Pakistani digital lending platform AdalFi said on Thursday it has raised $7.5 million in funding, the first major corporate financing announcement in the South Asian country this year as it grapples with a deepening economic crisis.
According to a statement from AdalFi, the fundraising round was headed by COTU Ventures and Chimera Ventures of the United Arab Emirates, Pakistan’s Fatima Gobi Ventures and Zayn Capital, and “angel” investors such as officials from US-based financial technology and services firm Plaid.
Magnitt’s Emerging Venture Markets Report predicted Pakistani entrepreneurs were only able to raise $315 million in 2022, down 5% from the record high of $333 million in 2021, as the country’s financial woes have deteriorated.
Banks already have access to the financial transactional data that AdalFi’s proprietary technology scores. The B2B2C fintech then offers real-time financing and allows personalized digital marketing to selected prospects.
Only 30% of Pakistani adults, who are most financially excluded with restricted access to credit, have access to formal banking services and mobile wallets, according to a poll by the non-profit Karandaaz.
“Across the board, in Pakistani banks, only 5% of deposit customers are also borrowers. So, we enable banks to tap this huge, latent customer base,” Salman Akhtar, co-founder, and CEO of AdalFi.
Akhtar referenced a State Bank study that revealed that consumers’ choice for uncontrolled informal credit markets was partly due to the long lead times for loan disbursements.
“Without our platform, banks typically take 2 weeks to process a loan request.”
Akhar stated that fourteen financial institutions, including United Bank Limited (UBL), Habib Bank Limited (HBL), and Meezan Bank, among other banks and microfinance institutions operating in Pakistan, have joined AdalFi.
AdalFi has drawn banks because, according to it, we provide rigorous credit ratings to assure portfolio quality.
AdalFi makes money by receiving a portion of the money the bank makes from the loan.
“The negative impact of non-performing loans is shared by us. The costs owed to AdalFi are prorated to account for loan losses.”