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Karandaaz News Bites

Quarter I - 2016

Issue No. 2

In this Issue..

Ÿ CEO's Message

Ÿ Promoting SME Finance with ORIX

Leasing Pakistan Ltd.

Ÿ Technical Committee Nominations

Ÿ Dr. Ishrat Husain Awarded Nishan-e-


Ÿ Queen Maxima Meets with Karandaaz


Ÿ Digital Credit Workshop

Ÿ Financial Inclusion: Quarterly Showcase

Ÿ Featured Blog Post: Smarter Wallets,

Engaged Customers

CEO’s Message

Participants at the Digital Credit Workshop hosted in Karachi by Karandaaz Pakistan and CGAP in February 2016

Dear Friends,

It gives me immense pleasure to connect with you for the first time through this newsletter and share

some of the latest happenings at Karandaaz Pakistan. Our work over the previous quarter has covered

a broad range of initiatives aimed at increasing access to finance for SMEs via vendor financing

agreements, capacity building of the industry, and cutting edge research in user experience, user

interface design and person to government (P2G) payment initiatives across the world. I am excited to

report that Karandaaz Pakistan is providing technical input on financial inclusion as part of the State

Bank of Pakistan's technical committees.

Finally, I would like to take this opportunity to thank you for your ongoing support, and look forward

to receiving your feedback and suggestions.

Ali Sarfraz Hussain

CEO, Karandaaz Pakistan

Promoting SME Finance with ORIX Leasing Pakistan Ltd.

ORIX Leasing Pakistan Ltd. and Karandaaz Pakistan

Signed a Risk Participation Agreement to Provide USD 40

Million in Asset Financing to Small and Midsize Vendors

and Distributors in Pakistan. The innovative value chain

finance program which has been developed with financial

support from the United Kingdom Department for

International Development (DFID) will provide asset

finance for capital investment to small businesses operating

in organized supply chains of the economy that currently

do not have access to formal financing. The involvement of

large corporations will provide valuable alternate evidence

for identifying and evaluating credit worthiness of the

vendor in SME sector who do not have collateral and are

currently deprived of access to the formal financial sector.

(L-R) Teizoon Kisat, former CEO ORIX Leasing Pakistan Ltd., and from Karandaaz Pakistan

Asad Azfar, Chief Investment Officer, Imdad Aslam, Director Digital Financial Services and Dr.

Ishrat Husain, Chairman Board of Directors



Issue No. 2

Technical Committee


Karandaaz Pakistan has been

nominated by the National

Financial Inclusion Strategy

(NFIS) Steering Committee

chaired by Governor State Bank

of Pakistan to three of seven

Technical Committees:

Ÿ Digital Financial Services &

Payment Systems

Ÿ Microfinance, Agriculture

Finance & Housing Finance

Ÿ SME Finance

The nominations are in line with

Karandaaz Pakistan’s areas of

focus. The ultimate goal of the

NFIS is to provide a basis for

coherent and sequential reforms

needed to address both demand

and supply side issues to help

tackle financial exclusion in an

integrated and sustained manner

fo improved results by 2020.

The Technical Committees are

expected to identify key actions,

propose detailed implementation

plans and recommend solutions

in their respective areas to the

NFIS Steering Committee. This

will enable Karandaaz Pakistan to

engage with policymakers and

play an active role in furthering

financial inclusion in Pakistan.

Dr. Ishrat Husain Awarded Nishan-e-Imtiaz

For his meritorious services to the nation, Dr. Ishrat

Husain, Chairman of the Board of Directors,

Karandaaz Pakistan, has been presented the highest

national accolade, the prestigious Nishan-e-Imtiaz by

President Mamnoon Hussain on March 23, 2016.

The award was conferred in recognition of Dr.

Husain's outstanding performance in the field of

Public Service at a special investiture ceremony held

at the Aiwan-e-Sadr on Pakistan Day. The Ceremony

was attended by the highest civil and military

leadership, officials, federal ministers,

parliamentarians, diplomats and people belonging to

different walks of life. Dr. Ishrat Husain is a leading

economist and intellectual. He is the former Dean

and Director of the Institute of Business

Administration (IBA) and previously served as the

Governor of the State Bank of Pakistan.

