Saudi Arabia-based fintech company Erad has raised US$16 million in a pre-series A funding round.

This round was supported by investors including Y Combinator, Nuwa Capital, Khwarizmi Ventures, Aljazira Capital, VentureSouq, Oraseya Capital, and Joa Capital.

Founded in 2022, Erad offers Shariah-compliant, data-driven financing solutions for small and medium-sized enterprises (SMEs) in Saudi Arabia and the UAE.

The company provides funding access within 48 hours.

Erad plans to use the investment to expand its operations in Saudi Arabia and other markets.

The funds will also help enhance its product offerings and increase local hiring.

🔗 Source: Erad

🧠 Food for thought

1️⃣ MENA’s $240 billion SME funding gap represents a massive market opportunity

erad’s funding comes amid a staggering $240-250 billion credit gap for SMEs across the MENA region, highlighting why investors see potential in alternative financing platforms 1.

This gap exists despite SMEs constituting 96% of registered companies and accounting for approximately half of total employment in the region 2.

Traditional banks allocate just 7% of their lending to SMEs in MENA, the lowest rate globally, compared to 16% in the Asia-Pacific region. This creates an acute financing bottleneck 2.

The International Monetary Fund suggests closing this financial inclusion gap could increase annual economic growth rates by up to 1% and potentially create 15 million jobs by 2025 2.

erad’s traction with over SAR 2 billion ($532 million) in funding requests since launch demonstrates the massive unmet demand for alternative financing solutions tailored to the region’s needs.

2️⃣ Fintech becoming the dominant startup sector across MENA

Fintech has emerged as the leading investment category in the region, accounting for 30% of all startup funding in MENA (approximately $700 million in 2024) 3, 4.