Mega funding rounds fuel Middle East's rising fintech giants

Al-Monitor Pro Members

Samuel Wendel

Senior Market Research Analyst, Al-Monitor

Feb. 21, 2023

Mega funding rounds — those over $100 million — were once rare for startups globally and almost non-existent in MENA. But that’s changing and the main reason is financial technology, or fintech, which boomed when the pandemic helped drive regional adoption of online services. In 2022, fintech companies (or those with fintech solutions core to their offerings) delivered five of MENA’s 10 largest mega rounds. Those five deals, a mixture of equity and debt financings, were alone worth $680 million combined and accounted for nearly 20% of all regional startup funding in 2022. Already, that trend is continuing into 2023: Egypt’s MNT-Halan, a super app offering numerous financial products, announced $400 million in new funding in February at a $1 billion valuation. Despite a global tech industry downturn amid broader economic uncertainty, MENA’s fintech companies are raising more capital than ever, a development that could reshape the region’s tech sector.

Scenario 1: MENA’s leading fintech companies rush for the exit

This wave of mega rounds further accelerates fintech growth, separating the winners from the pack, and comes as regional IPO activity remains elevated and interest in local technology listings rises. That positions MENA’s best of breed fintech companies to explore offerings on regional or international exchanges instead of seeking additional late stage funding rounds.

That said, few local tech startups have successfully gone public to date and the industry didn’t feature prominently during the 2022 IPO boom in the Gulf. In 2019, Dubai-based payments processor Network International listed in London and e-payments giant Fawry went public in Egypt, but more recently several regional tech players — including mobility company Swvl and streaming platform Anghami — opted to go public in the US by merging with a publicly traded special purpose acquisition company (SPAC). However, this alternative to traditional IPOs looks less attractive after SPAC activity cratered in 2022.

Scenario 2: Fintech funding cools off in MENA

As global economic uncertainty deepens in 2023, both local and key international investors tap the breaks on regional startup investments. That sees fewer (and smaller) fintech mega rounds in 2023, which results in overall sector funding totals plummeting.

Although some industry verticals — notably crypto — may face headwinds in 2023, fintech’s full potential is now clearer than ever in a region featuring a population that is large, youthful and tech savvy. Sophisticated investors with long-term outlooks won’t want to miss these regional opportunities and they now have more leverage thanks to falling valuations. That should keep fintech funding activity elevated.

Samuel Wendel is a senior market research analyst with Al-Monitor covering economic, tech and business trends across the Middle East. He has previously served as a journalist with Forbes Middle East and Wamda, where he reported on key industry developments spanning a range of sectors in the region.