Small and medium enterprises (SMEs) have been Saudi Arabia’s economic backbone for decades, numbering more than 1.3 million. Yet, many have long struggled to secure the financing needed to grow. A funding gap estimated at over SAR 300 billion ($80 billion) has left countless businesses unable to manage cash flow, finance operations, or scale.

Now, that gap is beginning to close. Fintech startups are shaking up the status quo, leveraging technology to deliver faster, fairer, and more inclusive financing solutions and making credit more accessible to underserved businesses.

FINTECHS STEP IN

Among the frontrunners is Lendo, a debt crowdfunding platform that connects SMEs with retail and institutional investors. So far, Lendo says it has facilitated over $667 million in financing, yielding $33.3 million in returns for investors. 

In the construction sector, Aajil targets supply chain bottlenecks with its Build Now, Pay Later (BNPL) model. It has financed $66 million for nearly 500 SMEs and closed a $9.7 million round to fuel regional expansion.

However, micro-enterprises, representing roughly 87% of Saudi SMEs, remain the most underserved. These businesses often fall outside the radar of traditional lenders.

That’s precisely the gap Nayla Finance is trying to close. The Riyadh-based fintech offers Shariah-compliant Murabaha financing—up to $26,600—via a cloud-native platform designed for micro-businesses. Earlier this year, it raised $4 million in seed funding, earmarking $2.7 million for debt financing.

“We’re redefining microfinance for the digital age,” says co-founder and CEO Shaqran Alyahya. “Traditionally, micro-businesses in Saudi Arabia, those with under SAR 3 million ($800,000) in revenue, have had limited access to fast, reliable financing due to manual underwriting, lack of formal credit history, off-the-shelf products, and rigid collateral requirements.”

Instead, Nayla uses a proprietary credit engine that blends financial and alternative data signals to evaluate risk. “We’re serving segments long excluded from traditional finance, home-based businesses, e-commerce stores, and corner shops. Our model is built around small-ticket loans and high frequency, enabling us to scale while serving the capital needs of the most active market segment.”

LENDING VOLUMES SURGE

The impact is visible in the numbers. According to the Saudi Central Bank, total lending to MSMEs surged an impressive 31% year-on-year in Q1 2025, reaching $102.18 billion.

Banks disbursed around 95% of that capital, with fintechs and finance companies contributing the rest, indicating increasing institutional engagement in SME lending.

Micro-enterprises received the lion’s share, securing 82% of total lending year-on-year, or $14.24 million, compared to 35% for small enterprises and just 18% for medium-sized firms.

“This isn’t just a statistical uptick—it’s a reflection of a quiet revolution led by fintechs,” says Nameer Khan, chairman of the MENA Fintech Association and founder of sustainability-focused fintech Fils. 

“The first enablers weren’t lenders; they were the payment companies like STC Pay, Hala, Geidea, Nearpay, Tamara, and Cashin. They laid the rails by bringing tens of thousands of SMEs into the formal ecosystem.”

AI POWERS A NEW LENDING PARADIGM

As payments digitize, so too does creditworthiness. “When fintechs digitize transactions, they start building financial identity,” Khan explains. “That’s where AI steps in. While instant loans existed, the rise of AI is now allowing lenders to assess creditworthiness in real time, using hundreds of variables, not just collateral or credit history.

“We’re seeing a shift from gut-feel lending to data-driven underwriting. Fintechs are leading this because they understand the pulse of these merchants. AI isn’t replacing human judgment; it’s making it faster, fairer, and more inclusive.”

One of the startups driving this evolution is Abwab.ai. The company uses AI to automate traditionally manual underwriting processes, aggregating financial data to deliver instant credit decisions.

“We’re building the real-time credit infrastructure that banks and fintechs need. Our platform automates underwriting by aggregating cash flows, accounting, and transaction data, turning a 4-to-8-week manual process into an instant decision,” says Baraa Koshak, founder and CEO of Abwab.ai.

Since launching in 2022, lenders using Abwab’s platform have processed about $106.66 million in SME loans. Their AI engine flags risks, generates dynamic credit scores, and matches borrowers with appropriate financing, speeding up access while reducing default rates.

Now integrated with over 10 lenders, it is eyeing expansion to the UAE, Egypt, and the UK. “We want to become the default AI underwriting layer for underserved SMEs across the GCC,” Koshak says.

WHERE CAPITAL FLOWS—AND WHERE IT DOESN’T

While digital-first sectors are drawing heavy investor interest, others remain underserved. 

“A lot of capital is currently flowing into digital-first businesses, especially those in logistics, B2B services, and fintech—sectors that scaled post-COVID and continue to show strong fundamentals,” says Koshak. 

“On the flip side, traditional brick-and-mortar retail, offline distributors, and early-stage microbusinesses are still struggling to access formal credit. The gap often comes down to data visibility and financial track record.”

Khan agrees. “I’ve noticed a surge in fintech, logistics tech, healthtech, and F&B ventures that are asset-light but tech-forward. These digitally obvious businesses attract investor attention because they have data, visibility, and scale potential. Startups with recurring revenues or digital customer interfaces are in a sweet spot.”

But he also flags a broader equity issue. “It’s not about lack of capital—it’s about lack of visibility. And that’s where embedded finance, open banking, and data-sharing frameworks can be game-changers.”

CLOSING THE CREDIT GAP

For many micro-enterprises, credit remains out of reach due to age, lack of documentation, or perceived risk—issues that traditional lenders are reluctant to absorb.

“These businesses are often left behind due to their distinct risk profiles: young age of business, younger entrepreneurs, limited documentation, high default perceptions, and a cost-to-serve that many lenders view as non-compelling,” says Alyahya.

Even when financing is available, it often comes with strings attached.

“The result is a fragmented market where the smallest players have the fewest options,” Alyahya explains. “At Nayla, we’re changing that by building models that adapt to micro-business realities.”

EMERGING MODELS, EXPANDING POSSIBILITIES

Alternative financing models, such as revenue-based financing, supply chain finance, embedded lending, and Shariah-compliant offerings, are all gaining ground. However, awareness remains a hurdle.

“The appetite is there, but many SMEs still don’t know these tools exist or how to access them,” says Koshak.

Khan sees a deeper trend unfolding: “Invoice factoring, BNPL for SMEs, payroll-linked lending, and revenue-based financing are gaining momentum. The future of SME finance isn’t just about lending—it’s about liquidity intelligence.”

Invoice financing is especially valuable in a market where payments are often delayed by 60 to 90 days. “For a small business, unlocking that working capital can be the difference between survival and scale,” Khan explains.

POLICY AS A CATALYST

While fintechs are moving quickly, they’ve had a powerful tailwind: Saudi Arabia’s policy agenda. Vision 2030 has positioned SMEs as a strategic growth pillar, with support from credit guarantees to regulatory sandboxes and accelerator programs.

“What excites me is the mindset shift at the policy level. We’re moving from ‘financial access for individuals’ to ‘ financial enablement for MSMEs’,” Khan concludes. “In Saudi Arabia, Vision 2030 is not just a macroeconomic ambition—it’s a direct catalyst pushing banks, regulators, and fintechs to prioritize MSMEs.”