Democratizing Investment Opportunities For MENA’s Underbanked Populations

Retail investors have become a powerful force in many developed markets, thanks to the growth of platforms like Robinhood in the United States and Freetrade in the United Kingdom that offer fee-free commission, ease of use and a wide range of investment choices for users.

In regions like the Middle East and North Africa (MENA), however, consumers lack access to similar solutions and haven’t had the opportunity to invest over the years.

Founded in 2020, Egyptian digital investment platform Thndr is looking to plug this hole and enable individuals in the MENA region, most of whom are underbanked, to invest in a range of stocks, bonds and funds via a mobile application.

“The issue is that people in the MENA region are not investing,” said Seif Amr, co-founder and chief operating officer of Thndr. “This kind of cascades into more problems. Most of the product offerings are not really relevant and are still very much analog.”

For most traditional investment products in the region, individuals have to engage in an outdated and slow process of physically going to a bank branch to open and manage their investment accounts.

Since individual investments are not widely used across the region, the level of financial literacy is relatively low, which is why beyond developing an easy-to-use app, Amr said educating their user base and raising awareness is key to ensuring they are well equipped and set up for success.

“We start off with education and then we provide this platform where you can learn,” Amr said. “You can connect with other peers and then actually invest in relevant offerings in the market.”

Commission-Free Monetization

Unlike traditional brokerage houses and financial institutions which have tailored their business model and product offering for the high-net-worth market, he said Thndr has purposefully built the platform to work for everyday individuals.

“We’re not just facilitating buying and selling or investing, we’re actually trying to become a source of information,” explained Thndr co-founder and CEO Ahmad Hammouda. “So, if you want to understand what is the stock market, what are mutual funds, what is this type of mutual fund; we are the go to place for you to learn this knowledge and then invest in the product that you want.”

These traditional institutions also monetize their products through commission which can be viewed by users as exploitative and for unethical gains. It’s the reason why Thndr has adopted a commission-free strategy and instead monetizes their solution through different revenue streams.

These include subscription features like access to real-time data and revenue-share agreements with asset managers that enable users to invest in mutual funds in addition to the stock market. Any idle cash sitting in a user’s Thndr account that is not being actively invested also generates interest for the company.

Related: Egyptian Startup Thndr Raises $20M to Make Investing Available to the Underbanked

To further accelerate its mission of democratizing access to investments for MENA’s underbanked population, the startup recently raised $20 million in a Series A round with plans to improve product development and expand their presence across the region.

Physical Signatures Are a Pain

Know your customer (KYC) and anti-money laundering (AML) checks are a top priority moving forward to protect users and keep illegal activity at bay. According to Amr, so far, they’ve been able to leverage their technology to enhance these checks without giving users unnecessary friction.

“We’re integrated with local players that cross-check details with what is supposed to be available on the ID, as well as integrating with the regulator that allows us to cross-check our list with the list of people banned due to bad behavior,” Amr noted.

Navigating the regulatory framework is another key issue for the growing startup, but according to Amr, the regulator has been very open minded and supportive since the company launched. For example, Thndr has received a full broker license — “it’s the first license to be issued in the country in the last 12 years,” Amr said.

Amr said a big challenge for the firm today is the government-mandated requirement for physical signatures to open any financial institution account, whether it’s a bank account, investment account or even to get a loan.

It makes it more difficult to scale, Amr explained, especially considering that more than 40% of their users come from cities outside the capital city of Cairo. However, he remains optimistic that the situation will improve over time.

“We’re closely engaging with the regulator and building this relationship because it is key to what we’re trying to achieve,” Amr said.

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