When Baraa Koshak launched Abwab AI three years in the past, his goal wasn’t to construct one other lender, it was to resolve the deeper, structural downside holding again SME finance throughout the Center East: inefficient underwriting.
In a dialog with Mark Walker at The Fintech Instances on the Dubai Fintech Summit this month, CEO Koshak defined: “It’s not the dearth of capital, particularly within the area. We’re grateful sufficient to have the federal government assist and the quantity of capital that’s focusing on these SMEs. However the situation then turns into an operational situation.”
Abwab AI, headquartered in Riyadh, automates SME underwriting by utilizing machine studying and transaction information to evaluate creditworthiness, turning what is usually a multi-week handbook course of into an on the spot choice.
“Should you actually drill into it, on common now out there, it’s taking 4 to eight weeks to answer an software of an SME, if they need to get financing or not,” he mentioned. “Why? As a result of essentially, it’s a really handbook course of.”
From Revolut to Riyadh
Koshak’s journey to Abwab AI started with hands-on expertise in fintech. “I based the primary licensed fintech in Saudi… and I used to be the chief product officer there. I took it from no licence, no product, to half 1,000,000 particular person clients, 80,000 enterprise accounts,” he mentioned.
That success caught the eye of Revolut, the place he was recruited to assist develop the platform to 12 international locations.
Throughout his time there, he additionally labored on “optimising the efficiency of the machine studying fashions that extract behavioural insights from transactional information”, he revealed. It was this expertise that helped him establish a serious alternative within the Gulf: utilizing cash-flow information to guage companies with out formal credit score histories.
“After I took a more in-depth look into the markets within the Center East generally,” he mentioned, “I realised it’s… the inefficiency within the course of and the dearth of insights that permits lenders to finance these SMEs with confidence… which is a pure know-how play.”
Fixing for native gaps
Saudi Arabia’s lending ecosystem is evolving quick, however many small companies nonetheless fall by the cracks. Conventional credit score indicators, like audited financials and bureau studies, are sometimes unavailable or outdated.
“For micro and small companies, they’re both unaudited or they’re delayed six to eight months,” mentioned Koshak. “Credit score bureau information provides you a historical past of their credit score publicity, however the enterprise didn’t actually get the credit score earlier than. They don’t have a report for it.”
Abwab addresses this hole by producing “various cash-based credit score indicators”. The aim is to allow banks and fintechs to confidently lend to SMEs that will in any other case be excluded.
To date, it’s working. Since popping out of stealth six months in the past, Abwab AI has helped course of over $400million in SME loans. “It’s been loads of sleepless nights,” Koshak admitted.
Regional growth and international ambition
From a base in Saudi Arabia, Abwab AI is now increasing into Egypt, the UAE and the UK. “We’ve began in Egypt and UAE and lately within the UK,” Koshak mentioned. “We’re seeing the ache level fairly related, however fairly variant in each totally different area.”
Every market poses distinctive challenges. Within the UAE, he famous, “there’s an enormous situation of skip fee, the place individuals come, open companies after which bounce.” Within the UK, in the meantime, “the information is far more out there… however the course of continues to be fairly handbook inside most monetary establishments.”
So why develop right into a developed market just like the UK? “Thirty per cent of all SME financing there’s from fintechs,” Koshak defined. “Round 10 to twenty per cent of those fintechs even have constructed the complete underwriting know-how that’s totally automated, and the remainder are nonetheless not there but.”
The corporate’s mannequin is a B2B2C play: enabling monetary establishments to scale quicker, and, more and more, serving to them discover shoppers too. “We obtained these lenders on board, after which the lenders are asking for extra… we began integrating with principally platforms like Promote and the likes to hyperlink their consumer base to the lenders that we work with.”
In Egypt, the place the market is giant however risky, Koshak sees each a problem and a serious alternative. “With what’s taking place with the forex currently… rates of interest are actually spiking. However nonetheless, the market must survive… particularly these SMEs, they need to carry on going.”
A scalable resolution with native customisation
Regardless of the variations throughout areas, the core platform stays the identical. “Should you’re promoting a SaaS resolution… it ought to work throughout areas,” mentioned Koshak. “There’s a little bit of personalisation, customisation, however many of the personalisation is definitely within the gross sales journey, not within the product itself.”
To take care of high quality, Abwab’s machine studying fashions are educated on assorted information from throughout markets. “Financial institution statements are structured in another way within the UAE and Saudi and Egypt,” he mentioned. “So can we produce the identical degree of credit score indicators throughout these totally different markets or not?”
That’s one motive the corporate is intentionally pushing into a number of markets early: to make sure the robustness of its know-how. “If we restrict ourselves to at least one market now, then we threat principally being tremendous tailor centered.”
Staying infrastructure-only
Abwab AI has no plans to change into a lender itself. “We nonetheless assume, from what we’re seeing out there, the difficulty isn’t capital,” mentioned Koshak. “There may be loads of curiosity from BlackRock, JP Morgan, non-public credit score funds that need to deploy within the area.”
As an alternative, he sees Abwab’s position as “that infrastructure participant” that makes it viable for capital to succeed in SMEs, with out changing into a monetary establishment itself. “We are able to allow that capital to succeed in really these SMEs with out essentially being the direct originators out there.”
Transferring ahead
Attending his first Dubai Fintech Summit, Koshak was upbeat concerning the connections being made. “We have now a goal within the crew. We need to get at the very least three POCs out of this,” he mentioned. “Fairly stoked about it and we expect we will get it up and working.”
Abwab AI is one in all a number of fintechs within the Gulf trying to make SME lending quicker and extra accessible – not by competing with banks, however by serving to them make smarter, faster selections. In a area the place small companies are the spine of the economic system but usually battle to entry credit score the precise know-how could make a significant distinction.
As Koshak summed it up: “If we automate the entire course of, then the choice – it may be on the spot.”