KSA's Funding Souq Secures $2.5M
KSA-based FinTech and crowdfunding platform Funding Souq has gathered a consortium of angel investors to secure its $2.5M SEED. The startup plans to utilize these funds to support the next generation of SME's with micro-crediting solutions.
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Saudi Arabia-based crowdfunding platform Funding Souq has closed a $2.5m seed round with contributions from an arsenal of angel investors including Amal Dokhan (Partner at 500 Global), Omar Aljeraisi, Christian Kunz (Head of Strategy at a leading Global Financial Centre). Existing investors include Mazin Alzaidi (Partner at STV ), Musaab Hakami, and IslamicFinanceGuru.
Founded in 2020, Funding Souq is a platform that connects investors with established SMEs looking to borrow between $20k-150k. Investors get exposure to SME lending and realize an Internal Rate of Return (IRR) of c.20% whilst supporting their local businesses and making an impact.
As most recently recorded in our Startup Funding- 2022 Emerging Venture Markets Free Report, the FinTech sector was the most prominent industry in 2021 accounting for more than 20% of all deals and 30% of all capital deployed across Emerging Venture Markets. In Africa, all 6 of last year’s MEGA Deals were closed by FinTech startups including Wave Mobile Money, JUMO, and Flutterwave. The industry was not shy of stardom in Saudi Arabia either; as recorded in our 2021 Saudi Arabia Venture Capital Report sponsored by SVC, funding in the FinTech industry grew by more than 1,200 % YoY, observing a 286% YoY increase in number of transactions to record the highest number of deals for any industry in KSA over 2021. Multiple FinTech themes sturred investor interest in Saudi Arabia over the past year including crediting solutions, payment gateways, SME financing, and open banking with star startups like Rasan Information Technology, Lendo, Hala, and Tamara raising major investments in 2021.
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Once onboarded, retail and institutional investors can choose to invest in individual businesses or a portfolio of businesses to diversify their exposure and maximize their risk-adjusted return. In December 2021, Funding Souq financed a portfolio of 25 businesses which is on track to generate an IRR of 22% for the investors that participated. More than 60% of those investors are repeat investors. "SMEs in the GCC are highly underserved by financial institutions and often don’t qualify for the financing they deserve as traditional lenders are overly conservative. According to the IMF, only 2% of GCC lending goes to SMEs as opposed to 22% in other high-income countries which in turn strains the regional economy. This lack of financing limits economic growth and is one of the main reasons why we started Funding Souq. We are incredibly proud to have financed 47 SMEs across Saudi Arabia and UAE in the first 12 months of operations and are looking forward to growing our portfolio exponentially”, says Martin Jaouni, Funding Souq’s CEO.
Funding Souq uses a robust credit scoring process that analyzes tens of variables before shortlisting a business for enhanced due diligence. Less than 9% of the businesses that apply get approved on Funding Souq. This disciplined approach to credit risk has helped us maintain defaults impressively at less than 1%. With this round of investment, Funding Souq will scale its operations and aim to grow its debt investor partnerships with family offices and banks to focus on Sharia-compliant financing. The company is also exploring entering new markets and developing new products that will further serve its mission to empower SMEs in the Middle East and beyond.
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