage, offering them accessible financial solutions. Around 100,000 users receive their salaries through Khazna, allowing the firm to seamlessly integrate financial products like loans and insurance into their payroll accounts.
For the remaining 400,000 users, Khazna presents lending options, aiding gig workers and retirees in obtaining credit. CEO Omar Saleh mentioned that the firm initially concentrated on payroll-based credit and pension lending, which enabled it to reach its recent break-even milestone achieved last month.
“For the last two and a half years, our focus has been on our primary product, which is credit for payroll and pension beneficiaries, alongside unsecured loans for gig workers,” co-founder and CEO Omar Saleh articulated during a conversation with TechCrunch. “This has been our most profitable and vital service, and its success has been crucial for our journey toward profitability.”
On the Path to Becoming a Digital Bank
Khazna also provides a range of ancillary services such as bill payments, buy now pay later options, medical insurance, and a rent-to-own scheme. By embedding itself within the payroll and lending segments, it strategically aims to evolve into a comprehensive digital bank that caters to Egypt’s underserved populations.
However, a significant limitation exists: unlike traditional banks, Khazna, similar to numerous fintech firms in Egypt, does not have access to customer deposits, making the cost of loan funding high. Thus far, the company has relied on wholesale debt financing in both US dollars (USD) and Egyptian pounds (EGP) for its lending activities.
To minimize borrowing costs and offer more competitive loans, Khazna is actively pursuing a deposit-taking license in Egypt. Securing this license would enable the startup to gather customer deposits, consequently lowering its funding costs.
“The critical factor for us is gaining access to user deposits. There is a tremendous opportunity for us to enter that market, which would significantly reduce our funding costs and ultimately position us much stronger,” he remarked.
Khazna is working towards obtaining the banking license from Egypt’s Central Bank by mid-2026, following the regulatory framework for digital banks outlined in July 2024.
At the same time, as the six-year-old fintech embarks on this licensing path, it is also eyeing Saudi Arabia, where demand for consumer finance solutions is on the rise. Unlike BNPL providers like Tabby and Tamara, which focus on short-term credit, Khazna seeks to set itself apart through medium-term credit offerings, including earned wage access (EWA), payroll-backed loans, and pension-related credit.
Expansion Plans, Including a Potential IPO
Khazna is inclined to prioritize Saudi Arabia due to its strong ties to Egypt, as highlighted by Saleh. With nearly three million Egyptians residing in Saudi Arabia, the remittance corridor between Egypt and Saudi Arabia is among the largest globally, presenting a significant opportunity to deliver cross-border financial services that combine credit with foreign exchange (FX) solutions.
Beyond market size and product alignment, the strength of Saudi Arabia’s capital markets is also a contributing factor in Khazna’s strategy, as per Saleh. Tadawul is recognized as one of the most liquid stock exchanges in the region, featuring a large retail-investor community and numerous successful IPOs launched recently.
Consequently, Khazna forecasts that 40-50% of its operations will be sourced from Saudi Arabia within the following four years, paving the way for a potential public listing on Tadawul. This development provides a clear exit strategy for early-stage investors who have supported the company over the past four to five years, according to Saleh.
Indeed, Khazna intends to fund this expansion utilizing the growth capital recently acquired. Nonetheless, the macroeconomic challenges faced by Egypt over the past two years have influenced the structure of this pre-Series B funding round.
Between 2022 and 2023, Egypt experienced currency devaluations and economic uncertainties, complicating fundraising efforts for startups. This led to a general slowdown in deal flows as investors adopted a more cautious approach towards Egyptian companies. However, 2024 has brought about a significant shift, with over $50 billion in foreign direct investment (FDI) flooding into the country, spurred by economic reforms and a more flexible exchange rate. As a result, investor confidence has rebounded, leading to renewed interest from both global and regional investors.
In this favorable scenario, Khazna has welcomed investment from both new and returning investors, including notable global firms like Quona and Speedinvest, as well as regional financial institutions and investment firms such as the 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 arm of İşbank in Turkey), Khwarizmi Ventures, Nclude (the fintech fund initiated by Egypt’s largest national banks), and ICU Ventures.