Karandaaz Digital

Karandaaz Digital aims to catalyze the financial services industry towards deeper financial inclusion by employing latest cutting-edge innovations and digital solutions to create social impact. The National Financial Inclusion Strategy (NFIS) adopted by the State Bank of Pakistan (SBP) aims to address the challenges of low-level financial inclusion in the country. It identifies increased access points for consumers and small businesses, awareness and knowledge of financial services, and a robust national payments infrastructure as some of the enablers in achieving universal financial inclusion in Pakistan. We collaborate across all the actors, in the financial services ecosystem to collectively maximize impact by improving access to digital finance for low-income, rural, and otherwise excluded segments of the population, most notably women. With funding from the Bill and Melinda Gates Foundation (BMGF), we aim to achieve the following:-

  • Drive shifting of government payments (G2P and P2G) onto digital platforms and hence digitize most-used payments in the public sector;
  • Test new digital payment innovations by partnering with commercial providers;
  • Improve user experience by providing well-designed user interface wireframes and enabling financial service providers in adopting them;
  • Support development of the start-up and FinTech ecosystem to foster private sector innovation;
  • Conduct regulatory and policy analysis and advocacy to address policy barriers to digital financial inclusion;
  • Create knowledge products for the public to accelerate diffusion of best practices in digital financial inclusion; and
  • Establish a national payments infrastructure consistent with Level One principles.

Payments Digitization

  • Almost 20 million customers walk-in to over 1,400 branches of the National Bank of Pakistan (NBP) annually across Pakistan, of whom approximately 70% do not have bank accounts of their own.
  • The volume of government payments transacted by NBP amounts to PKR 5 trillion, currently being collected and disbursed on a cash basis. The management costs of transacting such a vast volume of payments manually and in cash are considerably large, and place a financial and organizational burden on the national exchequer.
  • Digitizing these payments has a compelling value proposition for each participant: government entities, businesses, and consumers alike. It offers the government an opportunity to improve public service delivery, reduce management and transportation costs of payments, and improve transparency and accountability in these operations. By being connected to a digital financial system for making and receiving payments consumers can save time and money, and considerably improve their experience of  government services.
  • Karandaaz is supporting NBP to develop a comprehensive Digital Strategy for digitizing payment flows, to enhance efficiency and convenience for the Bank and its customers.

Money Order Digitization

  • Karandaaz is working with Pakistan Post, a known and trusted government entity with a widespread distribution network in rural areas, to improve access to reliable and affordable digital finance.
  • About 1.5 billion people worldwide use financial services provided by the postal networks. The postal sector is therefore the second largest contributor to financial inclusion worldwide: behind banks but far ahead of microfinance institutions or mobile phone operators. The provision of financial services to the masses through post office networks offers a promising and extensive network for reaching remote areas and connecting them to the financial system.
  • We are providing technical assistance to develop a mobile money order service, to enable Pakistan Post to launch its first complete digital money order service. This intervention will assist Pakistan Post in building new business opportunities, improving service penetration,  and providing efficient, transparent, and convenient services to its customers.

Kissan (Farmers) Package

  • In Pakistan agriculture is a major source of livelihood for the majority of people living in rural areas. Access to finance is a compelling challenge for most of these farmers;  particularly for poor and smallholder farmers making them vulnerable to financial shocks. Lack of timely access to capital is a key impediment in improving the efficiency of their production and adopting better technologies.
  • The Agriculture Department, Government of Punjab will disburse PKR 70 billion in agricultural loans to 500,000 farmers over a period of five years, by using a digital medium: allowing the farming community to receive interest-free loans via mobile wallets and ensuring end-user convenience.
  • Karandaaz is providing Technical Assistance to the Punjab Agri Department in selecting the most suitable technical partner for the implementation of the project, proposing improvements to the service design, and overseeing the development of mobile apps with the appointed technical partner.
  • We believe that this intervention will help address the challenges faced by the farmers,  in terms of increased access to formal and affordable agricultural finance through digital means. In addition the farmers will be better informed, with useful and timely information on weather updates and farming techniques via mobile apps, with the aim of increasing their productivity and income.

Government Digitization Initiatives

There is substantial evidence indicating that digitizing a range of government payment flows such as pensions, transfer payments, salaries etc. results in more efficient delivery of public service, at a lower cost to the government entity and an increased convenience for the user.

