Egypt secured the third position in the Middle East and North Africa (MENA) region for receiving venture debt (VD) investments in 2023, amounting to $4 million, following Saudi Arabia and the UAE, according to the latest Magnitt report issued in June.
VD funding
Despite the ranking, VD funding into the Egyptian market dropped by 86%, while it increased by 602% in Saudi Arabia and by 222% in the UAE, the Magnitt report said.
Saudi Arabia received $400 million in VD funding in 2023, followed by the UAE at $353 million.
“VD activity in 2023 was primarily centered in Saudi Arabia, the UAE, and Egypt, accounting for 92% of the region’s venture capital funding. The UAE alone captured 47% of MENA’s VD lending. These countries are leading the charge in attracting and utilizing VD to drive economic growth,” said the report.
FinTech startups dominated the scene, representing 79% of the total VD lending in the MENA region in 2023, up from 68% in 2022. The report highlighted that 2023 marked a record-breaking year for VD lending in MENA, reaching an all-time high of $757 million, reflecting a year-on-year growth of 262%.
“Despite the decline in deals, VD lending has grown for the fourth consecutive year, reaching a new record high in 2023. This growth underscores the increasing appeal of VD as a minimally dilutive capital source. Investors and companies alike recognize VD’s value, leading to sustained growth in this sector,” the report pointed out.
VD lending in 2023 was 50 times higher compared to the level seen in 2020, with deal facilities growing threefold.
The report highlighted that this rapid growth reflected an increasing dependence on VD to support business expansion and innovation.
It emphasized VD’s role in the MENA financing ecosystem has expanded significantly, with the ratio of VD lending to equity financing rising from 1.4% in 2020 to 28% in 2023, largely driven by substantial investments in FinTech.
Cairo International Financial Centre
In March 2023, Egypt signed an MoU to establish the Cairo International Financial Centre in the New Administrative Capital, aiming to enhance investment flows into and out of Egypt through collaboration with local and foreign financial institutions. Egypt intends for this Centre to become the leading financial hub and primary platform for venture capital funds in the MENA region.
In 2022, Egypt’s largest state-owned banks – Banque Misr, National Bank of Egypt (NBE), and Banque du Caire – along with Global Ventures, a prominent venture capital firm focusing on the Middle East and Africa, launched Nclude by Global Ventures. This initiative, approved by the Central Bank of Egypt (CBE), began with an initial investment of $85 million.
The establishment of Nclude aligns with Egypt’s strategic vision to support young innovators and entrepreneurs, focusing on accelerating fintech innovation and driving financial inclusion across the country.
