Egypt’s fintech unicorn MNT-Halan is on a consolidation streak. The microfinance and payments startup has raised $157.5 million, partly using the money to acquire another fintech, Tam Finance, as it looks to expand into Turkey.
Tam Finans provides financing to micro, small and medium-sized enterprises. It currently operates 39 branches in 26 cities across Turkey and claims a 40% market share in Turkey. According to Mounir Nakhla, CEO of MNT-Halan, the deal will see the merged entity lend “just under $1 billion.”
The exact financial terms of the deal were not disclosed, but one component of the deal was equity. Tam Finans MNT-Halan is jointly owned by Actera, one of Turkey’s largest private equity firms, and the London-based European Bank for Reconstruction and Development (EBRD), and both will become shareholders in MNT-Halan.
This latest funding comes about 19 months after MNT-Halan raised $400 million in equity and debt, valuing the company at $1 billion after backer Chimera Investments acquired a 20% stake for $200 million.
MNT-Halan did not disclose the exact valuation of this round, but noted that it is now valued at over $1 billion. Tam Finance has raised over $30 million since its inception, mostly through debt, according to PitchBook.
Nakhla, who co-founded the company with CTO Ahmed Mohsen, told TechCrunch that the company began discussions with Tam Finance about 18 months ago. The Egyptian fintech saw it as a response to expanding its existing business, calling it “a great entry into the Turkish market.”
“Turkey is a country with a GDP of $1 trillion and a large population, just two hours from Egypt,” he added. “We see a huge opportunity to leverage the various products we have built in Egypt,” he said. These include our core banking system product Neuron, backend systems, app development and other services. “We plan to leverage Tam Finans’ scale, distribution network, management expertise and financial potential to establish a strong and significant presence in Turkey.”
Along with upselling to existing customers, there is also the opportunity to attract entirely new customers. With over 30% of the Turkish population unbanked, this has meant opportunities for many fintech hopefuls. Since the 2018 economic crisis, several fintechs, such as Tam Finans, have emerged to provide financing to Turkey’s unbanked population and operate in the areas of credit assessment, credit consolidation, and alternative lending.
Tam Finans’ specialty is “invoice factoring”, a form of alternative financing for small and medium-sized enterprises (MSMEs), where Tam Finans buys a company’s unpaid invoices in exchange for cash upfront. The company has developed a credit rating system that allows it to digitally approve and disburse loans to over 20,000 active businesses. It has a total loan portfolio of approximately $300 million.
MNT-Halan recently obtained a factoring license and plans to enter the factoring space in Q4 2024 to complement its current small business lending business.
To date, MNT-Halan claims to have disbursed more than $4.5 billion in loans and served more than 7 million customers (5 million financial customers and 3 million borrowers) in Egypt, up from $2 billion in loans to 5 million customers in January last year. At the time, Nakhla, which bills itself as the largest non-bank lender in Egypt, said businesses were receiving loans worth an average of $1,000 at an annual interest rate of 25 percent.
While lending is MNT-Halan’s primary business and main source of revenue, it also deals in a range of other products including consumer finance, prepaid cards, e-wallets, savings, payments, e-commerce, FMCG delivery (via acquisition), mobile POS payments, etc., all of which feed into its larger lending business.
In April this year, we launched a super app that brings all these services together under one roof. Nakhla is most excited about the growth of our prepaid card product, which allows users to access consumer finance limits on the app and shop with flexible payment options.
“Nubank is an inspiration,” he said. “They have about 1.8 million app users per quarter, and this card is the next big thing.”
According to Nakla, MNT-Halan has issued more than 130,000 cards since its launch four months ago and is currently issuing 1,000 to 2,500 cards per day.
The fintech company claims to have generated more than $300 million in revenue in 2022, and while it does not disclose more recent figures, it has since reported revenue growth of 35% year-on-year and 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 entity will reach $500 million to $600 million in revenue,” Nakhla said.
MNT-Halan's acquisition of Tam Finance follows its expansion into Pakistan in March, when it acquired a microfinance bank, and is “looking at other big moves,” according to Nakhla.
This growth investment, raised from existing investors including Development Partners International (DPI), Lorax Capital Partners, funds managed by Apis Partners LLP, Lunate and GB Corp, will facilitate this move. The investment also includes $40 million from IFC, which the World Bank subsidiary disclosed invested in the company in January last year. With this round, MNT-Halan has raised over $630 million in equity and debt.
