It is not hard to imagine economic powerhouses with hulking conglomerates and bright tech behemoths in the mind. However, while these giants capture our imaginations, the actual MVPs of emerging markets turn out to be Micro, Small, and Medium Enterprises (MSMEs) quite frequently. Indeed, these underdog champions of the economies who spearhead innovation, fuel employment opportunities, and add appreciable shares of GDP to it. Specifically, Tech-Enabled SMEs in economies of the Middle East and North Africa (MENA) regions aren’t just muddling along; they are thriving, restructuring economies, and upturning conventions.
The Silicon Valley Mirage
One Size Doesn’t Fit All
Silicon Valley’s venture capital (VC) model has been revered for years as the industry standard for startup success. However, injecting this model into MENA’s varied landscape is like trying to put a square peg in a round hole. Moreover, the “winner-takes-all” culture, wherein a handful of market leaders hog the market, does not jibe with MENA’s economic reality. In contrast, tech- enabled SMEs are the backbone of the economy here, and consequently, a more participative approach is needed to ensure long-term growth.
Tech-Enabled SMEs – MENA’s Economic Payers
SMEs in Egypt create around 43% of GDP and generate roughly 75% of employment. Likewise, in Pakistan, small and medium businesses constitute approximately 90% of total enterprises, generate about 80% of non-farm employment, and contribute around 40% to GDP. Moreover, it isn’t merely about these figures; rather, they clearly illustrate the critical role SMEs play in driving economic development. Consequently, these statistics serve as a vivid example of how SMEs are indispensable engines of growth and stability in emerging economies.
Fintech Revolution – Tech-Enabled SMEs in MENA
Egyptian and Pakistani fintech startups are transforming the SME landscape, eradicating financial barriers, and paving the way for inclusion.
Egypt’s Fintech Digital Empowered SMEs
MNT-Halan
Established in 2018, MNT-Halan rapidly became Egypt’s first unicorn, achieving a valuation exceeding $1 billion. The company offers a comprehensive digital platform that includes e-commerce, payments, consumer lending, and financing for small and micro-businesses. Notably, with 2.2 million quarterly active users, MNT-Halan has disbursed over $4.4 billion in loans, thereby assisting more than seven million clients in Egypt
In an effort to enhance its market presence, MNT-Halan acquired Turkey’s leading non-bank micro-leasing firm, Tam Finans, in July 2024. This strategic move was financed by a recent $157.5 million funding round, which included a $40 million contribution from the International Finance Corporation (IFC). Consequently, the acquisition enables MNT-Halan to extend its consumer lending and factoring operations into Turkey, leveraging Tam Finans’ extensive network of 39 branches and a loan portfolio exceeding $300 million.
Flind
Being Egypt’s first fintech startup focused on SME financing, Flind harnesses advanced technology to offer affordable financial solutions; consequently, it fills a critical gap in the market. Moreover, as SMEs play a vital role in driving economic growth yet often struggle to secure capital through traditional channels, this innovative approach is especially key. Additionally, by streamlining access to credit, Flind not only supports business expansion but also reinforces the overall resilience of Egypt’s economy.
Pakistan’s Fintech E-nabled SMEs Innovators
– MNT-Halan’s Foray into Pakistan: Satisfied with regional leadership, MNT-Halan expanded into Pakistan by acquiring Advans Pakistan Microfinance Bank in March 2024. The State Bank of Pakistan and the Competition Commission of Pakistan approved this strategic acquisition, which gives MNT-Halan instant scale, adding more than 62,000 customers and 19 branches to its book. The move is aimed at accelerating the bank’s development and digital transformation to better serve micro, small, and medium business owners in Pakistan.
MNT-Halan Targets Pakistan’s Underbanked Market
Mounir Nakhla, Founder and CEO of MNT-Halan, highlighted the parallel between Egypt and Pakistan, noting that both nations have large, underbanked populations that are cash-heavy. By expanding into Pakistan, MNT-Halan seeks to unlock financial services access by leveraging its technology and expertise. The company plans significant investments, including opening 100 new branches and aiming to grow its loan book to $500 million within five years. Additionally, MNT-Halan intends to broaden its product offerings in the region, such as mobile wallets, debit and credit cards, and a Buy Now, Pay Later e-commerce platform.
The Power of Ecosystems – Collaboration Over Competition
Developing a successful SME economy is not simply a matter of individual success stories; rather, it involves building an ecosystem where companies collaboratively work together, share resources, and grow in tandem. Moreover, this approach sharply contrasts with the winner-takes-all, cutthroat competition typical of Silicon Valley. Consequently, in MENA, fostering a collaborative ecosystem is pivotal to unleashing the full potential of SMEs..
