Pakistani fin-tech AdalFi raises $7.5m to tackle lending challenges

KARACHI: 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.

The funding round was led by UAE-based COTU Ventures and Chimera Ventures, Pakistan-based Fatima Gobi Ventures and Zayn Capital, and “angel” investors including executives from US-based financial technology and services provider Plaid, AdalFi said in a statement.

As the country’s financial woes have deepened, Magnitt’s Emerging Venture Markets Report estimated Pakistani startups were only able to raise $315 million in 2022, down 5% decline from the record high of $333 million in 2021.

AdalFi’s proprietary technology scores the financial transactional data already possessed by banks. The B2B2C fintech then enables personalised digital marketing to qualified prospects and then provides real-time loans.

According to a survey by the non-profit Karandaaz, only 30% of adults in Pakistan have access to formal banking services and mobile wallets, making the country largely unbanked with limited access to credit.

“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, told Reuters.

Akhtar pointed to a study, by the State Bank which found long lead times for loan disbursements, were one factor behind consumers turning to informal credit markets instead.

“Without our platform, banks typically take 2 weeks to process a loan request.”

Akhar said fourteen financial institutions in Pakistan have signed up with AdalFi, including United Bank Limited (UBL), Habib Bank Limited (HBL), and Meezan Bank, among other banks and microfinance banks operating in the country.

“Banks have signed up with AdalFi because we offer rigorous credit scoring to ensure portfolio quality,” he says.

AdalFi monetises through a share of the revenue made by the bank from the loan.

“We share the downside risk of non-performing loans. Loan losses are accounted for on a pro-rata basis in the fees due to AdalFi.”