Dina H. Sherif, Mohamed Okasha and Malek Sultan are managing partners at Egypt-based VC firm Disruptech. This article was originally posted on LinkedIn.
The Arab region is a unique region. We could write about its distinctive historical, socio-economic, and political conditions forever, without running out of material. Yet, amid this wealth of information, we want to zoom right in on a very interesting fact. The region has the world’s lowest bank penetration rate in the world - only slightly over 14 per cent are in the formal banking system. If you think that’s what makes our region unique however, you would be wrong. The uniqueness only appears when you juxtapose that low bank penetration rate with an internet penetration rate that exceeds 100 per cent, a mobile penetration rate that exceeds 100 per cent and a smartphone penetration rate that was already at 60 per cent back in 2017. This uniqueness is what makes our region, and in particular, our country Egypt – home to the region’s largest unbanked population – fertile ground for financial technology (fintech).
This uniqueness is what gave birth to Fawry, a company established in 2009 by the managing partner of Disruptech, Mohamed Okasha, and his colleague Ashraf Sabry. Back in 2009, nobody in Egypt knew what fintech was, but everyone knew that there was a deep need to solve the problem of digital payments. Fawry not only tackled that problem, but it created a space for others to innovate and design market solutions to the multitude of problems that surround the lack of access to traditional forms of financial services by those considered ‘unbankable’ or simply ‘unreachable.’ In 2019, Fawry became the first fintech company to IPO in the region and since taking that step, the price of its stock has risen by 300 per cent. In August, Fawry became Egypt’s first tech ‘unicorn,’ born during a global pandemic and what is quickly becoming a global economic meltdown of massive proportions. If this is not testimony to the importance of this sector and the opportunities that lie within it, then we are not sure what is.
If you don’t believe that Fawry’s unicorn status and the birth of numerous rapidly growing startups in the space are proof that fintech is the future or that this sector will be critical to Egypt’s ability to achieve its commitment to inclusive and sustainable economic growth under Vision 2030, forget all of that and focus on one simple reality. In the midst of the global pandemic, Egypt and many similar countries in the region and beyond are finally introducing laws and regulations that will not only allow this sector to thrive, but will allow our economies to thrive by using technology to serve the millions of people who remain economically excluded from the system.
Further to the above, recent studies have demonstrated that providing fintech services to the unbanked and micro to small and medium sized enterprises (MSMEs) alone can generate additional annual revenue in the billions. According to a 2020 CGAP funded report on the landscape of Fintech in the Arab World (the region boasts significantly high survival rates, making these companies attractive for investors. For fintech companies launched in 2014, 90 per cent survived. With that in mind, it comes as no surprise that the 2019 Mena Fintech Venture Report highlighted a total of $237 million that were invested in 181 deals since 2015.
The enormous potential that lies within the fintech space was partly why Mohamed Okasha stepped down from his leadership role at Fawry to launch Disruptech, Egypt’s first venture capital fund to focus on fintech and fintech-enabled startups in Egypt. Stepping down from Fawry at a time when it was clear that the company was heading towards a billion-dollar valuation was built around a desire help entrepreneurs who have entered this space avoid the same sacrifices and hardships experienced during Fawry’s growth journey. Disruptech’s mission is to provide access to capital, specialised expertise, and the networks required for entrepreneurs in this sector to thrive and have impact on Egypt’s growth journey. This mission is reflected in the expertise and professional history of the partners and advisors brought in to join the team – Malek Sultan, and Dina H. Sherif who joined as partners, in addition to Mohamed Aboulnaga who joined as a senior advisor.
For the Disruptech team, establishing this fund – however hard it may be – is built on a solid belief that Egypt, the country that each of us loves deeply, cannot continue as is. We believe in Egypt’s potential, and we know that fintech is not just about financial inclusion, it is about economic inclusion, as Efosa Ojomo, from the Clay Christiansen Institute would say. Egypt is at a critical inflection point in its growth journey and many entrepreneurs are rising to the occasion. Our goal is for Disruptech to be a solid contributor to the story of Egypt’s future growth and its embrace of technology as a critical and essential tool within that inclusive growth journey.