Collaborative Success Stories
Regional Networking and Ecosystem Building
During a regional conversation, one founder explained how joining a trusted mentorship network helped his startup bridge a 50% funding gap and secure 15% lower interest rates from local banks. Another guest detailed overcoming exit hurdles by collaborating with regulatory bodies and investors to shift from a burnout crisis to a sustainable growth strategy. They highlighted that this tailored, cooperative approach is a concrete alternative to Silicon Valley’s winner-takes-all model in emerging markets.
Notably, Merai Syed, Director of Strategy and Growth at Invest2Innovate, has boosted SME scalability by forging strategic regional partnerships that have increased market penetration by 35%. Additionally, via her role with The Boring Syndicate, over 50 tech startups have been supported—collectively raising more than $100 million. This collaborative model is reshaping emerging markets with sustainable, innovative growth.
Fintech Solutions Bridging Credit Gaps
In a compelling piece by Mubariz Siddiqui, one of Pakistan’s leading fintech voices, he demonstrates how fintech startups—such as Haball, Abhi (YC S21), and CreditBook—are pioneering innovative payment and lending products designed specifically for SMEs. Moreover, these platforms employ open-loop, context-based strategies that enable businesses to simplify payments and access working capital, thereby effectively bridging the major credit availability gap that exists in the region.
MENA Venture Capital
Tech-Enabled SMEs in MENA -An Evolving Landscape
MENA venture capital is undergoing a notable shift in paradigm. For instance, in 2022, almost $4 billion of venture investment flowed into the region, with UAE, Saudi Arabian, and Egyptian startups leading the way. However, a huge funding gap persists, particularly for growth-stage firms. Consequently, the MENA region faces a $20 billion deficit, which underscores the need for more focused investment approaches.
Closing the Funding Gap
In a notable regional initiative, Saudi Arabia’s Public Investment Fund (PIF) allocated $1.5 billion in 2022 to support growth-stage tech ventures, thereby aiming to bridge an estimated funding gap of over $10 billion in the region. Furthermore, this bold strategy enabled more than 150 early-stage rounds across sectors such as fintech, healthtech, and digital transformation for SMEs. Additionally, the initiative provided not only critical capital but also strategic guidance, empowering startups to scale sustainably. Consequently, this targeted, locally-tailored approach serves as a powerful alternative to Silicon Valley’s winner-takes-all model, directly addressing the unique funding challenges faced by emerging markets in MENA.
Rethinking Growth Strategies Through Tech Adoption
As we move into the changing context of emerging markets, it is evident that technology-enabled SMEs are not merely players but also drivers of economic change. Indeed, they disrupt the classic Silicon Valley paradigm; moreover, they demonstrating that a collaborative and inclusive model can deliver sustainable growth.
How can policymakers, investors, and entrepreneurs in MENA continue to evolve and innovate funding models that are better suited to finance the distinct dynamics of their SME ecosystems, making growth inclusive and sustainable?
References
1. Nakhla, M. (2024, July 31). Egypt’s MNT-Halan says Turkish acquisition to help expand consumer credit, factoring. Reuters. Available at: [https://www.reuters.com/business/finance/egypts-mnt-halan-says-turkish-acquisition-help-expand-consumer-credit-factoring-2024-07-31/]
2. LaunchBase Africa (2024, May 27). Egypt Approves First-Ever Fintech Startup for SME Financing*. LaunchBase Africa. Available at: [https://launchbaseafrica.com/2024/05/27/egypt-approves-first-ever-fintech-startup-for-sme-financing/]
3. The Express Tribune (2024, February 15). Egyptian fintech giant expands in Pakistan. The Express Tribune. Available at: [https://tribune.com.pk/story/2526040/egyptian-fintech-giant-expands-in-pakistan]
4. Powell, J. (2023, November 15). The golden age for MENA startups is here. WIRED Middle East. Available at: [https://wired.me/business/startup-mena-golden-age/]
5. Hassanein, D. (2023, October 31). Growth-stage companies in Mena face $20 billion funding gap. Wamda. Available at: [https://www.wamda.com/2023/10/growth-stage-companies-mena-face-20-billion-funding-gap]
6. Daily News Egypt (2023, March 19). Small enterprises contribute 43% to GDP, account for over 75% of employment: MSMEDA. Daily News Egypt. Available at: [https://www.dailynewsegypt.com/2023/03/19/small-enterprises-contribute-43-to-gdp-account-for-over-75-of-employment-msmeda/]
7. The News International (2023, February 25). In a first, Pakistan launches credit guarantee company for SMEs*. The News International. Available at: [https://www.thenews.com.pk/latest/1147234-in-a-first-pakistan-launches-credit-guarantee-company-for-smes]