Egyptian scaleups are getting a structured shot at venture debt

Non-bank lenders Aman Holding, Bokra, and Erada Finance signed on to pilot venture debt (VD) for Egyptian scaleups under the Scale It Forward program, with 30 scaleups set to be selected this month. Co-developed by German development agency GIZ and enpact, the program gives each selected scaleup EUR 5k in non-repayable de-risking support to make lenders comfortable taking the risk.

Why it matters: The pilot itself could be small, but it aims to solve a structural challenge: getting financial institutions to engage with VD, an alternative growth-financing tool that’s not widely used in Egypt. The last data point we reported on Egyptian VD is from 2023, and it’s not encouraging. VD funding to local startups dropped 86% y-o-y to USD 4 mn that year, across just two transactions, a 75% drop in transaction count from 2022.

Risky for banks, costly for VC

Traditional financing models do not sufficiently accommodate high-growth, revenue-generating scaleups in Egypt, Sherif Younis, head of the Job Partnerships and SME Promotion in Egypt (JP-SME) project at GIZ Egypt, and Rawan Bassam, enpact’s Egypt country manager, tell EnterpriseAM. Profitability gaps, unpredictable cashflow, and no traditional collateral hinder these high-growth scaleups from accessing bank loans. In addition, venture capital (VC) solutions may not be the best option for them as “the price of their equity would be too high, and they don’t want to give up equity at this point,” Bassam says. Neither bank loans nor VC checks are built for this stage.

Scaleups that have outgrown equity but aren’t yet bankable need “a middle layer of capital, particularly in local currency,” Bokra founder and CEO Ayman El Sawy tells EnterpriseAM. USD-denominated debt exposes an EGP-earning company to FX risk it usually can’t absorb, he adds.

What is venture debt? It’s a type of lending offered by banks and non-bank institutions that typically combines the traditional features of a loan with some aspects of VC financing. It’s designed specifically for early-stage, high-growth companies that may not yet be in the black and do not qualify for a conventional bank loan, but are performing well and generating strong revenues. It’s not generally available to seed-stage companies, but it’s designed for companies that prioritize growth over profitability. (Our full 2022 explainer has more.)

How the program works

VD is developing locally but needs adaptation, Younis and Bassam say. The program adds structure around an existing arrangement and provides non-bank financial institutions with a structured environment to pilot VD solutions and better understand the financing needs of growth-stage Egyptian businesses. Additionally, it equips selected scaleups with screening, vetting, investment-readiness training, and non-repayable financial support to strengthen their financial positions.

The grant is about credibility. Each selected scaleup gets EUR 5k before any lender extends debt, money it never repays to the program. The lender’s own debt comes after, repaid with interest on an agreed schedule. “The goal of our support is to ease the burden on the scaleup when repaying the financial institution,” Bassam says.

Interest has picked up. The three FIs signed on in August, all non-bank financial institutions willing to activate VD products for growth-stage fintech, agritech, healthtech, e-commerce, climate tech, and digital services companies, Younis and Bassam tell us. The program was initially designed so that five FIs would take on six scaleups to pilot the VD solutions. However, after the selected FIs gained access to the curated scaleups pipeline, “this approach has changed, as some of the participating institutions have expressed interest in working with more than six scaleups,” they add.

How one lender sees it

Demand comes from three directions at once, El Sawy notes: Scaleups protecting their cap tables, VCs extending runway between rounds, and banks building a pipeline toward eventual bankability. “This creates a positive feedback loop: scaleups grow and graduate to bank debt, VCs see stronger returns and deploy more capital, and banks gain the confidence to lend to the sector,” he adds.

Venture debt “is a form of mezzanine financing” that sits in the middle of the risk spectrum, El Sawy tells us. It is “less risky than pure equity but riskier than traditional debt,” he adds. Lenders looking for hard collateral “will struggle to find a fit,” but those willing to take the risk and underwrite against growth and recurring revenue “will find a large and underserved market,” he says.

How scaleups are being assessed: From Bokra’s side, “The assessment focuses on revenue quality and growth, unit economics, cashburn and runway, management quality, existing investors, historical financial performance, repayment capacity, and the specific use of proceeds,” El Sawy says.

Without collateral, what’s the actual safety net? “Bokra’s protection comes from strong underwriting, cashflow visibility, and contractual controls,” El Sawy says, paired with Bokra Ventures, an in-house program working on strategy and governance before financing starts. Once money is out, a digital early-warning system tracks portfolio companies against KPIs — catching deterioration before it becomes default, he adds.

What would actually scale this up

Unlocking dedicated VD funds: What would accelerate VD in Egypt “would be the growth of dedicated VD funds in the region” paired with regulatory frameworks letting institutional and retail investors put capital into them directly, El Sawy says. Scaleup demand already exists, but what’s missing is capital earmarked specifically for VD, which could fund healthtech, edtech, logistics, agritech, and fintech scaleups while creating “a new investment asset class,” he adds.

IN CONTEXT- In February, the Egypt Startup Charter — led by the Ministerial Group for Entrepreneurship, alongside startup founders, investors, and support institutions — set out a plan to de-risk the ecosystem and remove bureaucratic growth barriers, targeting USD 5 bn in fresh VC inflows by 2031. The charter involved a USD 1 bn unified financing initiative to achieve the VC inflows target, which includes credit backing for VD as one of its five pillars, alongside a fund of funds run by MSMEDA and matching funds for angel and corporate investors.

Credit backing for VD serves as a critical market signal for institutional allocators, improving the risk profile at the individual-transaction level even where macro headwinds still dominate foreign LPs’ calculus, Foundation Ventures Managing Partner Mazen Nadim previously told us when the charter launched.

What’s next: Selection of the 30 scaleups is targeted for this month, with funding to follow. The program launched in January and runs through December 2026.

OUR TAKE- This framework remains an initial pilot rather than a fully developed market, and the 30 scaleups and three lenders or more won’t move Egypt’s financing landscape alone. Nevertheless, it will show the structural cracks in the local VD market while offering a model for tailoring debt mechanisms to the needs of both scaleups and financial institutions in Egypt.