The State of Crowdfunding in Saudi Arabia
Crowdlending transaction value in Saudi Arabia will amount to US$17.8m in 2021 according to Statista. The researchers add that in 4 years, the sector will show the annual growth rate of 3.95% and add another US$20.8 million by 2025. In contrast, the transaction value in the Crowdinvestin sector is projected to reach US$2.1m in 2021.
In this article, we will explore the Saudi crowdfunding landscape. You will learn about its key players and regulatory compliance authorities, too. Yallah!
What you will learn in this post:
Crowdfunding Opportunities in Saudi Arabia
As a part of “Vision 2030”, crowdfunding in the Kingdom allows startups to take off. Alternative financing creates opportunities for small and mid-size firms to scale and mature while also helps investors make handsome returns and diversify their portfolios.
There are many crowdfunding platforms in the MENA region that offer alternative financing opportunities for startups and real estate developers:
- Manafa is one of the first and most known players on the market. At Manafa, investors can explore different opportunities and filter projects by niche. They see founders’ info, check financials, and contact the founding team if they like an offer. The minimum investment amount is 1K SAR.
- Along with Manafa, Scopeer was a trailblazer in Saudi crowdfunding. Scopeer supports the ‘all or nothing’ model. If a business fails to raise the designated capital, contributions return to investors. The company uses third-party providers to perform due diligence. They help check a firm’s management and legal structure before listing a project.
- Lendo is another Shariah-compliant crowdfunding platform. With min capital of 1K SAR, an investor can expect yearly returns in the range of 9%-18%. For its risk assessment, Lendo considers companies’ turnover, age, and debt sector level. The opportunities with higher risks yield larger benefits. The investing period usually lasts from 1 to 6 months.
- At Forus, investors can make 6-20% of returns. The exact amount of profit varies. It depends on credit rating of a borrower, associated risks, and loan time. Forus goes beyond internal risk analysis. The company does extra checks. Its partners that focus on SMBs evaluations help it with due diligence.
- Raqamyah seamlessly connects businesses and investment firms. The platform offers 2 options. First, a system automatically selects projects for investors based on the pre-selected criteria. Second, an investor manually chooses a borrower and a project to invest in. He considers projects’ score, purpose, type, timeline, and profit margin.
- Founded in 2019, Ta3meed is among popular crowdfunding platforms in Saudi Arabia, too. The company appeals to investors who want to finance government purchase orders (POs). This way, they help local businesses and earn returns. After registering, an investor needs to deposit a minimum of 10K SAR.
Top Performers: Growing Market Segments
With increasing housing demand, real estate crowdfunding in Saudi Arabia might level up. Traditionally, real estate, hospitality, and construction were the key investing opportunities. But with global pandemic and plummeting oil prices, the focus shifted.
In H1 2020, Saudi-based startups received $95M of funds. This constituted a 102%-growth in comparison with H1 2019. E-commerce has been a top interest not only in Saudi Arabia but the whole MENA region.
Fact. The sector promises to skyrocket to 24BUSD by 2026. But wait – there’s more. There’s a leader in the niche and it’s grocery e-commerce. Earlier this year, grocery marketplace Nana, for example, made headlines. The startup raised 18MUSD in series B funding.
Another growing market to watch is logistics and delivery. A Saudi-born food delivery app Jahez, for instance, became the country’s grand funding deal. The company sealed 36.5MUSD in funding in June.
Beyond that, remote education and social learning accelerate. With COVID impacting every single aspect of our lives, the way we learn is no exception. Started as an easy test prep platform, an EdTech startup raised 13MUSD in pre-B series funding.
Rules and Regulators in the Kingdom
Earlier we wrote about crowdfunding regulations in Saudi Arabia. We spoke about the main authorities that control the whole ecosystem. Let us briefly recap.
The Capital Market Authority or CMA handles several things. The regulator creates and monitors compliance to financial rules and regulations. Additionally, its tasks include taking the local savings and investments sector to the new heights. Recently, CMA drafted changes to its Authorised Persons Regulations including:
- stricter risk and suitability assessment requirements;
- updated notification, disclosure, and reporting rules.
If you are looking for share ownership projects, you might want to read more about the process webs. Then, CMA is the source to learn more.
The Saudi Arabian Monetary Authority has been controlling many debt-based crowdfunding platforms. The regulator used its regulatory sandbox. The regulatory framework allows innovative startups to test their disrupting ideas. They can do it in a controlled environment.
But they have to submit market research that shows their idea is unique. Good news for an investor. Quality ideas go through pre-screening and a test phase before they end up on the market.
On top, a company must compare its technology key features against competition and show differences. So no look-alikes and other “facebooks” are likely to enter funding quests. Thus, an investor searching for an opportunity to grow wealth has better options at hand.
Similar to CMA, SAMA crowdfunding rules have an upcoming update in debt-based crowdfunding.
While the whole world is on hold and uncertain about what’s going to happen next, Saudis see a leap in food sales. This might mean a surge in tech startups trying to match supply with existing demand.
Social education is one more niche to take a close-up look at. Learning at home is no longer a comfort matter but a necessity shaped by the current state of affairs. Why not let your capital grow with one of the promising EdTech pioneers in an emerging market?
Finally, logistics is another smart way to grow your money. Last-minute delivery solutions and companies offering them are the game changers.
Crowdfunding platforms can monitor the development of the new industries and emerging trends to shape and adjust the marketing strategy in the post-covid environment. There are plenty of prospective startups and real estate projects which crowdfunding platforms can absolutely serve by providing various financing tools.
If you’re looking to build a crowdfunding platform in Saudi Arabia, UAE, or elsewhere in the MENA region, reach out to LenderKit to discuss your project.