MENA’s Credit Ecosystem is Fragmented. How is Embedded Finance Quietly Solving It?

The Credit Gap Holding Back MENA’s SMEs

Small and medium-sized enterprises (SMEs) form the backbone of MENA’s economies: accounting for up to 90% of businesses and more than half of formal. Yet they remain critically underserved by finance. Banks have traditionally lent only 7–8% of their credit portfolios to SMEs in MENA, the lowest share in the world. In some Gulf countries, SME lending is as low as 2% of total bank. This fragmentation extends beyond SMEs to gig workers and micro-entrepreneurs, who often lack the collateral or credit history banks demand.

Why aren’t banks meeting this huge demand? Simply put, serving these segments with traditional methods is costly and cumbersome. Underwriting each small business or gig worker loan through manual processes can take weeks. In fact, it takes 4–8 weeks on average for banks to respond to an SME loan application in many MENA markets, largely due to paperwork and in-person. Such lengthy, high-touch processes drive up onboarding costs, making small loans uneconomical for banks. Many lenders also still rely on rigid criteria – audited financials, established credit history, physical branch visits – which most micro and small businesses cannot fulfill. The result is a massive financing gap: entrepreneurs are forced to rely on personal funds or informal lenders, while banks miss out on a growth opportunity.

This status quo is starting to change. Across MENA, a wave of fintech innovation is quietly stitching together the broken credit ecosystem. Embedded finance, integrating financial services seamlessly into non-bank platforms is emerging as a game-changing solution to reach SMEs and gig workers where traditional banking falls short.

A New Breed of Financial Access: Embedded Finance

Embedded finance refers to baking financial products like payments, lending, or insurance into the platforms and apps people already use, rather than requiring a separate trip to a bank.

Instead of forcing businesses to adapt to banks’ processes, embedded finance brings credit to the customer, invisibly woven into their everyday workflows.

This model is taking off globally and in MENA. Globally, the embedded finance market is projected to reach $7.2 trillion by 2030. Closer to home, MENA’s embedded finance market (worth around $10–11 billion in 2024) is forecast to soar to $37 billion by 2029, growing twice as fast as the global average (driven by fintech innovation, open banking, and a young digital-savvy population). Regional governments are also pushing initiatives like open banking APIs and fintech sandboxes, which provide the plumbing for these integrated solutions.

Most importantly, business customers are eager for these new models. A recent global survey found that 82% of SMEs feel overlooked by traditional banks, and would switch to an embedded financial service if their business software or marketplace offered one. In other words, the vast majority would prefer getting payments, loans, or credit through the platforms they already use over dealing with a bank branch. Similarly, 64% of SMEs believe that software platforms or marketplaces offering integrated financial services can serve them better than banks. This sentiment is likely just as true in MENA, given the region’s high fintech adoption. In the GCC, over 65% of SMEs already prefer digital banking channels, and there is growing demand for Sharia-compliant embedded finance products tailored to local needs. The message is clear: small businesses want fast, convenient, contextual finance – not bank bureaucracy.

How Embedded Finance Is Bridging the Credit Divide?

Embedded finance is succeeding by flipping the distribution model. Instead of expecting SMEs or gig workers to come to a bank, it enables non-bank players to offer financial services directly at the point of need. In effect, everyday platforms are becoming the new bank “branches”, delivering credit and finance invisibly through smarter integrations and AI.

Consider a few examples of how this is playing out in MENA and beyond:

• Point-of-Sale (POS) Providers – Payment processors and POS vendors are leveraging transaction data to extend credit to merchants. For instance, fintech platforms now let small retailers get revenue-based financing and instant working capital advances through their POS systems based on daily sales. Instead of a lengthy loan application, a shop owner can accept an embedded loan offer right on their card reader or merchant app, repayable as a percentage of their future sales. This turns payment devices into credit-delivery channels. In Saudi Arabia, payment gateway PayTabs partnered with fintech FlapKap to offer business financing within the payment platform – so merchants using PayTabs can obtain growth capital seamlessly as they process.

• B2B Marketplaces and SaaS Platforms – Online marketplaces and software that SMEs use are embedding financial tools like lending and insurance. E-commerce marketplaces offer sellers short-term loans to buy inventory, repaid from their sales on the platform. According to a Visa-affiliated study, 77% of SMEs globally are considering switching to a software platform that provides integrated financial services. No wonder – it means an SME can handle sourcing, sales, and now financing all in one place. “Businesses can now access revenue-based loans, invoice factoring, or instant credit directly through their e-commerce or B2B marketplace,” says one expert, instead of turning to a bank. Even accounting and ERP software are adding embedded financing – for example, offering a working capital line when the software sees a cash flow gap in the company’s ledgers.

• Logistics and Supply Chain – Perhaps one of the most fragmented sectors is logistics, full of independent truckers and small distributors. Here, too, embedded finance is stepping in. Think of a logistics company issuing its own virtual corporate card to truck drivers for fuel and expenses, or a freight platform offering on-demand payment terms to shippers. These services use real-time delivery data to manage risk. By integrating finance into supply chain platforms, drivers can get fuel advances or vehicle financing when they need it, and shipping clients can access trade credit at the click of a button. All without a traditional lender in sight.

• Gig Economy Apps and Telcos – Telecom operators and ride-hailing or delivery apps have begun to embed financial products for their users. In the UAE, for example, Etisalat and Uber have experimented with providing micro-loans, insurance, or savings tools to gig drivers and couriers through their apps. These players have rich data on user earnings and behavior, which can be used to underwrite credit. Telcos, tech retailers, and even utilities in MENA are rapidly embracing embedded finance to tap new revenue streams and enhance customer stickiness. From airtime credit and device financing to in-app wallets, non-bank brands are becoming financial service distributors.