Queen Máxima of the Netherlands Met with

Karandaaz Pakistan

Queen Máxima of the Netherlands, in her capacity

as the United Nations Secretary General's Special

Advocate for Inclusive Finance for Development

(UNSGSA), met with the senior management team

of Karandaaz Pakistan in February 2016 where the

team briefed Queen Máxima about the aim of the

company to increase financial inclusion in Pakistan

by employing technology enabled digital solutions

and catalyzing SME financing. Imdad Aslam,

Director Digital Financial Services introduced the

DFS strategy being employed by the company to

achieve 40 percent financial inclusion of the adult

population of the country by 2018, while Asad Azfar,

Chief Investment Officer discussed the company's

approach towards improving SME access to finance

for strengthening broad based economic and

employment growth in the country.

Workshop on Digital Credit and Analytics

Karandaaz Pakistan in conjunction with the Consultative

Group to Assist the Poor (CGAP), a member of the World

Bank group, held a one-day workshop in Karachi titled

Digital Analytics and Credit: Resources to Plan a.

Facilitated by Jamal Rahal, an internationally renowned

digital credit expert and Gregory Chen, Senior Financial

Sector Specialist, CGAP, the aim of the workshop was to

provide participants with a detailed introduction to digital

credit essentials, opportunities and requirements. A total

of 54 industry players from telcos, banks, microfinance

banks and fintechs attended the workshop.

(L-R) From DFID-Pakistan (UKAid): Waqas ul Hasan, Sr. Private & Financial Sector Adviser,

Dr. Louise Walker, Group Head, Economic Growth, Joanna Reid, Head of DFID Pakistan and

Dr. Ishrat Husain, Chairman Board of Directors, Karandaaz Pakistan

2 www.karandaaz.com.pk

Financial Inclusion in Numbers

Quarterly Showcase

Issue No. 2

Global Findex 2014

(World Bank)

Smallholder Diaries 2015



Agri Produce

In-Kind Consumption

Non-Agri Produce



There are



3.2 million


SMEs in Pakistan, but only

SME loans outstanding on banks'


Upto different financial tools used by sampled smallscale

farming families (living on < USD 2/day) in Punjab

to diversify household income.

A2F Survey 2015

(State Bank of Pakistan)

Access to Finance Opinion Poll 2015

(Gallup Pakistan)

Access to financial services has improved from


population in 2008 to in 2015.




of Pakistani women make important financial

decisions in consultation with their husbands; 23%

Pakistani men make important financial decisions in

consultation with their wives.


Using Mobile Money to Promote

Financial Inclusion 2015

(Karandaaz Pakistan)

Mobile phone


Mobile wallet

usage (transaction in last 90 days)

State of the Industry Report on

Mobile Money 2015




Kenya Tanzania Bangladesh Pakistan India

Pakistan lags behind leading countries in terms

of uptake of

in comparison to


phone ownership.

29 cross-border mobile money initiatives connected 19

countries, with cross-border remittances growing 52% in

volume over the last year.



Issue No. 2

Karandaaz Research Showcase

Photo Credits: GRID Impact

User Interface, User Experience in the Digital Finance


Mobile wallets in Pakistan are currently based on the

Unstructured Supplementary Service Data (USSD) channel

providing a user experience with limited ease of use. This

limited usability is a challenge for providers as it adversely

affects their ability to sustain traction and active use of wallets in

the market, especially among less literate segments of the

population. Smartphone penetration in the country currently

stands at 31 percent. This statistic is expected to increase given

that low cost smart phones are increasingly available and

improved 3G/4G services are likely to reinforce uptake among

income strata previously able to afford only feature phones.

Karandaaz Pakistan recognizes the benefits of providing

enhanced customer experience to the end user in the form of a

viable, user-friendly alternative to the USSD channel which has

the potential to ultimately contribute towards increasing mobile

wallet activity significantly. Karandaaz Pakistan has therefore

commissioned a research study aimed at developing user

friendly designs responsive to the local market, with a special

emphasis on the less literate.

