Pakistani Start-Up to Invest in Women-Led FinTech Firms

“Adoption of financial technology (fintech) in Pakistan will add 93 million bank accounts and $36 billion a year to the country’s GDP by 2025. It will also create 4 million new jobs and add $7 billion to the government coffers in this period.”

(BE2C2) — Start-up investor Karandaaz Pakistan, funded by Gates Foundation, plans to invest in women-led financial technology (FinTech) firms after investing a similar fund to improve financial inclusion in the country.

“We are finalizing an equity investment of $800,000 in women-owned (fintech) start-ups,” Ali Sarfraz, the chief executive officer of Karandaaz Pakistan said in Karachi– Pakistan’s economic hub.

Sarfraz said the purpose is to improve financial inclusion of women-led businesses as the segment of the population is missing in the financial architecture.

Financial inclusion spurs economic growth on overall basis, specially among small and medium size businesses and helps document more of the national economy to increase transparency.

According to the latest State Bank of Pakistan statistics on branchless banking sector, mobile wallets reached a high of 33 million as of September 2017, up 21% over the prior quarter. About 22 percent of these accounts – 7.4 million – are owned by women, up 29% in July-September 2017 over previous quarter. A McKinsey and Co analysis shows that adoption of financial technology (fintech) can help dramatically increase financial inclusion in Pakistan.

Karandaaz, a non-profit organization set up jointly by UK Department for International Development (DfID) and Bill and Melinda Gates Foundation, has already invested half a million dollars in seven financial technology firms in the past one and half year to improve financial inclusion of the population– Pakistan has 23 per cent of population bank accounts.

A McKinsey Global Institute report titled “Digital Finance For All: Powering Inclusive Growth In Emerging Economies” projects that adoption of financial technology (fintech) in Pakistan will add 93 million bank accounts and $36 billion a year to the country’s GDP by 2025. It will also create 4 million new jobs and add $7 billion to the government coffers in this period.

Sarfraz said Pakistan has some of the key structural pieces in place: centralized identity system, very good mobile foot print, ever increasing use of smart phones and kind of regulatory environment.

“So, in terms of readiness of financial inclusion, we are there,” he said, adding that international companies are glad to work in the ecosystem.

“And yet it is paradox that despite having all of that why people are not financially connected,” Sarfaraz said. “Our level of financial inclusion is lower than some of the countries with comparable GDP level.”

Karandaaz said people are afraid of tax implications in cashless economy and people still like to feel cash in hands.

“Individuals should have the use cases. I can’t use mobile wallet to buy vegetables or two apples,” he said. “Infrastructure is expensive; they (businesses and consumers) are not connected as point of sale machine is expensive.”

Sarfaraz said the solutions that are available in the market are not easy to use. The applications don’t have helpful interface. “We need to invest in innovations, but do not need as much investment in infrastructure as in services,” he added.

The objective of Karandaaz is to use mobile technology to reach to a larger number of people.

Mobile wallets, also called m-wallets, are smartphone applications linked to bank accounts that allow users to make payments for transactions such as retail purchases.

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