EMEA FinTechs Step up to Plug Small Business Finance Gap

In an area once dominated by banks, EMEA FinTechs are now major SMB lenders.

Across Europe, Middle East and Africa (EMEA) region, a generation of FinTech lenders are shaking up the way small and medium-sized businesses (SMBs) access finance. And if recent events are anything to go by, demand for their services has surged.

So far this year, Liberis, iwoca, Lulalend and MNT-Halam have all announced additional fundraising rounds to help grow their respective SMB lending platforms and meet the demand for alternative financing solutions.

To get the ball rolling, London-based embedded finance provider Liberis announced last month that it had raised an additional 30 million euros ($32.6 million) on top of the 140 million pounds ($172.57 million) the company raised in September, with plans to grow its receivables financing proposition across the continent.

Then this month, South African FinTech Lulalend announced a $35 million Series B round to help fund its SMB lending platform, stating in a blog post that the new capital “will allow us to service the surging demand for the fast access to working capital we offer businesses.”

Also this month, another British FinTech, iwoca, extended its credit line with Pollen Street Capital from 125 to 170 million pounds ($150 to $204 million) after seeing the total number of SMBs it funded across the U.K. and Germany increase by 54% in 2022.

Cost of SMB Loans Rising

For iwoca and its peers, demand from SMBs comes at a time when small business loans have become more expensive and harder to come by in the U.K.

As PYMNTS has reported, less than half of small business loan applications in the country were successful during the third quarter of 2022. This marks a dramatic shift from pre-pandemic when nearly two-thirds of applications were successful.

In fact, across Europe, credit standards have tightened in recent months, reflecting an uncertain macroeconomic environment.

Commenting on the latest funding news, iwoca CEO and Co-founder Christoph Rieche said, “Businesses up and down the country are in need of instant working capital to manage the increased pressure on their cash flow” — a gap the company is looking to fill today.

Looking farther south, Egyptian FinTech MNT-Halam announced earlier this month, in one of the biggest capital raises of 2023 so far, that it had netted an additional $400 million in funding at a valuation of over $1 billion.

Investment firm Chimera Abu Dhabi provided over half of the fresh capital, having invested more than $200 million in exchange for over 20% of the company. Other investors include the International Finance Corporation (IFC), which last month disclosed that it will invest up to $40 million in the FinTech firm, per a PYMNTS report.

Explaining the rationale behind its decision, the IFC, which acts as the private investment arm of the World Bank, said that the injection of capital “is expected to promote increased access to finance for micro, small and medium enterprises (MSMEs) and consumers in Egypt.”

The IFC added that it also anticipates that the investment will help improve competitiveness in the Egyptian MSME finance market by “supporting a leading innovator that leverages technology to provide competitive MSME and consumer credit at scale.”

For all PYMNTS EMEA coverage, subscribe to the daily EMEA Newsletter.