Amman-based fintech startup Liwwa has closed a $2.3 million round led by Silicon Badia's Badia Impact Fund.
DASH Ventures and investor Samih Toukan also participated in the equity financing.
This is the peer-to-peer lending network's second fundraising round in a year, having closed a $500,000 deal with DASH, Bank al Etihad and MENA Venture Investments in March 2015.
It will use the funds to grow its underwriting capacity in Jordan and MENA as well as open a software development and data center in New York.
"We are committed to delivering on the promise of technology­ driven credit assessments. Doing so will allow us to lend to small businesses that lack conventional credit histories," said Liwwa CTO Samer Atiani in a statement.
CEO Ahmed Moor said the new investors added "strategic depth" to the business.
Liwwa was founded by Atiani and Moor in 2013 at Harvard University's Innovation Lab, as a Sharia-compliant crowdfunding and investing platform, structured so that investors on the platform receive a return on a regular schedule based on a lease-to-own structure. This means that there's no equity or interest in the equation and therefore Liwwa remains Sharia-compliant.
The concept is to use statistical methods to develop a lightweight credit assessment process designed to supplant cash­flow underwriting. The company says that to date its Shadow Underwriting regression model is 97 percent predictive of cash­flow underwriting outcomes.
In the company's first year in Jordan it lent $1.6 million to 75 small businesses, and it says it wants to close what it estimates as a $240 billion SME funding gap in MENA.
Wamda Research Lab associate William Altman said this represented a huge opportunity not only for Liwwa but for the SMEs in the region that are currently underserved by traditional methods of finance.
"We know that SMEs are the lifeblood of a growing economy and that it's also expensive and risky for banks to lend at those lower levels. A company like Liwwa is important for filling the financial gap and contributing to greater economic development in the region," he said.
There are only three peer-to peer lenders in the region, Beehive and Venturefin in the UAE and Liwwa. Altman said all were doing similar things, but differentiated themselves in how they onboarded users into their platforms.