October 20 2024

Investments pick up in the Pakistan fintech market

With one of the world’s largest unbanked populations, Pakistan is one of Asia’s last major nascent fintech markets. Yet in 2023 and through the first half of 2024, it was mired in a funding slump – not unusual given the broader global trend, but problematic for a country that truly needs more digital banking services to boost financial inclusion. In the 2023 fiscal year, fintech funding in Pakistan fell 80% to just US$20 million while the number of deals decreased 44% to just eight. However, 2024 could turn out to be a better year for funding given rising investor interest.

On October 16, Pakistani fintech ABHI secured $15 million in debt financing through a credit facility provided by Shorooq Partners and Amplify Growth Partnership companies to expand its operations in the United Arab Emirates (UAE). While this expansion is ostensibly focused on the UAE rather than Pakistan’s domestic market, it is important to note that the target market for ABHI is Pakistani migrant workers in the Middle Eastern country. ABHI brands itself as Pakistan’s “first financial wellness platform." It allows salaried employees to draw down a percentage of their accrued salary before the next payroll cycle. 1.5 million Pakistanis live in the UAE.

Prior to ABHI’s capital raise, Pakistani fintech PostEx announced a $7.3 million pre-Series A funding round in August. PostEx offers digital financial services and logistics services to e-commerce customers – who are increasingly looking to settle transactions without cash. According to Tech Crunch, 95% of e-commerce transactions in Pakistan are paid with cash on delivery. Courier companies in Pakistan take 10 to 15 days to settle those transactions from the dispatch time to delivery. All this leads to a capital crunch for e-commerce merchants.

Tech Crunch further reported that PostEx has ambitious expansion and fundraising plans. It is planning to enter both the Saudi Arabia and UAE markets. In the latter, it already has a license for financing. plans to enter Saudi Arabia. The startup also is aiming to raise an additional US$15 million in capital in a new fundraising round.

We remain cautiously optimistic about Pakistan’s fintech sector in the long term. Provided the country can stabilize its finances and economic situation, the fundamentals are strong. Incumbents have limited reach, especially when it comes to digital finance, and the addressable market is huge, with up to 110 million unbanked people. Additionally, both internet and mobile banking users continue to grow, rising  15.5% and 30.2% in 2023, respectively.