Two years ago, a group of entrepreneurs in Pakistan began researching the market to find out why financial services are not reaching the majority of traders in the world’s fifth most populous nation.
On Friday, Tiger Global said it was supporting its startup, Credit bookto meet these challenges. This is the New York-based company’s first investment in Pakistan.
A number of other investors, including Firstminute Capital, Banana Capital, VentureSouq, Ratio Ventures, and i2i Ventures, as well as angel investors Sriram Krishnan and Julian Shapiro also participated in the $ 11 million Pre-Series A round. This is also Firstminute Capital’s first investment in the South Asian market.
“We started research and started experimenting in late 2019,” said Iman Jamall, co-founder of CreditBook, in an interview with TechCrunch. “I was working as a service designer on a project for one of the largest Pakistani banks at the time and observed different personality types to understand why financial inclusion was low at the level at that time.”
The challenges that Jamall, one of the country’s few founders, identified were cash flow, the role of credit and the social relationships it brings, and the over-reliance on “essentially paper for everything,” she said.
Photo credit: CreditBook
The over-reliance on paper to keep the ledger ledger and consistently low cash flow are a challenge that traders share in many South Asian and Southeast Asian markets. As we previously covered, these small businesses are often run on informal credit and rely on the money they secure by selling their existing inventory to buy their next batch. Customers buy things for weeks and sometimes months before releasing the tab.
These shortcomings are hurting these small businesses and mom and pop stores and hindering their growth at a time when big ecommerce giants are trying to woo customers.
CreditBook is now offering merchants an accounting app that enables them to digitize the handwritten general ledger that has traditionally been used to keep track of daily accounts.
The mobile app of the same name has amassed retailers in over 400 cities, the startup said. CreditBook declined to disclose the number of merchants using the service, but said the number of users making transactions has increased ten-fold since last year.
Digital accounting is the startup’s main offering today, but Jamall said CreditBook is working on developing and testing financial products on top of that. It was too early to reveal exactly what these financial products would look like, she said. (But it’s definitely not ecommerce, she said.)
Jamall provided context to the areas CreditBook explores. “There is a huge blank space in payments in Pakistan. But mobile money has started to grow in importance, especially amid the pandemic, “she said, adding that the local regulator has also made efforts in recent years to accelerate the adoption of mobile payments and focus on building one Concentrate instant payment infrastructure. (Much like India’s UPI, which has become the most popular way users transact online in recent years.)
It’s a huge opportunity. CreditBook estimates that there is a $ 45 billion funding gap for small businesses. Pakistan, home to over 220 million people, 60% of whom are under 30 years old.
“We are excited to partner with CreditBook to make Tiger Global’s first investment in Pakistan,” said John Curtius, partner at Tiger Global, in a statement. “The investment is proof of the team’s incredible traction and vision.”
Friday’s announcement builds on a turning year for Pakistan’s fast-growing startup ecosystem as several global investors including Kleiner Perkins, Addition, 20VC and Buckley Ventures make their first ventures in the country. Startups in Pakistan have raised over $ 300 million this year, more than the past six years combined. Grocery delivery startup Krave Mart announced earlier this week that it raised $ 6 million in its pre-seed funding round.