GRID Impact, a global research, innovation and design

company, is currently carrying out the second round of in-depth

research with Pakistani mobile money users and providers

based on the Human Centered Design (HCD) approach.

Insights from the iterations are being incorporated into two

concept designs that will be disseminated to the industry later

this year. The resultant wireframes from the design process can

be incorporated by providers within their specific mobile

financial services applications, thereby enabling their customers

to enjoy a richer and more user friendly interface.

Photo Credits: Web.pk

Global Landscape Study: P2G Payment Initiatives

Person-to-government (P2G) payments are a significant part of

the overall payments landscape. Digitizing these payments

therefore, could have tremendous economic and social benefits

for governments, companies, and consumers alike. Despite the

significance of the opportunity, digital P2G payments are still in

their early stages and very little is known about them today. The

Global P2G Landscape Study is the first comprehensive study to

take a systematic look at the opportunities and challenges

associated with digitizing P2G payments.

The Study will identify current P2G initiatives and document the

most interesting ones with a particular focus on those targeted at

unbanked and underbanked customers. The objective of the

study is to distill lessons about the success elements of moving

P2G payments from cash to digital. For the purpose of the study

P2G is defined as the transfer of funds from a citizen to an

account of the government making use of a digital platform. The

initial global scan has identified a wide range of P2G payment

initiatives, including payment of taxes (income, property, etc.),

nontax government revenue (fees for government services such

as passports, company and vehicle registration, tolls, fines, etc.),

and others including utility fees, public school fees, and social

security and pension contributions. In addition to providing a

collection of global evidence about the current range of digital

P2G initiatives, the research study exploresa key question: what

does it take to set up efficient, sustainable, and inclusive

payment systems for government fees and services? Dalberg

Development Associates has been commissioned to conduct

the research with financial and technical support being provided

by the Consultative Group to Assist the Poor (CGAP).

4 www.karandaaz.com.pk

Featured Blog Post

Smarter Wallets, Engaged Customers

Issue No. 2

Bilal Ali Qureshi joined Karandaaz Pakistan as an Associate, DFS

in 2015 and is mainly responsible for implementing Karandaaz

Pakistan's government digitization agenda. His interest lies in

influencing customers to try different mobile money channels.

Prior to joining, Bilal was a strategic planning specialist at

Easypaisa, Telenor. He also has experience working with leading

development agencies in the country such as UNDP and The

World Bank.

With increasing competition in the branchless

banking OTC (over the counter) business, this

segment has become highly commission

intensive, leading to diminishing margins for

MFS (mobile financial services) providers. This

reality has pushed mobile money providers to

focus on mobile wallets as an alternate service

delivery channel. Mobile wallets help providers

move away from troublesome agent commission

wars and allows them to offer customers a

relatively more convenient service at a

substantially lower cost. A major hindrance to this

strategic shift is that demand for and uptake of

mobile wallets remains low in Pakistan.

In the aftermath of the recent SIM reverification

drive, providers requested the State Bank of

Pakistan (SBP) to grant permission for remote

mobile wallet account opening via biometric

verification. This was approved, and mobile

wallet opening in Pakistan now takes less than 5

seconds in comparison to the old process which

took over 15 minutes thus dramatically increasing

account opening efficiency. The positive impact

of this new account opening process is clearly

reflected in recent industry data; the market

witnessed a 44% growth in total number of mobile

wallets registered in Q2 of 2015.What remains

problematic is that typically, 70% of all new

accounts become inactive within 90 days of

account opening.

To increase the mobile wallet activity ratio, a few

players in the market are seeking out new ways to

incentivize mobile wallet subscribers. For the last

year providers have been offering free P2P

(person to person) transactions on their mobile

wallets, and also tested bundling free P2P with

free GSM airtime, text and data on the basis of

customers' mobile wallet activity. These

campaigns have had limited success and have not

addressed one of the core issues of the mobile

wallet: the fact that it is a cumbersome device that

is difficult to use, particularly in a low literacy

environment. To change this, providers should

consider focusing their efforts on developing a

more user-friendly mobile wallet interface.



