Excerpts from interview of Chief Investment Officer
Karandaaz Pakistan Navid Goraya
1. Can you tell us a little bit about Karandaaz Pakistan and how is it contributing to the national goal of greater financial inclusion?
Karandaaz Pakistan, a non-profit organization, set up by UK’s Department for International Development and Bill & Melinda Gates Foundation is supporting the goals set up under the National Financial Inclusion Strategy of the government. The organization develops and disseminates evidence-based insights to facilitate innovation, women entrepreneurship and youth empowerment, and to support the financial ecosystem to promote financial inclusion in Pakistan. It is an avid proponent of financial inclusion and particularly focuses on ensuring gender parity and inclusion of all in the process. Karandaaz Pakistan works across the ecosystem with all the players and invests growth capital in small and medium size enterprises (SMEs) to trigger broad-based employment generation in Pakistan. So far, Karandaaz Pakistan has provided PKR 6 billion as funding on a range of initiatives which will ultimately contribute towards promoting financial inclusion in the country. This includes providing capital to over 500 SMEs through innovative product programmes in partnership with the financial institutions, growth capital to three SMEs and seed investments in seven FinTech companies to help them scale-up their products. One of the digital finance interventions supported by Karandaaz in agriculture sector resulted in extension of financial services to over 93,000 unbanked farmers.
2. What is Karandaaz Pakistan doing to support SMEs?
Karandaaz invests growth capital in small and medium size enterprises with the objectives of increasing revenues to contribute to economic growth and supporting broad-based employment generation in Pakistan. Karandaaz works in three streams for financial inclusion of SMEs: Credit, Private Equity and Strategic Platforms. Through its credit business, Karandaaz invests risk capital with partner financial institutions in innovative credit models to significantly accelerate SME access to finance. Karandaaz is currently working with 3 financial institutions and has provided financing to over 500 SMEs through its various product programs. Karandaaz also provides growth capital in the form of direct equity injections in SMEs with potential for profitable growth and broad-based employment creation.Karandaaz also makes investments in commercial strategic platforms that build financial inclusion infrastructure and services for micro, small, and medium size enterprises.
3. What is the investment criteria of Karandaaz?
Karandaaz invests in registered private limited companies with Pakistan as their primary place of business. The companies can have annual turnover and total assets less than USD 15 million and employees in the range of 10-300. For direct equity investments, Karandaaz may invest up to GBP 5 Mn for a shareholding of up to 50% with an investment term of 5-7 years. Further details of SME financing is available on our website www.karandaaz.com.pk.
4. What kind of sectors is Karandaaz interested to invest in?
Karandaaz is looking to invest in SMEs in various sectors, including Agriculture, Healthcare, Education, Light Manufacturing, Food and Services.
5. What has been the impact of your investments so far?
Karandaaz investments have resulted in over Rs 30 billion increase in overall revenues of the funded SMEs, with estimated additional jobs of 10,000 including women and youth employment. Additionally, Karandaaz is working on capacity building of its partner financial institutions to gear them for SME financing.
6. Any special programmes for youth?
When we talk about SMEs or start-ups, we are inadvertently talking about supporting young people to get involved in economic activity through either getting jobs or preferably becoming job creators. Our investments in capital sector are also leading to employment generation for youth and women. Young entrepreneurs are at the forefront of innovation and technology as the main drivers which Karandaaz supports. In financial year 2016-17 alone, Karandaaz has added 1,000 new jobs and supported 300 plus SMEs. Most of these jobs are for youth and most of these SMEs are being led by young entrepreneurs and innovators.
7. How is Karandaaz through its programmes ensuring women's participation in economic activity?
Genderhas been identified as a priority area for Karandaaz given the high disparity in access and usage of digital financial service by women. Karandaaz has initiated an important discussion to sensitize the financial services industry about the importance of designing products and services keeping in view the preferences and specific needs of women leading to an enhanced access to financial products for them.The second round of the Karandaaz Innovation Challenge Fund was launched in May 2017, which centered on supporting women entrepreneurship. Winners of this challenge round are now receiving financial and technical assistance from Karandaaz.