Even though Funding Souq has yet to start public operations in Saudi Arabia, with initial approval received only in April 2024, the Islamic fintech is eyeing to deliver a 15% yield to its crowdfunding investors when the gates to its platform are opened in a few months’ time.
Founder and CEO Martin Jaouni explained to IFN Investor this confidence is premised on the fintech being able to partly unclog the current limited access to financing for local SMEs. “The market is there, the timing is right, the capital is available. So at least on paper, a lot of stars are aligned in Saudi Arabia.”
As a guide, Martin cited official figures from Saudi authorities that overall bank lending to SMEs was 8% in 2021, up from 6% in 2018. The target is for this ratio to reach 20% by 2030 with government support of guarantee programs, development banks and such.
Martin said Funding Souq will be part of the Saudi SME-lending drive and said the growth potential would extend far beyond 2030, noting this ratio stands at about 40% in the developed economies of OECD countries.
The confidence is also drawn on Funding Souq’s current operations in the UAE, which Martin said has a similarly underserved SME landscape — making up barely 5% of total bank lending.
Within Saudi Arabia, Martin said official figures showed the total funding gap to be around US$230 billion in 2021. Coupled with around a million registered SMEs, being a sizeable amount of potential borrowers, Martin readily admitted that a start-up like Funding Souq could hardly address this shortfall alone.
There are at least 12 Islamic crowdfunding and P2P platforms in Saudi Arabia including Funding Souq, according to IFN Islamic Fintech Landscape as at the 13th May 2024
Among the key restrictions is that a crowdfunding retail investor can place a maximum of SAR50,000 (US$13,320) in a single business and total annual investment is capped at SAR200,000 (US$53,290). Entry point starts from SAR100 (US$26.65). Also, all investors must be Saudi nationals.
For a quicker ramping-up of the vast capital needed, Martin said the initial focus will be on getting domestic institutional investors with bigger purses. “We have a good pipeline of SAR50 million (US$13.32 million) of commitments.”
WIth this capital funding ready, the fintech has lined up over 20 qualified leads of waiting SMEs. Martin anticipated the likelihood of one or two of these deals to be done by June 2024, if all regulatory approvals are received.
“We have also struck up partnerships who will help us scale up to 10 times more leads, of around 300. One is a company called Qoyod with thousands of businesses using their accounting services. We will integrate with them to finance their portfolio.”
