CEO – Karandaaz, Pakistan

Evolve: Please share something about yourself, a brief overview of your professional journey? Ali 

Ali Sarfraz Hussain: My professional journey, spanning nearly two decades, has been to enrich my experience across private, and not-for-private sectors. I have been engaged in advising private sector firms while working as Strategy Consultant Capgemini UK, and later as Chief Operating Officer of Business Support Fund, Pakistan. At Mobilink, I developed new strategies in the wake of increased competition after entry of new players in the market. I have also worked in senior policy and operational positions in the public sector. I established the £55 Million Punjab Skills Development Fund Company by piloting new models of skills training. We also developed and successfully implemented a new model for eliminating child labor at brick kilns in Punjab bringing the incidence of child labor to less than 2%. In my current role as, a CEO of Karandaaz Pakistan, I am leading the company to improve financial inclusion in Pakistan through SME financing, digital financial services and knowledge management and communications.

Evolve: Tell our readers about Karandaaz Pakistan, its achievements and future plans? 

Ali Sarfraz Hussain: Karandaaz Pakistan is a Section 42 (not-for-profit) company, promoting 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. Karandaaz Pakistan has three work streams: 

• Digital Financial Services (DFS): The DFS line of business focuses on expanding the poor’s access to digital financial 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 Outreach.
• Corporate Investment and Credit (CIC): The CIC line of business provides wholesale structured credit and equity-linked direct growth capital investments in small and mid-size enterprises with compelling prospects for sustainable growth and employment generation in Pakistan
• 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 markets and the financial ecosystem as well as conducting trainings and workshops.

Key achievements include the establishment of the much-awaited Pakistan Microfinance Investment Company (PMIC) in partnership with the Pakistan Poverty Alleviation Fund, and KfW, which will extend credit to those SMEs who do not have access to finance presently. Other key achievements include the closing out of two risk participation agreements with Meezan Bank Ltd. and Orix Leasing Pakistan Ltd. of $50 million and $40 million respectively. The innovative Corporate Vendor and Distributor Finance Program, developed with financial support from the United Kingdom Department for International Development (DFID), will provide working capital finance (in the case of Meezan Bank partnership) and asset finance (in the case of Orix Leasing Pakistan Ltd.) for capital investment to small businesses operating in organized supply chains of the economy that currently do not have access to formal financing, while the involvement of large corporations, such as Atlas Honda, Pak Suzuki and Millat Tractors, 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.

We have also signed a grant agreement with National Bank of Pakistan for developing a strategy for digitizing the bank’s government-to-person (G2P) and P2G payments worth 5 trillion PKR annually, which will result in efficiency, transparency and cost save for the government. This work will also go a long way in banking the unbanked populations in Pakistan. We have also signed a technical assistance agreement with Pakistan Post to help digitize money orders, while two agreements with Bank Al Falah are being finalized for developing a digital bank strategy and for value chain payments digitization. On the other hand, we commissioned a human-centered design research which resulted in a Smartphone User Interface and User Experience Design Toolkit to enable mobile money service providers in Pakistan in designing user interface with a human-centered design approach. The resultant wireframes have been made available for download on our website. We have also recently completed a research study, Seeding Innovation: A Framework for Rooting FinTechs in Pakistan, to identify potential investment opportunities for creating an enabling environment for sustainable FinTech eco-system, which will be launched in the coming weeks. 

In terms of enhancing the capacity of the sector in deploying digital financial services in the country to improve financial inclusion, we have held workshops on Digital Credit (in collaboration with The Consultative Group to Assist the Poor, CGAP) and on Smartphone Mobile Money App Design with a Focus on Low-Literate and Non-Literate Population in Pakistan. Furthermore, we partnered with Digital Frontiers Institute to bring the Certificate in Digital Money course to Pakistan. The course is certified by the prestigious Fletcher School at Tufts University, USA and is providing a valuable opportunity for institutions within the digital finance space to build the capacity of key personnel. The first cohort of this course was successfully completed on September 30. 

We have just launched the “Global Landscape Study on Digitising P2G Payments”, which is the first-ever global study to take a systematic look at the opportunities and challenges associated with digitizing person-to-government (P2G) payments. The report has been developed based on a preliminary global scan of 61 initiatives, and in-depth analysis of nine diverse P2G initiatives across seven countries, including Rwanda, the Philippines, India, Tanzania, Ghana, Kenya and Pakistan. We have also launched the first Innovation Challenge to improve the current mechanism of foreign remittances from Pakistani workers. Successful applicants have the possibility to receive funding up to 50 million PKR. Lastly, we have produced 29 blog posts on digital financial inclusion and policy and regulatory barriers to date. 

