Queen Máxima of the Netherlands Meets 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.

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 and Interim CEO introduced the DFS strategy being employed by the company to achieve 40 percent financial inclusion of the adult population of the country by 2018. The strategy aims to increase touch points and build use cases through government digitization, digital credit and interoperability. A discussion ensued about the potential of digitization of government payments to bank the unbanked Pakistani population, while significantly reducing financial leakages and cash handling costs. Director DFS also spoke about the company’s engagement with the National Bank of Pakistan to digitize G2P and P2G payments across the country.

Asad Azfar, Chief Investment Officer and Director Corporate Investment and Credit described the company’s approach towards improving SME access to finance for strengthening broad based economic and employment growth in the country. Karandaaz Pakistan has approximately USD 60 million to invest over a course of three years in three core areas. First, the company is investing equity alongside two sponsors, Pakistan Poverty Alleviation Fund and KfW in a wholesale investment company that will finance retail microfinance providers. Second, in response to declining private sector credit and in particular small business credit, Karandaaz Pakistan has designed a value chain finance risk participation program through which commercial bank(s) and a leasing company are leveraging the company’s capital to finance small vendors and distributors embedded in organized corporate supply chains. The program is designed to provide credible visibility on cash flows so banks can finance cash flows (as opposed to excessive focus on collateral) and extend term credit to finance capital investment and growth. Third, Karandaaz will develop a small portfolio of growth capital investments at the larger end of its target market to demonstrate a viable equity linked investment platform for growth capital financing for small businesses, with a view to scale up an equity business over time.

Karandaaz Pakistan presented Queen Maxima with a recently published synthesis of three national level surveys on financial inclusion and mobile money: “Using Mobile Money to Promote Financial Inclusion in Pakistan”

Queen Máxima greatly appreciated the efforts of the Karandaaz Pakistan team and asked their opinion about government initiatives that would help further the financial inclusion agenda in the country. The team highlighted that structural reforms, such as tax system reform to improve business accounts, and infrastructure development including credit scoring, collateral registry were required to bring transformational improvements in small business access to finance. They also discussed the need for a government drive for digitization of all government flows and gender disaggregated data collection.