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Saudi Arabia-based fintech savings platform Hakbah has raised its first round of institutional capital.
In a pre-Series A round worth US$2 million, Hakbah got support from Dubai-based venture capital firms Global Ventures and Aditum Investment Management. The funding follows approval granted by the Saudi Central Bank (SAMA).
The investment will be used to accelerate Hakbah’s presence in Saudi Arabia, improve its user journey, and enhance its savings engine algorithm.
“Savings are an important pillar of the Financial Sector Development Program and increasing them is a key focus for Saudi Vision 2030,” said Naif AbuSaida, founder of Hakbah, in a statement. “Hakbah will play a key role in supporting this goal by widening its savings offering and partnerships for employees, gig-workers, students, housewives, and many others.”
Noor Sweid, Managing Partner of Global Ventures, added, “While savings groups are the most popular form of alternative borrowing for unbanked groups in emerging economies, various pain points still define the user experience. These include inefficiencies in identifying and managing savings groups, to a lack of transparency, flexibility and consistency in payments. Hakbah is stepping in to digitize the $6 billion rotating savings and credit association (ROSCA) market in Saudi Arabia, and the wider region.”
AbuSaida founded Hakbah after noticing a savings crisis in the MENA region where, for example in Saudi Arabia, 70% of Saudis do not have emergency savings and the household savings rate averaging 1.6% only.
In an interview for Entrepreneur Middle East, AbuSaid explained that there are a few reasons why the MENA region has a low savings rates compared to other emerging and developed economies. “The social safety net and the pension systems are either inadequate or underdeveloped which has resulted in individuals and households not prioritizing savings for the future, and instead relying on family support or government assistance,” he said. “Also, many regions in MENA have a large young population. With some of the population relying on dependents, it leads to lower savings rates as households need to allocate more income to consumption.”
He added that Hakbah contributes to various governmental initiatives to increase savings, financial literacy, and financial inclusion, such as the Saudi Arabia Zood savings program by Saudi Development Bank, and Dirhami by the Abu Dhabi Council for Economic Development (ADCED). “What Hakbah is doing is simple and intelligent,” he said. “We digitalize the traditional way of savings in an innovative way. Our first product is focused on social savings, aka Jameya. This is group savings with the purpose to spend on financial needs. This has an important factor of social solidarity (Takaful in Islam). People help each other by prioritizing their need of the total amount over time, compared to other people’s needs and sharing the pool of money to rotate among them. Hakbah’s focus is on short-term savings to spend, to help increase financial inclusion and financial literacy, and build an understanding of the importance of savings.”
However, AbuSaida added that the best way to educate the market on the importance of savings is to understand their needs and culture. “What we do at Hakbah, is offer a solution to save with a hustle. It is a solution based on a cultural financial habit and is attached to their feeling of helping others and themselves,” he explained. “This is the first step to move many households and individuals into savings. For 20% of our serviced customers, this is the first time they are using Jameya. We are expanding the market with new savers and are answering their needs by making it easier for people to save with a purpose.”
Hakbah reported that its organic growth in 2022 was over 20x, as it helped 18,000 customers save over $35 million. It strengthens financial inclusion via social savings, and this value proposition has driven unprecedented demand from 120,000 active, verified and ready-to-serve customers on its platform.
Indeed, the culture of savings in Saudi has been rising since the COVID-19 pandemic, AbuSaida added. “I’ll give some real examples in Saudi Arabia from our Hakbah customers. 70% of our serviced customers are 21-32 years old, which is below the average expected savings age rate,” he explained. “We have some customers who have just turned 18 and 19 years old and are saving SAR 300-500 in our Jameya to buy new iPhones or start small ecommerce for mobile accessories or T-shirts. This highlights the change we see in mindsets towards savings in Saudi Arabia. We are building the foundation for savings, independency, and financial literacy.”
In conclusion, his advice for other founders raising funds is three-fold. “Focus on your vision and exceptional performance, and the funding will follow,” AbuSaida said. “You’re a business person, and your company must be profitable at some point, so the purpose of funding is to boost it to the next phase, not to keep you alive on the edge of operation. And lastly, raise fast.”