Khazna, an Egyptian fintech startup, has secured $16 million in pre-Series B funding, bringing its total funding to over $63 million. The investment will support the company's expansion plans, including its application for a digital banking license in Egypt and its entry into the Saudi Arabian market.

Khazna, founded in 2019, focuses on providing financial services to low- and middle-income workers, who often rely on cash transactions and informal lending due to limited access to traditional banking. The company offers solutions such as salary advances, digital payments, and microloans to help employees and contractors access essential financial services.

Since its last funding round in 2022, Khazna has grown its user base from 150,000 to over 500,000 people, with around 100,000 users receiving their payroll through the platform. This integration enables Khazna to offer financial services like loans and insurance directly into their payroll accounts. The remaining 400,000 users benefit from lending services, including gig workers and pensioners who can access credit.

CEO Omar Saleh attributed the company's break-even point last month to its focus on payroll-backed credit and pension lending. Khazna's strategy is to embed itself into both payroll and lending, ultimately becoming a full-fledged digital bank for Egypt's underserved communities. The company provides additional services, including bill payments, buy now, pay later, medical insurance, and a rent-to-own product.

However, Khazna faces a significant challenge: unlike traditional banks, it does not have access to customer deposits, making it expensive to fund loans. To address this, the startup is working to obtain a deposit-taking license in Egypt, which would allow it to accept customer deposits and lower its cost of funds. Khazna aims to secure the banking license by mid-2026.

In addition to its expansion plans in Egypt, Khazna is setting its sights on Saudi Arabia, where there is a growing demand for consumer finance solutions. The company hopes to differentiate itself with medium-term credit products like earned wage access, payroll-backed lending, and pension-based credit. Khazna's strong connection with Egypt, where nearly three million Egyptians live in Saudi Arabia, presents an opportunity to offer cross-border financial services, combining credit-led offerings with foreign exchange solutions.

Khazna's expansion into Saudi Arabia is also driven by the country's capital markets, which offer a clear path to a high-value exit for early-stage investors. The company plans to have 40-50% of its business coming from Saudi Arabia in the next four years, making it eligible for a public listing on Tadawul.

The pre-Series B funding round was structured in response to the macroeconomic challenges in Egypt over the past two years, which included currency devaluations and economic instability. The round saw participation from new and existing investors, including global investors like Quona and Speedinvest, as well as regional financial institutions and investment firms.

Khazna's successful fundraising is a testament to the renewed investor confidence in Egyptian startups, following economic reforms and a more flexible exchange rate. The company's expansion plans and digital banking license application mark a significant milestone in its journey to provide financial services to Egypt's underserved communities.