Sharing the ride with Careem
In March 2023, Abdul Latif Jameel Finance Saudi Arabia and Careem, the region’s leading multi-service platform, announced the launch of a new financing program designed specifically to allow Saudi Careem drivers, or ‘Captains’, to finance their own cars. For many Careem Captains their main source of income comes through the ride-hailing app, and the program provides them with flexible payment plans and installments to obtain any new model from several brands including Toyota, Lexus, KIA, Hyundai, Geely, Suzuki, and MG vehicles.
We spoke to Dr Khalid Al Karimy, CEO, Abdul Latif Jameel Finance Saudi Arabia, and Ahmad Arrabi, General Manager, Careem Saudi Arabia, about the partnership and what it means for each business.
Can you provide some background on Abdul Latif Jameel Finance’s operations in Saudi Arabia?
KAK: Abdul Latif Jameel Finance started over 40 years ago as one of the first automotive finance companies in Saudi Arabia. Initially, we only financed Toyota vehicles, but we have gradually expanded our services, so we now offer finance for multiple brands. In the last six or seven years, we have also started to finance other areas, such as home appliances, medical devices, and sports equipment.
Most recently, we have started to provide cash finance to individuals and small businesses (SMEs).
From an internal perspective, one of the biggest recent changes for us was the integration of two other Abdul Latif Jameel entities into Abdul Latif Jameel Finance, namely Abdul Latif Jameel United Real Estate Finance Company, which provides different financial solutions for real estate, and Bab Rizq Jameel Microfinance, which provides ‘productive loans’ for individuals and microbusinesses.
Ahmad, can you tell us about Careem’s development in Saudi Arabia?
AA: Careem started in Dubai, UAE in 2012 and expanded into Saudi Arabia in 2013. At that time, the majority of our focus was on ride-hailing, moving people within and between cities, and Careem quickly became one of the largest ride-hailing companies in the region. We now cover over 70 cities across the region, from Morocco to Pakistan. In 2019, Careem was acquired by Uber, although it still operates under the Careem brand in the Middle East.
Ride-hailing continues to be the ‘big brother’ of all our services. Not only in numbers, but also in terms of the perception of our customers, as it’s something we’ve been doing for 10 years. Since 2017, however, we’ve been developing Careem as a ‘super app’ through which you can access a whole bunch of services, like food delivery, and fintech services through Careem Pay, all connected by our high-value subscription service Careem Plus. Our super app has taken off in Dubai and several other cities. Our vision is to expand it to more cities in the next couple of years.
In April 2023 we welcomed a new partner as e&, the regional telecoms provider and technology investment group, announced a $400 million investment in the Careem super app.
How important are the Captains for achieving Careem’s objectives?
AA: Captains are the main pillar of our business, both for ride-hailing and non-ride hailing delivery services. A happy Captain delivers a happy service, whether it’s a ride or delivering groceries. So it’s important we understand their needs to ensure that their experience on the platform is fulfilling and understand what might be limiting new Captains from joining the industry.
Historically, one of the things holding back the supply of new Captains was that the regulations stipulated they needed to own their vehicles directly.
Recognizing this was hindering the growth of the industry, however, Saudi Arabia’s Transport General Authority changed the regulations in 2022 so that Captains no longer needed to own their car, as long as they had authorization to drive it.
This was a big change as it opened the door for a lot more Saudis to access more flexible earnings as Careem Captains. But there was still a segment of the market that wanted access to car financing to purchase their own car to become a ride-hailing Captain, many of whom couldn’t actually access the traditional finance products offered by the banks due to tough restrictions around eligibility since they didn’t have full-time employment. So even if you were driving full-time as a Careem Captain and earning a good income, you cannot typically get a traditional bank loan to buy a car.
How has the finance market in Saudi Arabia changed over the past few years and how have these changes affected Abdul Latif Jameel Finance?
