Funding rounds highlight the investor confidence in the Middle East BNPL sector in 2023

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Despite the bearish market sentiments in the global buy now pay later sector, the Middle East region is showing a strong growth potential. Low credit penetration, coupled with favorable regulatory oversight, are among the factors that are expected to aid the growth of the BNPL industry across the Middle East in 2023. Investor confidence is also high when it comes to the growth potential of the BNPL market and this is evident in the different funding rounds raised by providers.

• In January 2023, Tabby, one of the leading BNPL firms based in Dubai, announced that the firm had raised US$58 million in its Series C funding round, which included participation from Sequoia Capital India, PayPal Ventures, STV, Arbor Ventures, Mubadala Investment Capital, and others. With the Series C round, the firm is now valued at US$660 million.

The demand for BNPL services offered by Tabby is driven by the growth of the e-commerce sector in the region. As the trend of online shopping continues to grow across the Middle East over the next five years, PayNXT360 expects the BNPL penetration to accelerate subsequently, thereby aiding the growth of the industry from the short to medium-term perspective.

Alongside Tabby, other regional firms are also seeking to capitalize on the growing use of deferred payment methods in the e-commerce sector. For instance,

• In April 2023, Shaker Group, the Saudi Arabia-based manufacturer and distributor of home appliances, announced that the firm had acquired a 10% stake in Cashew, another BNPL provider in the Middle East. With its investment in Cashew, Shaker Group is planning to strengthen its e-commerce and retail platforms.

In collaboration with Cashew, Shaker Group is expected to offer its customers a digital financing solution. This will enable the firm to leverage the growing adoption of the BNPL payment method among customers while unlocking the growth potential in the e-commerce sector.

The growing adoption of BNPL schemes in the e-commerce sector also presents a growth opportunity for foreign providers. Consequently, PayNXT360 expects foreign BNPL players to expand their presence in the Middle East region, before the payment method becomes the standard in the online shopping space.

While regional firms are seeking to expand their market share in the fast-growing sector, a few of the players are also exploring to expand their business outside of BNPL. To support their expansion plans and drive business growth, these firms are also raising capital in the Middle East.

• In March 2023, Tamara, another leading player in the segment based in Saudi Arabia, announced that the firm had secured a US$150 million debt facility from Goldman Sachs. Since its launch in September 2020, the firm had raised a total of US$366 million in equity and debt funding rounds.

In addition to supporting the accelerated demand for its BNPL product, Tamara is also planning to use the capital for expanding its presence in other business verticals. The firm, notably, intends to build a presence across retail, payments, and banking, where it sees a much deeper demand to fulfill with its technology.

These multi-million-dollar funding deals announced by Middle East-based BNPL providers are a clear indication that venture capital and private equity firms are foreseeing a strong growth potential in the regional market over the next five years. As the demand for making payments on credit continues to grow in the Middle East, BNPL usage is poised to experience accelerated growth.

Consequently, PayNXT360 expects more venture capital and private equity funding to enter the Middle East BNPL industry over the next three to four years. This will not only drive the industry growth but will also aid innovation from the short to medium-term perspective. The BNPL sector in the Middle East is also projected to experience an influx of foreign BNPL providers over the next three to four years, owing to the favorable regulatory environment across the region. As a result, PayNXT360 expects the competitive landscape to grow at a rapid rate in the Middle East BNPL market from the short to medium-term perspective.

To know more and gain a deeper understanding of the BNPL market in the Middle East, click here.