Former Beltone executives launch Egyptian FinTech startup Invia

It’s either the worst or the best time to start a startup in Egypt—depending on who you ask—as the country’s economic crisis deepens.

Yehia Ashour, the former CEO of Beltone SME, is betting on the latter.

He and his co-founders – CEO Ahmed Zeinhom and Chief Information Officer Omar Aboulmagd – have set up FinTech startup Invia to cater to small businesses that have limited access to finance.

“We want to localize the value chain and develop the companies that will make this country less dependent on imports,” Ashour added The national.

“With the economic conditions in Egypt, specifically, the solution we need is to make the small businesses bigger, and especially the small manufacturing businesses.”

The economic fallout from the war between Russia and Ukraine has left Egypt with soaring inflation, a higher import bill, dwindling foreign reserves and a falling pound.

At the same time, global macroeconomic challenges have put a strain on start-up funding and deal levels worldwide.

Funding for startups in the Middle East and North Africa remained relatively flat in 2022, recording a total of $3.1 billion compared to $2.9 billion in 2021, according to data platform Magnitt’s Emerging Venture Markets Report released this month. The number of agreements decreased by 8 per cent, from 679 to 627.

Egyptian startups raised $517 million last year, compared to $501 million in 2021. Egypt led the Mena region with 160 deals, but that’s still down 3 percent from 2021.

However, FinTech took 29 percent of funding in Mena, more than the transport and logistics and e-commerce sectors combined.

Invia’s founders all have finance backgrounds and held senior roles at Beltone SME, a subsidiary of investment bank Beltone Financial which was established in April 2020 to provide income-based financing for small and medium-sized businesses.

Beltone was established in 2002 and offers a range of financial services in Egypt and the Mena region.

Abu Dhabi-based investment firm Chimera bought a majority stake in the Egypt-listed company in August.

While Ashour was Beltone SMEs co-founder and CEO, Zeinhom was its chief investment officer and Aboulmagd was its vice president of investments.

They left Beltone SME last month to embark on a similar mission, and also offer revenue-based financing, meaning investors agree to provide capital in exchange for a certain percentage of revenue. But Invia focuses on small businesses that often struggle to access funds.

“Banks are always interested in very sustainable, very predictable companies that are very stable in their cash flows,” Ashour said.

“The small businesses are always in the gray area. They are too big for microfinance, but they are too small for banks and equity investors.”

The Central Bank of Egypt has made financing micro, small and medium enterprises, or MSMEs, a priority since 2016, when it issued a directive obliging banks to allocate 20 percent of their credit portfolio to such entities within four years. In 2021, the central bank increased this requirement to 25 per cent.

Invia hopes to attract the financial institutions and banks that have the SME mandate by helping companies reach the “investable” level.

“We are not looking to compete with banks. We want to complement banks and help these small businesses grow, so that banks are their next financing partner,” Ashour said.

Invia is currently raising a pre-seed round, which is likely to be revealed in the next couple of months.

It is dealing with three difficult variables at once – the global economic crisis and a declining economic situation in Egypt, as well as layoffs and cuts in venture capital and start-ups.

However, the weakening of the Egyptian pound, which has halved in value against the dollar in the past year, could have an upside, Ashour said.

“We’re looking to fund and grow the local businesses, which means we’re not dependent on dollars,” he said.

“When you attract venture capital funds and early-stage investors, that’s an advantage. Because my query is getting lower every day.”

Updated: 19 January 2023 at 05.30