KAK: Historically, the Saudi finance industry has been dominated by banks, which tended to take a conservative approach to lending. This has changed in the last decade, particularly since the launch of Vision 2030 in 2016. The Central Bank of Saudi Arabia (SAMA) modernized the financial services regulatory framework to make it more suited to the evolving needs of today’s consumers. Among the changes was the creation of a regulatory ‘sandbox’ that allows fintech businesses, mainly startups, to develop and refine their businesses in a less restrictive environment. Once the proof of concept is perfected, they graduate from the sandbox to the wider market.
These changes affected us from two directions. Number one: it opened up new opportunities for us in terms of digitalization. We have created a dedicated unit within the company called Digital Business to drive revenue from digital initiatives. One of these initiatives is Cash Jameel, which is a retail cash loan you can access through your cell phone. We also have an automotive e-commerce tool that allows you to apply for a loan, verify your ID, select a car and everything else through the app, without having to come to a physical showroom. And we are launching a digital platform for SMEs that will enable them to apply for a loan, undergo due diligence checks and secure finance, all via the app.
We wouldn’t be able to do any of this if it wasn’t for the innovation-friendly fintech ecosystem in Saudi Arabia.
The second major impact is that the behavior and expectations of people have changed. Consumers in Saudi Arabia are very tech-savvy. I think it has one of the fastest-growing user-bases in the world for social media apps like Twitter, for example. People here are very comfortable in the digital space. They know how to navigate these kinds of services online and, increasingly, they expect to be able to do so.
How did the partnership with Abdul Latif Jameel Finance come about?
AA: During the COVID-19 pandemic, we saw that while demand for ride-hailing services was increasing, we were finding it harder to attract new Captains to increase our supply. We started exploring new ideas to try and encourage more Captains into the industry, one of which was addressing the issue of car financing. There were already a couple of similar initiatives in the region, although not on this scale. We started talking to Abdul Latif Jamel Finance to see if there was something we could do to make it easier for Captains to obtain vehicle finance, and this partnership was born.
Abdul Latif Jameel Finance has been in the vehicle finance market for over 40 years. What attracted you to this opportunity with Careem?
KAK: We saw an exciting business opportunity to expand our business while also meeting the needs of Careem and its Captains. Until now, it has been very hard for Careem Captains to obtain finance for their vehicles. Many of them are not salaried so they can’t pass the credit assessment of the traditional banks. We have been dealing with self-employed people for quite a while, however, so we understand this market well. We saw this as a great opportunity because we are helping young entrepreneurial Saudi nationals to access the financial services market. The loans will be productive as they will be used to purchase a vehicle from us, which in turn will enable them to generate an income. At the same time, it is a way for us to expand our customer reach to this segment of the market – people who are committed, entrepreneurial, and determined to earn their own living.
How was Abdul Latif Jameel Finance able to fill a finance gap that banks were not able to address?
KAK: We are a car finance company, so we can approach it from a vehicle perspective as well as a loan perspective. Banks just focus on the money. That’s maybe the fundamental difference between us. We knew that Careem Captains are not salaried, so we worked closely with Careem to understand the typical earnings profiles of their drivers. Careem was able to assure us, and demonstrate, that these drivers would earn a certain amount of money per year, on average. Based on this, we were able to create this product together specifically for Careem Captains. It’s still a calculated risk, but it’s one we were prepared to take, given the opportunity, as part of our vision to drive financial inclusivity. Further security is provided by the fact that the car itself remains in the name of Abdul Latif Jameel Finance until the loan is repaid. So, if anything goes wrong, we still own the asset.
Does the finance arrangement cover hybrid and electric vehicles as well as traditional combustion engine vehicles?
KAK: Yes, absolutely so, it covers any type of vehicle transmission. Hybrid vehicles are growing in sales and Toyota has a couple of models that are very successful in the market. The pure electric vehicle market is not yet as strong in Saudi Arabia, due to public perceptions and a lack of infrastructure. But the government is working hard to address this and in the next five to 10 years we expect to see strong growth in electric vehicles, too.
Is there a target number of Captains you want to reach with this product?
