In Egypt, a significant number of citizens don’t have access to standard banking services, leaving many dependent on cash transactions and unofficial loans. Khazna, a fintech enterprise established in 2019, is addressing this problem by providing financial services custom-made for low- and middle-income workers. The firm offers solutions such as salary advances, digital payments, and small loans to help employees and contractors gain access to essential financial services.

Khazna recently secured a substantial $16 million in pre-Series B funding, increasing its total funding to over $63 million. This investment will bolster its expansion plans as it gears up to apply for a digital banking license in Egypt and broaden its footprint into Saudi Arabia.

When we reported on the fintech in 2022, it had just raised $38 million pre-Series A and had over 150,000 customers using its products. Today, Khazna has expanded its user base to over half a million people, which is half of what it aimed to achieve by the end of 2022, according to what CEO Saleh shared at the time.

The company focuses on serving workers earning three times less than Egypt’s minimum wage, equipping them with affordable financial tools. Approximately 100,000 users receive their salaries through Khazna, enabling the company to integrate financial services such as loans and insurance directly into their payroll accounts.

For the other 400,000 users, Khazna provides lending services, helping freelancers and retirees gain access to credit. CEO Omar Saleh revealed that the company initially focused on payroll-backed credit and pension lending, contributing to its financial break-even last month.

“Our main focus over the past two and half years has been on our core product, which is credit offering to payroll and pension recipients as well as unsecured loans to gig workers,” co-founder and CEO Omar Saleh told TechCrunch on a call. “Perfecting this product was crucial as it has significantly contributed to our profitability.”

Becoming a Digital Bank

Khazna offers other services like bill payments, buy now, pay later, medical insurance, and a rent-to-own product. By incorporating both payroll and lending, it strategically positions itself to become a full-scale digital bank for Egypt’s underserved communities.

However, unlike traditional banks, Khazna, along with many other fintechs in Egypt, doesn’t have access to customer deposits. This makes funding loans costly. To date, Khazna has depended on wholesale debt financing in USD and EGP to fund its lending operations.

To cut down borrowing costs and offer more affordable loans, Khazna is now on a mission to obtain a deposit-taking license in Egypt. This license would allow the startup to accept customer deposits, thereby reducing its funding costs.

“The biggest game changer here is for us to get access to user deposits. There’s a massive opportunity for us to capture part of that market in a way that will significantly reduce our funding cost, and ultimately, that would put us in a uniquely advantageous position,” he remarked.

Khazna aims to secure the banking license from Egypt’s Central Bank by mid-2026, after the regulator laid out its regulatory framework for digital banks in July 2024.

Simultaneously, the six-year-old fintech is eyeing Saudi Arabia, where there is a growing demand for consumer finance solutions. Unlike BNPL players like Tabby and Tamara, which focus on short-term BNPL credit, Khazna hopes to stand out with medium-term credit products like earned wage access (EWA), payroll-backed lending, and pension-based credit.

Expansion Plans and a Potential IPO

Another reason why Khazna is focusing on Saudi is its strong ties with Egypt, as Saleh points out. With nearly three million Egyptians living in Saudi, the Egypt-Saudi remittance corridor is among the world’s largest, offering an opportunity to provide cross-border financial services, combining credit-led offerings with foreign exchange (FX) solutions.

Beyond market size and product fit, Saudi Arabia’s capital markets are also a driving factor in Khazna’s decision, according to Saleh. Tadawul is one of the region’s most liquid and retail-investor-driven stock exchanges, launching several IPOs over the past couple of years.

For this reason, Khazna plans to generate 40-50% of its business from Saudi in the next four years, making it eligible for a public listing on Tadawul. For early-stage investors who have backed the company for four to five years, Saleh says this provides a clear path to a high-value exit.

Surely, Khazna will fund this expansion with the recently raised growth capital. However, the macroeconomic challenges in Egypt over the past two years influenced the structuring of this pre-Series B round.

Between 2022 and 2023, Egypt faced currency devaluations and economic instability, making fundraising more difficult for startups and ventures. The overall slowdown in deal flow reflected this, as investors took a cautious approach to Egyptian startups. But 2024 brought a major shift, with over $50 billion in foreign direct investment (FDI) flowing into Egypt following economic reforms and a more flexible exchange rate. As a result, investor confidence returned, bringing renewed interest from global and regional investors.

As a result, Khazna welcomed participation from new and existing investors, including global investors like Quona and Speedinvest, as well as regional financial institutions and investment firms like SANAD Fund for MSME, anb Seed Fund (managed by anb Capital), Aljazira Capital (the investment arm of Bank Aljazira of Saudi Arabia), Tibas Ventures (the venture capital arm of İşbank of Turkey), Khwarizmi Ventures, Nclude (the fintech fund set up by Egypt’s largest national banks) and ICU Ventures.