MFS providers in Pakistan have based their

mobile financial services on the Unstructured

Supplementary Service Data (USSD) menu

which has worked superbly for the OTC model,

where an agent is trained to use a cell phone to

conduct MFS transactions. However, it is very

hard for customers to carry out similar

transactions on their phones. The USSD menu

has multiple layers, and is hard to operate, prone

to human errors and time consuming. In order to

extend mobile wallet uptake to presently

unserved markets, it is important to offer an

interface which is more understandable and thus

potentially more useable. If we map out the

global scenario, we see that in addition to USSD

and Interactive Voice Response (IVR), a growing

numbers of mobile money providers are making

their services available through apps. According

to GSMA, 62% of services are now available via

an application, a percentage that is likely to

increase as smartphone penetration rises.

With increasing smartphone penetration in

Pakistan, currently at 31%, we see a great

opportunity for mobile wallets to become the

primary MFS delivery channel. Smartphones

offer substantially more screen space and

technology capacity which lends these devices to

greater user friendliness. Smartphone apps for

mobile wallets can potentially address some of

the user experience limitations of USSD,

including session time-outs and user error.

Beyond improved user interface and experience,

smartphones offer other benefits that enable

customer retention. Providers for example, can

make necessary periodic updates to their mobile

wallets at a relatively lower cost thereby enabling

c o n t i n u a l i m p r o v e m e n t s . M o r e o v e r ,

smartphones can help providers resolve some of

the problems customers face within the OTC

model such as frustration associated with a lack of

proximate and liquid agents. An agent locator

feature could be particularly useful for new

customers, along with features that enable

customers to rate agents on customer service and

liquidity metrics.










0 2013 2014 2015 2016 2017 2018 2019 2020






When it comes to designing smartphone apps, it

is important for providers and designers to take a

customer-centric approach. For this, app design

firms need to integrate strong research elements

within the design process. Human-centered

design is a technique that has proven successful in

incorporating customer insights into smartphone

user interface design. Once design firms have

successfully identified the need of each of the

targeted market segments, providers can

brainstorm different ways that the final app can

address those needs. Ideas being implemented in

other markets include:

Ÿ The introduction of local languages in the

MFS application interface.

Ÿ An interface that offers different symbolic

imageries and voice assistance for low literacy

markets like Pakistan.

Ÿ In effect, the feature-rich interface and

flexible functionality of smartphones can

offer a better customer experience that the

old USSD menu, and potentially ease the

adoption and usage of mobile wallets.

Read more blogposts at www.karandaaz.com.pk/blog



from the British people

Karandaaz Pakistan, a Section 42 company established in August 2014, promotes access to finance for small businesses

through a commercially directed investment platform, and financial inclusion for individuals by employing technology

enabled digital solutions. The Company has financial and institutional support from leading international development

finance institutions; principally the United Kingdom Department for International Development (DFID) and the Bill &

Melinda Gates Foundation.

The Company has three work streams:

Ÿ Corporate Investment and Credit (CIC): The CIC line of business provides wholesale structured credit and equitylinked

direct growth capital investments in small and mid-size enterprises with compelling prospects for sustainable

growth and employment generation in Pakistan

Digital Financial Services (DFS): The DFS line of business focuses on expanding the poor's access to digital financial

Ÿ services in Pakistan by working across the ecosystem with all stakeholders including regulators, policy-makers,

government departments, businesses and researchers and academics with activities arranged in four key work

areas–Policy and Regulation, Seeding Innovation, Experimentation and Solutions Development, and Scale and


Ÿ Knowledge Management and Communications (KMC): The KMC line of business supports the company's core

financial inclusion goal by developing and disseminating evidence based insights and solutions to influence market

and the financial inclusion ecosystem.

Karandaaz Pakistan is sponsored and governed by eminent Pakistanis, and is managed by an experienced team with core

expertise in international investment management and digital finance.

1E, Mezzanine Floor, Ali Plaza,

Nazimuddin Road, F-6/4, 44000, Islamabad

Tel:(051) 8449761

Email: info@karandaaz.com.pk

facebook.com/KarandaazPK twitter.com/KarandaazPK linkedin.com/company/karandaaz-pakistan


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