I am delighted that Karandaaz Pakistan has gathered significant momentum in developing partnerships with private and public stakeholders for expanding financial inclusion to date. Going forward, we aspire to join hands with many more entities while making our existing partnerships stronger. We plan to conduct digital experiments with industry stakeholders to increase use cases. I also foresee us working with local universities to promote innovation, acceleration & incubation through start up competitions.

Evolve: 95% of the economic establishments in Pakistan are small and medium enterprises (SMEs). What plans does Karandaaz Pakistan have for these SMEs? What is Corporate Investment and Credit? How does it work? 

Ali Sarfraz Hussain: As you are already aware, there are several binding constraints for SMEs, including limited access to finance, lack of skilled labor force, lack of access to business services and technology, energy constraints as well as lack of entrepreneurial mindset. Under our Corporate Investment and Credit line of work, Karandaaz Pakistan is increasing access to finance for SMEs since financing needs of MSMEs are unmet by the formal financial sector (there are 3.2 million SMEs, but only approximately 188,000 SME loans outstanding on banks’ books). As highlighted earlier, Karandaaz Pakistan has invested risk capital and structured credit in partnership with commercial financial institutions through viable credit models to significantly increase access to finance. In the first phase, we are targeting SMEs in existing value chains of the country. In the meantime, we are also working on developing a product specifically for women enterprises. Karandaaz Pakistan also has plans to invest growth capital in proven small and medium-size businesses led by credible management teams with compelling potential for generating employment and financial returns. Karandaaz will indicatively make substantial equity-linked investments with a planned exit horizon in selected companies, with the aim of piloting a growth capital business model. 

Evolve: What are your focus areas and how did you choose these focus areas? 

Ali Sarfraz Hussain: Our focus areas are centered around the National Financial Inclusion Strategy of Pakistan. For instance, we are working in digital finance since it has the greatest potential to increase the reach of the poor to financial services. Similarly, we have selected SME financing as another vertical since it can financially include those businesses and enterprises that have been part of the formal economy. Finally, how can we push for financial inclusion if our practitioners, policymakers, entrepreneurs, youth etc. do not have an indepth understanding of financial inclusion—the obstacles and barriers as well as opportunities it is faced with? Hence, our Knowledge Management and Communications work which conducts ground-breaking research, disseminates relevant insights through our blog (www. karandaaz.com.pk/blog), builds capacity of the industry stakeholders, and holds innovation challenges to propel the industry in the right direction. 

Evolve: What distinguishes Karandaaz from its competitors? 

Ali Sarfraz Hussain: Karandaaz Pakistan’s distinct identity stems from the fact that we are a not-for-profit entity with an over-arching objective to support the market in a neutral and non-biased fashion. We have a mandate to work with all the stakeholders, including telcos, banks, FinTechs, policymakers, government sector entities, SMEs etc. Furthermore, we enjoy sound financial and technical support of three prominent and prestigious international organizations, which enable us to bring best practices from around the world to Pakistan. 

Evolve: What kind of culture have you maintained in your organization and how would you throw light on its significance? 

Ali Sarfraz Hussain: Karandaaz Pakistan is a new company with few employees. Hence, we are in the process of forming a culture at this organization. So far, we have been mindful to create a culture that values creativity and entrepreneurial thinking, which works well for us since we are a young team, with great energy and appetite for taking risks. 

Evolve: Where do you see yourself and your organization in next 5-10 years? 

Ali Sarfraz Hussain: One cannot determine the course of one’s life, so as far as I am concerned, let’s see where life takes me. However, our vision is to develop Karandaaz Pakistan as a mature investment platform which can be leverage for SME financing and digital financial inclusion. 

Evolve: What is the recipe to achieve long-term success? 

Ali Sarfraz Hussain: I believe this quote by Confucius is the key to achieving long-term success: “It doesn’t matter how slow you go as long as you don’t stop.” 

Evolve: Any message for the readers of EVOLVE magazine? 

Ali Sarfraz Hussain: Follow your instinct!