Fintech

by Amira Salah-Ahmed | 30 September 2016

 

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As Egypt’s entrepreneurs seek new opportunities, fintech has emerged as an area of focus for investors and aspiring founders.

Short for financial technology, fintech has seen a global boom over the past two years. According to a study by the World Economic Forum, equity investment into fintech companies has quadrupled from $4 billion in 2013 to more than $12 billion in 2014.

In late May, the leading Cairo-based regional startup accelerator Flat6Labs launched the country’s first fintech accelerator called 1864, describing it as a platform “for fostering the fintech innovation space in Egypt through enabling entrepreneurs to transform their disruptive ideas into commercially viable solutions.”

The local fintech startup accelerator program is powered by Flat6Labs in partnership with Barclays Bank Egypt, whose year of establishment in Egypt is the namesake for the new project. Founders who get accepted into the 14 week cycle receive seed funding of up to LE150,000 in exchange for 10-15 percent equity and are offered a strong mentorship program and networking.

The accelerator welcomes all ideas related to financial services, including payments, digital banking solutions, lending, trading, cyber security, payments, cryptocurrency, wealth and asset management as well as capital markets.

Egypt’s entrepreneurial ecosystem has boomed in the past few years with a heavy focus on technology-enabled solutions to the many structural problems present in the country’s economic and social dynamics. It is often said that entrepreneurs find opportunity in the midst of dysfunction, and no area has been as promising as the country’s financial and banking system.

Only around 10 percent of the Egyptian population is banked, and a significantly lower percentage has access to credit cards and financial tools or investment instruments. There is a lack of trust in the official banking system and this is compounded by the existence of a sizeable informal economy where transactions are off the books and taxes are systematically evaded.

But while the unmet needs of the financial market would appear to create ample pockets of  opportunity, the country’s old and bureaucratic labyrinth of banking regulations may pose numerous challenges for entrepreneurs. Currently, Egypt is also battling dire economic conditions and depleted foreign reserves that have resulted in a currency crisis and, in turn, restrictive capital controls instilled by the Central Bank of Egypt in an attempt to mitigate the growing black market for dollars.

Sever gearing up to launch in Egypt with a mission to make saving easier for a young generation by creating a platform where users specify what they want to save for--such as a car, laptop, vacation, marriage plans-- and then track their progress through a plan that is created using the appropriate financial instruments.

However, because they are companies and cannot accept or hold deposits, the founders have resorted to creating partnerships with local banks. So their users would have to open a bank account at a partner institution and deposit their money there. The money is invested in low-risk funds and users can track their progress by using the its platforms.

While Egyptian startups have become adept at navigating workarounds, there is a pressing need to upgrade the country’s aging banking regulations in order to fully capitalize on the massive opportunity that exists in this sector alone.

This needs to be addressed quickly because the ideas, technical know-how and passion needed to birth countless innovative startups in this field are already present.