Amid rush of foreign funding in fintech, Pakistani startups raise $85m
Internet finance platforms fetched about $22m mainly from abroad since January
KARACHI: Venture capitalists injected more than $85 million in Pakistani startups in the first five months of 2021, with fintech companies riding a wave of interest by overseas investors, according to data from Invest2Innovate Ventures (I2I), which supports early-stage enterprises in untapped developing markets.
Pakistani Internet platforms engaged in finance and business, or fintech companies, fetched about $22 million, mostly in foreign funding, since January 2021, according to Alpha Beta Core, a tech-driven boutique investment banking and financial advisory services platform.
It includes recent deals by TAG Innovation, KTrade and Abhi, which raised $12.1 million in separate rounds.
Industry experts said that Pakistan’s increasing mobile phone penetration and growing young population are major attractions for foreign funding in startups.
Official data shows Pakistan has 85 percent teledensity, with 183 million cellular, 98 million 3G/4G and 101 million broadband subscribers.
The decrease in global air travel during the coronavirus pandemic has also provided an unexpected advantage for startups in Pakistan, cutting out the requirement that investors visit the country as part of the due diligence process, and making them more open to discussing deals remotely over Zoom or other video conferencing platforms.
Syed Amin Ul Haque, federal minister for IT, told Arab News that fintechs were “gaining traction” in Pakistan due to government measures to create an “enabling environment,” including increasing broadband connectivity and reducing taxes on telecoms.
“IT enabling environment has been created in Pakistan through policy measures,” Haque said.
“Withholding tax was 12.5 percent and now it has been approved by the cabinet to bring it down to 10 percent. Federal excise duty on SIM cards was 17 percent, and now we have reduced it to 16 percent.
“All these measures will be part of the financial bill in the upcoming budget, to be implemented from July.”
During the last 10 months of the current fiscal year, IT exports had also increased by 46 percent, the minister said.
Kalsoom Lakhani, founder and partner at I2I, told Arab News that data collected by her firm showed that Pakistani startups had already raised close to $85 million in funding.
“This means that we have already surpassed the total amount, $65.6 million raised in 2020, by the middle of the year,” she said.
“Most of the funding has been made in e-commerce, but a high number of deals in fintech, mainly pre-seed and seed, were made.”
Khurram Schehzad, CEO of Alpha Beta Core, said that the growth of fintech in Pakistan was due to a realization that the country’s growing retail, wholesale and trade sectors required a better financial ecosystem.