The digital lending industry in MENA is expected to reach a net valuation of $1,482.10 million by the end of 2027, witnessing a CAGR of 17.4%. While there is a wide catalogue of contributors to this rapid growth, two of the most prominent ones are the government’s continued investments in the sector and rising internet penetration, both of which are actively bridging the gap between lenders and credit-hungry communities.  

Thus, as a fintech evangelist, it is clear to see that the digital lending industry in MENA will continue rapidly evolving, but the question remains, what are the fundamentals you need to keep in mind to claim your stake in this gold rush?  

That is exactly what we will be discussing in today’s blog post.  

Current Market Gap  

The digital lending industry across MENA has been ripe for disruption for some time now. However, limited digital literacy and slow adaption of technology are the two main factors which have slowed its pace.  

For instance, P2P lending only arrived at MENA in 2013 when Liwwa and Beehive set out to address the $300 billion consumer credit gap. While digital lending products such as BNPL and P2P have gained considerable traction in global markets such as the US, UK, and China, consumers across MENA are only now warming up to the possibilities of leveraging innovative digital lending instruments.  

In addition, SMEs across the region reportedly have access to the same credit instruments as regular consumers. That means they cannot easily access affordable digital credit instruments. Although SMEs create 9 out of 10 jobs in most economies, underserving this credit-hungry community hampers future job prospects and economic growth.

For instance, the IFC recently estimated that across the MENA region, there is an SME credit gap of more than $195 bn & nearly 34% of all SMEs are either fully or partially constrained due to the lack of access to affordable credit instruments.  

Why the Market is Growing Now? 

The digital lending & fintech market, in general, is witnessing a period of revival through renewed growth & this is evident in the fact that almost one in four investment deals in recent times involved the fintech sector.  

A recent report by Redseer revealed that in 2021, the MENA fintech sector received over 30% of total funding. Remittances and payments had the highest number of deals, while digital lending fintechs raised the most funds.

While these fresh investments in the sector are an impetus for growth, the question remains as to why the industry is witnessing a revival now after a period of downturn.  

Our research points out three prominent factors:

• Increased government investment in infrastructure  
• Expansion of digital literacy among consumers 
• Establishment of digital databases for facilitating advanced processes such as eKYC, digital signature and credit scoring  

The digital lending industry or the digital economy in any country runs primarily on the factors shared above. Therefore, it is easy to see why these factors are driving the change. 

List of Popular Digital Lending Instruments 

The opportunity for digital lending companies in MENA is unique. The region has a large digitally literate young population with a high affinity for new financial instruments. Fintechs in the region can easily experiment with innovative offerings. This attracts more fintech institutions and encourages existing players to enhance their services.

Now while data on the popularity of specific lending instruments is not publicly available, developments within the subcategories of the industry can be noted.  

For example, in consumer lending, BNPL and P2P lending are growing rapidly, with startups filling the $300 billion credit gap. Similarly, in commercial lending, companies like LNNDO are simplifying SME loan processes and making progress. 

Today, the most popular P2P lending platforms in the region can fulfill loan campaigns of $80k to $500k in less than 5 minutes. SME lenders like LNNDO are extending working capital loans up to $100,000 to hundreds of SMEs in less than a week with zero collateral. These metrics, along with others, indicate the rapid growth of both the consumer and business lending ecosystem across MENA.  

In Conclusion 

The “Voice of Consumer” survey conducted by Redseer revealed that the current adoption of lending fintech among consumers in the MENA region is only 7 percent. However, the survey also indicated that the future intent to use digital lending services exceeds 38 percent. Considering the current rate of growth, it is highly likely that the day when digital lending becomes a mature industry in MENA is approaching rapidly.