AA: The priority is to get started with the first few drivers and use that experience to further refine the program as we go. We don’t want to get distracted by setting arbitrary targets that end up reducing our freedom to innovate and iterate. There has already been a lot of interest since we announced the partnership with Abdul Latif Jameel Finance, so we are confident that it will grow quickly once we perfect the design of the program.
Is it important for you to work with partners that share the same vision and values?
KAK: Absolutely. Abdul Latif Jameel, both as an organization and as a family, has a very strong vision and a set of values that run throughout the business. We are committed to philanthropy, to social development, to empowering people and communities to lead happy, productive lives. These values are aligned with Careem’s mission to create employment opportunities and enable people to earn a living for themselves and their families.
This philosophy matches our new strapline, which is ‘tamkin’ meaning in English, ‘we empower you’. We help you find a car; we help you source finance; we help you secure a job and make a living. This is very important to us.
What are the benefits for Careem in working with a company like Abdul Latif Jameel Finance?
AA: We have been in the region for 10 years, and we have learnt that a big factor in the success of any new program is finding the right partner. A partner who shares your mission and your vision will help to grow the program and expand its potentials. Abdul Latif Jameel Finance Saudi Arabia has already made it very clear they share the same ambitions to make this a successful program over the next few years. Our mission is to simplify people’s lives. We cannot do that if we offer a suboptimal experience for Captains trying to register with us. Abdul Latif Jameel has a strong reputation, based on their credibility and reliability. Partnering with them will help us deliver the very best experience for our Captains.
For our Captains themselves, the benefits are even clearer – it is a way for them to buy a car, earn a living and support their families and communities. At any one time, around 20% of our potential Captains are stuck in the registration process due to vehicle ownership authorization issues, or vehicles that are not eligible to be used as ride-hailing vehicles. Solving this problem will be a crucial lifeline for them.
Careem has been in Saudi Arabia for 10 years already and is in multiple countries all over the world. What are your expectations or hopes for Careem over the next decade?
AA: We are expecting an exciting journey! Our number one priority is the roll-out of our ‘super app’ which will enable us to simplify the lives of a lot more people in a lot more ways than just mobility.
The super app has already proven successful in the UAE, where we offer over a dozen services including food and grocery delivery, micro-mobility, a digital wallet and suite of fintech services, and additional third-party services such as home cleaning, car rental and laundry.
We’ve expanded these services into Saudi Arabia and Jordan, and we’ll be introducing them into more countries in the years ahead.
We believe that the opportunity for a Super App in our region is huge. There are so many daily frictions that can be solved with digital services, and there are no dominant players in our region offering the convenience and value that a super app can offer. On top of this, the Middle East has among the highest consumer digital engagement in the world. In KSA and the UAE, digital adoption (the average of users in each industry who have interacted with it through digital or remote channels) stands at 78%. And emerging markets have seen the highest growth in app downloads in recent years.
Careem is incredibly well placed to seize this opportunity. We’ve already simplified life for over 50 million customers and created over 2.5 million earning opportunities for Captains. We now have two powerful partners in Uber and e& to help us build category-leading businesses in our key markets and scale the Super App.
We want to make Careem the first app people turn to on their phones, because it makes their lives easier and more convenient, from ordering your groceries or paying the bills to taking your kids to school or sending money to your family – you’ll be able to do it all through Careem.
Similarly, what are your plans for Abdul Latif Jameel Finance Saudi Arabia over the next few years and how will the partnership with Careem help you achieve these plans?
KAK: Our aim is to continue diversifying our products and customers, something the partnership with Careem will undoubtedly help us achieve.
Our digitalization agenda is also going to be a central part of our growth strategy.
We are continually exploring new ways to leverage digital technology to increase our reach and enable underserved communities to access financial products to improve their lives. We want to make it as easy as possible for people to apply for a wide range of financial products quickly, easily, and securely from the comfort of their own homes. Continuing to invest in digitalization is essential to achieve this, and this is what we’ll be focusing on over the next few years.