The thriving Saudi Shariah compliant financing sector can expect to welcome a new player: Funding Souq, a homegrown digital lending platform that has recently closed a successful seed round, which is hoped to support its transition to more Islamic financial transactions.
The US$2.5 million seed round was successfully closed with contributions from a consortium of angel investors including Amal Dokhan, a partner at 500 Global; Omar Aljeraisy; Christian Kunz, the head of strategy at a global financial center; and existing investors including Mazin Alzaidi, a partner at STV; Musaab Hakami; and IslamicFinanceGuru.
“With this round of investment, Funding Souq will scale its operations and aim to grow its debt investor partnerships with family offices and banks to focus on Shariah compliant financing,” the company, which was established in 2020, said.
Funding Souq is a platform that connects investors with established SMEs looking for funding worth around US$20,000 to US$150,000. Investors then realize an internal rate of return (IRR) of 20%.
The company has helped finance 47 SMEs across Saudi Arabia and the UAE within the first 12 months of its operations. In December 2021, it financed a portfolio of 25 businesses, which is on track to generate an IRR of 22% for the investors that participated. More than 60% of those investors are repeat investors, Funding Souq said.
The crowdfunding platform is also looking into entering new markets to serve SMEs in the wider Middle Eastern region.
“SMEs in the GCC are highly underserved by financial institutions and often don’t qualify for the financing they deserve as traditional lenders are overly conservative,” Martin Jaouni, CEO of Funding Souq, noted.
In Saudi Arabia, the Kingdom’s Vision 2030 has focused the spotlight on the local entrepreneurial and innovation ecosystem, enabling SMEs through several initiatives that prominently feature Islamic finance, including Sukuk and crowdfunding. The central bank’s regulatory sandbox currently lists three permitted fintech companies operating a crowdfunding platform, all of which also provide Shariah compliant solutions.