Fintech
Egypt’s MNT-Halan Cashes in $157.5M, Absorbs Turkish Fintech to Expand
MNT-Halanan Egyptian fintech unicorn, is on the road to consolidation. The microfinance and payments startup has raised $157.5 million in funding and is using the money in part to fund its acquisition of another fintech, Tam Finans, to expand into Turkey.
Tam Finans provides financing to micro and SMEs. It currently operates 39 branches in 26 cities across Turkey and claims to have a 40% market share in the country. The combined entity resulting from this deal will have a loan portfolio of “just under $1 billion,” according to MNT-Halan’s CEO, Mounir Nakhla.
The exact financial terms of the deal were not disclosed, but one component of the deal involved shares: Actera, one of Turkey’s largest private equity firms, and the London-based European Bank for Reconstruction and Development (EBRD) jointly own Tam Finans MNT-Halan and both will become shareholders of MNT-Halan.
This latest funding comes about 19 months after MNT-Halan raised 400 million dollars in stock and debt, which brought the company to a value of $1 billion after one of the financiers, Chimera Investments, acquired a 20% stake for $200 million.
MNT-Halan is not disclosing its exact valuation with this latest round, other than to note that it is now over $1 billion. Tam Finans has raised over $30 million since its founding, mostly through debt, according to PitchBook.
Nakhla, who co-founded the company with the CTO by Ahmed Mohsen — said in an interview with TechCrunch that his company began discussions with Tam Finans about 18 months ago. The Egyptian fintech saw it as a counterpart to expand its existing business, “a great entry into the Turkish market.”
“Turkey is a country just two hours away from Egypt with a GDP of around $1 trillion and a large population,” he added. “We see a huge opportunity to capitalize on the various products we have created in Egypt.” That includes, he said, its core banking product Neuron; its backend system; and its app development and other services. “We intend to leverage Tam Finans’ scale, distribution networks, management experience and financial power to have a strong foothold and significant presence in Turkey.”
In addition to upselling existing customers, there are also opportunities to bring in completely new ones. Over 30% of the Turkish population remains unbanked, and this has presented an opportunity for many aspiring fintechs. Since the economic crisis of 2018, several fintechs such as Tam Finans have emerged to offer financing to the unbanked segments in Turkey, operating in the areas of credit scoring, credit consolidation and alternative lending.
Tam Finans specializes in “invoice factoring,” a form of alternative financing aimed at micro, small and medium-sized enterprises (MSMEs), where Tam Finans buys companies’ outstanding invoices in exchange for cash up front. The company has developed a credit scoring system that allows it to digitally approve and disburse loans to over 20,000 active businesses. In total, it has a loan portfolio of about $300 million.
MNT-Halan itself recently obtained a factoring license and plans to launch into this sector in the fourth quarter of 2024 to complement its existing business of lending to small and microenterprises.
To date, MNT-Halan says it has issued more than $4.5 billion in loans and served more than 7 million customers in Egypt (5 million financial customers and 3 million borrowers), up from $2 billion in loans to 5 million customers in January. At the time, MNT-Halan, which bills itself as Egypt’s largest lender to the unbanked, said businesses accessed loans worth $1,000 on average, paying 25% annual interest.
Lending is the core business and main revenue generator of MNT-Halan, but it also offers a range of other products, including consumer finance, prepaid cards, e-wallets, savings, payments, e-commerce, delivery of consumer goods (via a acquisition) and payments via mobile POS, all elements that flow into a larger lending operation.
In April, it launched a super app to bring all these services under one roof. Nakhla is very excited about the growth of the prepaid card product, which accesses consumer financing limits on the app and allows users to make purchases with flexible payment options.
“Nubank is an inspiration,” he said. “We have about 1.8 million app users on a quarterly basis, and the card is the next big thing.”
According to Nakhla, MNT-Halan says it has issued over 130,000 cards since its launch four months ago, and is currently issuing between 1,000 and 2,500 per day.
The fintech said it had more than $300 million in revenue in 2022, and while it is not disclosing more current numbers, revenue has grown 35% year-over-year since then, and it expects the same growth (in dollar terms this year) despite the sharp devaluation of the Egyptian pound. “Our forecast for 2024 is that the combined entities will reach between $500 million and $600 million in revenue,” Nakhla said.
MNT-Halan’s acquisition of Tam Finans follows its expansion into Pakistan in March, where it acquired a microfinance bank, and is “exploring other big moves,” according to Nakhla.
This growth investment raised from existing investors including DPI (Development Partners International), Lorax Capital Partners, funds managed by Apis Partners LLP, Lunate and GB Corp, will facilitate these moves. The investment also includes $40 million from IFC, a World Bank subsidiary money revealed that he was investing in the company last January. With this round, MNT-Halan has raised over $630 million in equity and debt.