Khazna Secures $16M Funding for Expansion into Saudi Arabia

Addressing Financial Inclusion in Egypt with Khazna

A significant segment of the Egyptian populace is underserved by conventional banking systems. This situation often necessitates reliance on cash-based transactions and informal borrowing methods. Khazna, a fintech company established in 2019, is actively addressing this challenge.

Khazna’s Financial Solutions

Khazna specializes in delivering financial services specifically designed for workers with low and moderate incomes. The company’s offerings include salary advances, digital payment solutions, and microloans. These tools aim to provide employees and independent contractors with essential financial access.

Recent Funding and Expansion

Recently, Khazna successfully obtained $16 million in pre-Series B funding. This brings the total amount of funding secured by the company to over $63 million. The new capital will be utilized to support the company’s growth strategy.

This strategy includes preparations for applying for a digital banking license within Egypt. Furthermore, Khazna intends to extend its operations into the Saudi Arabian market.

Growth and User Base

When Khazna was previously featured in 2022, it had just completed a $38 million Series A funding round and served over 150,000 customers. Currently, Khazna’s user base has expanded to exceed 500,000 individuals.

This figure represents half of the company’s projected user target for the end of 2022, as stated by co-founder and CEO Omar Saleh.

Focus on Under-Served Workers

The company’s primary focus is on individuals earning income at a level three times below Egypt’s minimum wage. Khazna provides these workers with accessible and affordable financial instruments.

Approximately 100,000 users currently receive their salaries through Khazna. This allows the company to seamlessly integrate financial services, such as loans and insurance, directly into their payroll accounts.

Lending Services and Profitability

For its remaining 400,000 users, Khazna offers lending services. This caters to the needs of gig economy workers and pensioners, providing them with access to credit.

Saleh indicated that this lending product enabled the fintech to achieve break-even status last month.

Strategic Focus on Core Products

“Over the past two and a half years, our efforts have been concentrated on refining our core product offerings,” Saleh explained to TechCrunch. “These include credit facilities for payroll and pension recipients, as well as unsecured loans for gig workers.”

“Prioritizing and perfecting this core product has been crucial, as it has facilitated our attainment of profitability. It represents the most lucrative and central aspect of our business journey.”

Evolving into a Digital Banking Institution

Beyond its current offerings – encompassing bill settlements, buy now, pay later schemes, health insurance, and rent-to-own options – Khazna is strategically positioning itself to evolve into a comprehensive digital bank for Egypt's underbanked populations. This progression is fueled by its integration with both payroll systems and lending services.

However, a key distinction separates Khazna from conventional banks: it currently lacks the ability to accept customer deposits. This limitation results in higher expenses when securing funds for loans. Currently, Khazna finances its lending activities through wholesale debt, denominated in both US dollars (USD) and Egyptian pounds (EGP).

To mitigate these borrowing costs and provide more accessible loan options, Khazna is actively pursuing a deposit-taking license within Egypt. Acquiring this license would enable the company to accept funds directly from customers, thereby reducing its overall funding expenses.

Saleh stated that gaining access to user deposits represents a significant turning point. He believes there is a substantial opportunity to capture a portion of this market, leading to a more competitive funding cost structure and a uniquely advantageous position.

Khazna anticipates obtaining the banking license from Egypt’s Central Bank by mid-2026. The Central Bank established the regulatory guidelines for digital banks in July 2024, providing a clear pathway for licensing.

Concurrently, as Khazna initiates the licensing process, it is also expanding its focus to Saudi Arabia. This expansion is driven by the increasing demand for consumer finance solutions in the region. Khazna aims to distinguish itself from short-term buy now, pay later (BNPL) providers like Tabby and Tamara by concentrating on medium-term credit products.

These products will include earned wage access (EWA), lending secured by payroll, and credit solutions linked to pension funds.

Strategic Expansion and Future IPO Considerations

A significant factor influencing Khazna’s focus on Saudi Arabia is its robust ties to Egypt, as Saleh explains. The substantial Egyptian diaspora in Saudi – numbering close to three million – fuels a major remittance corridor between the two nations. This presents a valuable opportunity to deliver international financial services, integrating credit products with foreign exchange (FX) solutions.

Saudi Arabia's Attractive Capital Markets

Beyond the favorable market conditions and product alignment, Saudi Arabia’s capital markets are also a key consideration for Khazna’s strategic direction, Saleh indicates. The Tadawul stock exchange, located in Saudi Arabia, is recognized as one of the most active and retail-investor-focused exchanges in the region. It has facilitated numerous initial public offerings (IPOs) in recent years.

Consequently, Khazna is aiming to generate 40-50% of its total revenue from Saudi Arabia within the next four years. Achieving this milestone would position the company favorably for a potential public listing on Tadawul.

Funding Expansion and Navigating Economic Headwinds

The recently secured growth capital will be instrumental in financing this expansion initiative. However, the challenging macroeconomic environment in Egypt over the preceding two years played a role in the structuring of this pre-Series B funding round.

Egypt experienced currency devaluations and economic uncertainty between 2022 and 2023, which complicated fundraising efforts for startups and venture-backed companies. This slowdown in investment activity mirrored a broader investor hesitancy towards Egyptian ventures.

Renewed Investor Confidence in Egypt

However, 2024 witnessed a notable turnaround, with over $50 billion in foreign direct investment (FDI) entering Egypt. This influx followed the implementation of economic reforms and a more adaptable exchange rate policy. The resulting increase in investor confidence has sparked renewed interest from both international and regional investors.

Diverse Investor Participation

This positive shift enabled Khazna to attract investment from both new and existing partners. Participants included global investors such as Quona and Speedinvest, alongside regional firms like Aljazira Capital (the investment division of Bank Aljazira of Saudi Arabia), anb Seed Fund (administered by anb Capital), DisrupTECH, ICU Ventures, Khwarizmi Ventures, and SANAD Fund for MSME.