Peer-to-peer online lender in Saudi Arabia to help cash-strapped SMEs

Lendo offers pre-financing online to small businesses from individual lenders against outstanding invoices

Only 8 per cent of bank loans went to SMEs in Mena last year, according to a survey by the World Bank. Khushnum Bhandari for The National

A new peer-to-peer lender on Wednesday launched operations in Saudi Arabia, offering small and medium-sized enterprises quick access to much needed financing.

Lendo offers SMEs pre-financing online from individual lenders against outstanding invoices.

Access to funding is one of the biggest challenges facing small business owners in the region's two biggest economies, Saudi Arabia and the UAE, according to a 2019 survey by financial services company AT Kearney.

A World Bank and Union of Arab Banks survey found that only 8 per cent of all loans go to SMEs across the Middle East and North Africa. Since traditional bank loans can be difficult to secure, alternative financing products are springing up, and financial technology is stepping in to fill the market gap.

“Banks only work with six-figure loans that are lengthy in nature while Lendo has spent efforts to bridge that gap and welcome invoices of all amounts. Our vision is to enable SMEs to fully focus on their growth and lenders to access new market segments that can provide higher returns," said Osama Al Raee, chief executive at Lendo.

The start-up was co-founded by Mr Al Raee and Mohammed Jawabri with an undisclosed amount of venture capital backing from investors in the Middle East.

As a substitute to obtaining short-term finance, Lendo matches small businesses with alternative investors. The platform offers Sharia-compliant loans starting from 100,000 Saudi riyals (Dh97,940), with no minimum funding required from lenders. The aim is to provide immediate liquidity to businesses to invest in growth opportunities.

In the near-term, Lendo is looking to build a credit scoring engine for its platform and using artificial intelligence to support underwriting capabilities, according to the company.

Saudi Arabia, the largest economy in the Arab world, has been boosting alternative revenue lines following a three-year oil price slump that began in 2014. A pillar of its Vision 2030, the kingdom's overarching economic overhaul programme, is to increase non-oil economic growth by boosting the SME sector, which is a key component of its diversification efforts. SMEs are considered a pipeline for job creation and innovation.

There are currently 22 support initiatives for the private sector, such as cash subsidies and financing guarantees, which aim to strengthen its role as the main driver of economic growth and job creation.

The kingdom expects non-oil GDP growth to accelerate next year after increasing 2.5 per cent in the first half of this year, Finance Minister Mohammed Al Jadaan said last month. The overall economy grew 1.1 per cent over the same period.