In many ways, it is no surprise Egyptian transport start-up Halan shifted from offering tuk-tuks and motorcycle rides to providing a full range of financial services. The rise of the “super app” is a global trend and many companies are using a large base of users to expand into other verticals.
When chief executive Mounir Nakhla co-founded Halan in November 2017, he had already started two microfinance companies, Mashroey in 2009 and Tasaheel in 2015.
He then laid the groundwork for what became MNT-Halan in June, combining ride-hailing with lending, a buy-now-pay-later (BNPL) service, e-commerce, payments and logistics. In August, the company integrated its core banking software Neuron and in September announced it had secured a whopping $120 million from investors.
MNT-Halan is now riding Egypt’s FinTech wave, propelled by improved regulations, access to funding and tremendous opportunity to serve a largely unbanked population. The Arab world's third-largest economy is also its most populous country.
“In less than three months, MNT-Halan has reached a run rate of 100m Egyptian pounds ($6.37m) in monthly issuances of BNPL and consumer finance,” Mr Nakhla tells The National. “This is crazy growth.”
Egypt is well positioned to become a leading global FinTech hub in the Middle East and North Africa region, according to a June report from Fitch Solutions. The trend is driven by a supportive environment created by the government and a shift to cashless payments precipitated by the Covid-19 pandemic, the report said.
In 2020, the Central Bank of Egypt allocated 1 billion pounds for a FinTech Innovation Fund. And earlier this month, the central bank released regulations for its instant payment network (IPN), which would allow people to make electronic payments between bank accounts using their mobile phones.
Noha Shaker, founder of the Egyptian FinTech Association, says the non-profit group has worked with both the central bank and the Egyptian Financial Regulatory Authority to develop new laws governing the banking and non-banking sectors over the past few years.
“With the support of regulators on the ground, now is the right time to build a FinTech start-up in Egypt,” Ms Shaker says.
MNT-Halan has been granted micro, consumer and nano finance licences from the financial regulatory authority, as well as an electronic wallet licence from the central bank.
“The Central Bank of Egypt wants to reduce cash from circulation and they are coming out with one regulation after the other to promote digital transactions,” says Mr Nakhla. “We are capitalising on this macro trend and the low-hanging fruit that most of the economy is based on cash.”
World Bank data shows that 67 per cent of Egyptians did not have a bank account in 2018. MNT-Halan estimates that more than 70 per cent of the population is “financially underserved”.
However, Ms Shaker goes further to define financial inclusion as access to finance, not just a bank account.
“You’re looking at 100 million Egyptians with a financial inclusion rate of 10 to 12 per cent at best,” she says.
Halan started off as a ride-hailing and delivery business, using motorcycles and tuk-tuks to transport passengers and goods across Egypt. In late 2019, Mr Nakhla and co-founder and chief technology officer Ahmed Mohsen decided the app would take more of a FinTech route.
“Ride-hailing gives you a huge base of frequent users, but the unit economics don’t make sense,” says Mr Nakhla.
The company put a team of 30 to 40 developers to work for about 18 months to develop Neuron, its proprietary payment processing and lending software, which uses machine learning and artificial intelligence to predict consumer behaviour.
“It became the backbone of our lending and payments businesses and it’s the only software that exists in Africa and the Middle East that has these capabilities,” he says.
In June, Halan entered a share swap agreement with MNT, the holding company of microlending businesses Mashroey and Tasaheel. The agreement came on the heels of MNT’s acquisition of 100 per cent of the shares of Raseedy, the first independent digital wallet licensed by Egypt’s central bank.
On the app, consumers can now buy home appliances, electronics, furniture and light vehicles in instalments through the e-commerce platform. They can apply for loans ranging from 3,000 pounds to 200,000 pounds, as well as pay their mobile and utility bills.
“We’re launching multiple products, to have multiple touchpoints, to keep these people within our ecosystem,” Mr Nakhla says.
The company is eyeing growth over the next few years from 1 million active users to 10 million, as well as increasing its stock-keeping units (SKUs) to the tens of thousands, and boosting its loan book to billions of dollars, up from the current hundreds of millions of dollars.
Mr Nakhla declined to disclose the total amount raised by both Halan and MNT-Halan as a new entity. However, in December 2020 Forbes Middle East named Halan as the 10th most-funded start-up in the Middle East, with $23.5m.
Investors in Halan’s seed, Series A and Series B rounds include Singapore’s Battery Road Digital Holdings, Egypt’s Algebra Ventures, the UAE’s Wamda Capital and Uber’s founding chief technology officer Oscar Salazar.
“MNT-Halan is uniquely positioned to provide financial solutions, mobility and e-commerce services to the widely underserved masses in Egypt,” says Algebra Ventures managing partner Karim Hussein. “This exceptional team and their unique products are clearly Egypt’s next unicorn in the FinTech sector.”
The $120m announced in September was provided by private equity firms Apis Partners, Development Partners International and Lorax Capital Partners, as well as venture capital firms Venture Partners, Endeavour Catalyst and DisrupTech.
It is by far the largest financing round in the Mena region. Last year, Egypt-based start-ups raised a record $190m in funding and accounted for 22 per cent of deals in the Mena region, data platform Magnitt said in its 2020 Egypt Venture Investment Report.
There are several competitors in Egypt’s FinTech space, but Ms Shaker says “the market is huge”.
BNPL provider Shahry raised $650,000 in pre-seed funding in May 2020. Digital banking start-up Telda, founded in April this year, raised $5m in the region's largest pre-seed led by Sequoia Capital.
E-payment solutions company Fawry became Egypt’s first unicorn when it reached a market capitalisation of $1bn in August 2020. The company reported a net profit of 113.3m pounds in the first half of 2021, an increase of about 60 per cent year-on-year.
“The opportunities for investments are unprecedented. The return you can make in Egypt competes with any mature market and also competes heavily against the emerging markets,” Ms Shaker says.
In the first half of 2022, MNT-Halan is looking to expand to other countries in Africa with large, unbanked populations, and perhaps “one or two countries in South Asia”, Mr Nakhla says.
When asked about the possibility of an initial public offering, Mr Nakhla chose his words carefully.
“I don’t want to make any commitments. However, our group of shareholders is considering possible future plans of listing in the next few years.”
Date started: 2021
Founders: Mounir Nakhla and Ahmed Mohsen
Based: Cairo, Egypt
Size: ~3,000 employees
Investment: $120m+ (~$23.5m for Halan previously)
Investors: Apis Partners, Development Partners International, DisrupTech, Endeavour Catalyst, Lorax Capital Partners, Venture Partners