Karandaaz partners with government entities with the objective of shifting their payments onto digital platforms, and developing new digital payment use cases through access to appropriate technical resources and funding. We thus aim to reach poor households and migrate their cash/check-based payments into digital format as a first step towards achieving our overall objective of greater financial inclusion.

Seeding Innovation

Karandaaz partners with commercial providers, private firms, and FinTech start-ups to develop and test a range of digital payment innovations: with the prospect of reaching millions of new customers who are otherwise financially excluded, or have limited access to financial products and services.

Value Chain Payments Digitization

  • Retail merchants are among the major catalysts for promoting digital financial inclusion, by functioning as a gateway for registration and uptake of mobile wallets. Employing a value-chain approach is thus valuable in building more inclusive market systems; as this provides a framework in which a target segment of the population can be identified, its needs assessed, and customized solutions developed to cater to it.
  • Karandaaz has partnered with one of Pakistan’s leading private banks to conduct a pilot for digitizing payments to 6,500 last-mile retailers, and 10 distributors, within the targeted value chain.
  • The aim of this intervention is to strengthen the delivery of financial services to the targeted merchant retailers, and to understand their motivations in adopting digital payments, as well as the business practices and technology requirements.
  • The success of this intervention will enable us to set the stage for a commercial scale up of the digitization drive to 80,000 retailers.

Digital Strategy Development

  • The banking sector in Pakistan appears far removed from the digital disruption that has rattled other sectors. 76 percent of the Pakistani population now uses a mobile phone and a rapidly growing proportion of this segment, presently estimated at 30%, is moving to smartphones. Customers and business clients are open to transacting business over digital platforms; and expect a simple, intuitive, and low-cost experience.
  • A solution which capitalizes on digital advances and escapes the pitfalls of the branchless banking model is required to significantly improve financial inclusion in Pakistan.
  • Karandaaz has provided assistance to a major Pakistani private bank to develop a digital strategy for creating an in-depth understanding of the market needs in the payment sector, and offering recommendations to expand its footprint to serve excluded segments of the population with accessible and quality financial products.

User Interface and Experience

  • The delivery of mobile financial services through a smartphone interface has the potential to extend and improve financial access across Pakistan. A well-designed user interface, taking into account the challenges of the less literate, will enable providers to better serve existing customers as well as expand into new market segments.
  • Karandaaz has partnered with one of the leading mobile network operators (MNO) to develop and redesign its mobile money app, based on the findings of the Human Centred Design (HCD) Research Study conducted.
  • The project aims to overcome the design challenges of transacting via a USSD channel by creating a user-friendly interface, conducting literacy drives to create awareness, and offering various incentives to mobile money users and agents to further the adoption of mobile money. In an attempt to bridge the gender gap in accessing digital financial services, the customer literacy and awareness drives are focused primarily on rural women.

National Payments Infrastructure

To increase the utility and usage of digital financial services for poor consumers and the merchants that serve them, the payments sector must provide ubiquitous, cost effective transaction processing. With the establishment of national payments infrastructure in line with the Level One Principles, Karandaaz aims to significantly reduce the cost barriers to reaching the poor with financial services, paving the way for more robust commercial efforts to serve them and thereby help to create an economy that benefits everyone.

We are forming partnerships with multiple stakeholders including regulators, government entities, key infrastructure players, and other participants with the aim of lowering the cost of participating in the financial system, increase financial inclusion and develop modern and robust payment systems as per Strategic Goals 4 and 5 of the SBP Vision 2020.

National Payments Infrastructure

Policy and Regulation

Policy and Regulation

Karandaaz supports policy-makers and regulators to develop an enabling environment for fostering innovation in the digital financial services industry in Pakistan. We identify the critical challenges and regulatory barriers towards digital financial inclusion and conduct research to better inform deliberations around those barriers.

Our senior team members have been selected to constitute three Technical Committees formed under the National Financial Inclusion Strategy (NFIS) by the SBP to address technical issues and propose solutions in order to achieve specific NFIS objectives. The three Technical Committees with representation from Karandaaz are Payment Systems, SME Finance, and Agriculture & Housing Finance.