8 MENA startups dive into debt - lending that is

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Taking on debt can be inevitable, be it to keep a startup ticking over until you can secure a funding round or to pay for medical bills. Yet in many instances, banks in the Middle East make it very difficult to access finance.

Wamda Research Lab has identified eight startups - six still going and two which have folded - in the Middle East (none in the Maghreb region) that are or were involved in faciliating the lending of money.

The industry globally is booming, but some say it’s already peaked following scandals in the two biggest peer-to-peer lending markets: major problems at US peer-to-peer lending industry leader Lending Club, which is destabilising other startups in the same field, and the concept being used to fund ponzi schemes in China.

The signals are confusing.

Market researcher CB Insights identified 46 global direct and marketplace lenders in February. Then it held a panel in June which participants called the end of peer-to-peer lending. And finally in August it found that six of the top ten fintech deals in the second quarter of 2016 were for lending-related startups globally.

So with that, here are the Middle East’s players. They cover regular and micro lending, peer-to-peer, and a distinctly local version of Egypt’s ‘gameaya’ funding collectives.

Hayati Healthcare

Founded: 2009

Closed: 2010

Sector: healthcare loans

Founder: Michael Matly

Country: UAE

Hayati startup billed itself as the first medical patient financing company in the Middle East. It provided loans for medical procedures not covered by insurance such as plastic surgery, dental, and fertility treatments, at interest rates of 1-1.25 percent. The startup launched with seed funding from the Arab Business Angels Network and Gulf Finance, which was the loan underwriter. It lasted only a year, closing shop in 2010.

Pi Slice

Founded: 2012

Sector: microcredit

Founders: Genny Ghanimeh

Country: UAE

This startup’s markets are actually Lebanon, Palestine and Jordan, and is supported through a partnership with Microworld. Pi Slice is a platform on which microfinance institutions (MFI) publish different borrowers’ loan proposals - much like the way Kiva operates. Anyone from an individual to NGOs can invest in these and the money goes to borrowers included in that portfolio. The borrowers pay the loans back on average in 12 to 18 months, with interest, part of which is passed on to the original lender. It’s not clear how the startup funds itself, what fees it charges, or whether it takes a percentage on the loans.

Feenaa

Founded: 2013

Closed: 2015

Sector: advice and business lending

Founders: Hadi Abdelnour

Country: Lebanon

This startup closed last year, thanks to Lebanon’s tiny market and tough regulatory climate for fintech and particularly lending startups. It advised small businesses on suitable fundraising structures, and managed the relationship between debtors or investors, and the company.

Liwwa

Founded: 2013

Sector: peer-to-peer SME finance

Founders: Samer Atiani and Ahmed Moor

Country: Jordan

Liwwa connects individual and institutional lenders with SME owners looking for cash. So far they only work with businesses in Jordan and the UAE and can only be used for buying assets and products. They say that while they can’t help you pay the painter, they can help you buy the paint. This ‘asset exchange’ model allows them to be shariah-compliant. They also operate on a traditional crowdfunding model: a campaign lasts 14 days if it’s not fully funded by the end the money is returned to the lenders. Liwwa takes a 2 percent fee on payments to investors.

Beehive

Founded: 2014

Sector: peer-to-peer SME finance

Founder: Craig Moore

Country: UAE

Beehive offers shariah-compliant peer-to-peer finance for SMEs by directly connecting prospective investors with businesses. They allow businesses to crowdfund the entire sum they need, including for invoice financing, thus allowing them to access finance at a lower cost than banks offer. No equity changes hands and the time frame for lending is up to three years. The systems works through a bidding process: investors make an offer of a certain amount at a particular rate - let’s say $10,000 at 12 percent - and the business can choose the best offers. Beehive charges investors a 1 percent annual fee on repaid capital, and businesses fees between 2 to 4 percent of the principle depending on the time frame of the loan.

Greenwallet

Founded: 2014

Sector: online consumer lending

Founders: Ali Tabbalat and Mohammed Shoubaki

Country: Jordan

Greenwallet uses a proprietary credit scoring formula to assess a client’s credit worthiness in order to make a decision in 15 minutes. Clients can pick up funds at Western Union, Moneygram outlets, or with their loan officer partners. Intriguingly, the repayment sum is billed to a customer’s phone bill over a set period of time. The source of the loans, maximum and minimum loan values and fees aren’t clear from the startup’s site, nor did the company respond to queries by the time of publication.

Money Fellows

Founded: 2014

Sector: online consumer lending

Founders: Ahmed Wadi and Adham Badr

Country: UK and Egypt

This startup brings online Egypt’s collective saving and lending groups. A group of people create a circle and agree to pay in a certain amount for a certain period. At the start of, say, every month one person is paid out the full sum, and the circle closes once every person has received money. Money Fellows takes a 1.5 to 2.5 percent fee on each payout. It launched only in Egypt in June, and has raised a seed round of $15,000.

Venture Fin

Founded: 2015

Sector: peer-to-peer SME finance

Founders: Ibrahim Jaber and Ahmed Al Qassimi

Country: UAE

This company offers both equity and debt crowdfunding to startups - the first we’ve seen to provide both options. With both options an entrepreneur sends a proposal to Venture Fin which vets it, puts it through a third party audit. If the proposal is accepted, it goes into the usual crowdfunding system - investors buy-in and the entrepreneur only receives the cash if it’s fully funded in the set time. Venture Fin will “deduct commissions and third party fees” if it is. The Hult Prize and the Sustainability Platform will be funnelling startups which can meet Venture Fin’s strict criteria through the process.

Feature image via Aureolin.

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