What makes these embedded offerings so powerful is technology. Because they sit on troves of alternative data (payments history, platform ratings, delivery timeliness, etc.), these ecosystems can assess creditworthiness in innovative ways. Many fintech lenders now leverage APIs and AI models to underwrite “thin-file” clients that banks struggle to score. In fact, roughly 75% of new fintech products rely on open banking APIs to access financial data and deliver services in real time. This API-driven approach allows instant sharing of bank statements, sales data or even smartphone data (with consent) to paint a fuller picture of a small business or gig worker’s cash flows.

Crucially, AI is being used to analyze this data deluge and make smarter credit decisions. For example, Dubai-based fintech Quantix built an AI-driven credit scoring engine that enables lending to gig workers and SMEs with no traditional credit history. Its platform CashNow , in partnership with Citi, extends small loans to ride-hailing drivers and freelancers by analyzing their earnings and behavior, unlocking credit for an underserved segment. Similarly in Saudi Arabia, Abwab.ai uses machine learning on transaction data to automate SME underwriting, turning what used to be a multi-week manual process into an instant decision. These technologies drastically cut the cost and time of serving small customers. A loan that might have been uneconomical for a bank to underwrite manually (say $5,000 to a home-based business) can now be approved algorithmically in minutes – embedded in the platforms the business already uses daily.

The New “Branchless” Ecosystem and Why It Matters

For banks and regulators, the rise of embedded finance signals a shift from a branch-centric model to an API-centric model of distribution. Financial services are no longer confined to bank branches or even banking apps, but are flowing through retail networks, software platforms, and supply chains. Ecosystem players are effectively becoming the new branches, providing last-mile delivery of credit and financial access to communities banks found hard to reach. The advantage is twofold: banks (often via fintech partnerships) can tap into new customer segments without heavy brick-and-mortar investments, and underserved customers get access to finance when and where it’s needed instead of being left behind.

Importantly, this integration is happening “quietly” – the end-user might not even realize a bank is involved. A merchant getting a cash advance from her POS app or a driver getting a loan in his ride-share app experiences it as a feature of that platform, not a loan application. Financial access becomes an invisible, embedded part of doing business. This invisibility is actually a sign of success: it means less friction for users. As one industry report put it, the financial system of the future won’t be built in banks – it will be embedded everywhere. We are already seeing this in MENA’s booming digital economy, where platforms that seamlessly integrate finance are winning SME customers’ loyalty.

The trend also aligns with public goals of greater financial inclusion. Rather than expecting millions of unbanked or credit-thin businesses to immediately formalize, embedded finance meets them halfway. For example, by analyzing cash-flow data instead of collateral, fintech lenders can extend credit to a shop that has no audited financials but healthy daily sales. By tapping mobile wallet or telco data, they can score gig workers who have no credit bureau file. All of this brings previously invisible borrowers into the formal financial fold, but on their terms. Regulators in MENA are watching closely yet generally supportive, seeing that smart partnerships between banks and fintechs can responsibly extend credit to SMEs while maintaining oversight.

Abwab.ai ’s Insight: Toward Invisible, Intelligent Credit

The quiet revolution of embedded finance holds a key insight: solving MENA’s fragmented credit ecosystem isn’t about building more banks, but about building connectivity and intelligence into the ecosystem. It’s about making finance so integrated and data-driven that it disappears into the background of commerce. This vision lies at the heart of what companies like Abwab aim to achieve. By automating the heavy lifting of underwriting and harnessing local data signals, Abwab’s platform enables lenders to serve SMEs at scale – effectively turning the “cost problem” of SME lending into a technology solution. The mission is to bridge the region’s $250+ billion SME financing gap not by trying to drag SMEs into branches, but by infusing credit into the digital channels they already use.

In practice, that means a small business might get approved for a loan through an app on their phone, minutes after applying, because an AI has analyzed their cash flows and vetted their risk. Or a gig delivery driver might automatically receive an offer for an emergency advance during a tough week, based on the platform noticing a dip in his earnings. This is invisible banking – finance delivered in context, exactly when needed, with minimal friction. It’s the opposite of the old model of queuing in a bank with a stack of documents. And it’s how MENA’s entrepreneurs will finally get the financial access they deserve.

Embedded finance is quietly transforming who gets credit and how. Banks that embrace this shift by partnering with fintechs, opening their APIs, and using AI to streamline risk – are already reaching segments once deemed unprofitable. Ecosystem players from retailers to logistics firms are becoming vital conduits of capital, acting as the “front door” to financial services for millions of small businesses. And fintech innovators are ensuring that no worthy borrower remains invisible due to lack of data or collateral. In the end, a more inclusive, efficient credit ecosystem is taking shape – not built brick-by-brick on street corners, but woven via code and collaboration into the fabric of everyday commerce.

The bottom line: MENA’s credit fragmentation can be solved not by more branches, but by more integration. With embedded finance and AI-driven underwriting, the region’s SMEs can access financing as simply as tapping a screen – and that could unlock the next wave of inclusive growth across the Middle East and North Africa.

References & Sources:

1. Visa x 11:FS SME Global Insights Report

2. Boston Consulting Group (BCG) Fintech Partnerships Report

3. World Economic Forum (WEF) – The Future of Embedded Finance

4. Statista / EY MENA Fintech Report

5. International Monetary Fund SME Finance Diagnostic – MENA Region

6. McKinsey & Company – Financial Inclusion in Emerging Markets

7. IFC - International Finance Corporation Report – SME Banking in the Middle East

8. Plaid / Tink Developer Surveys

9. Embedded Finance Explained – Andreessen Horowitz

10. Kearney : The Economics of Embedded Lending