Oraan raises $ 3 million to increase financial inclusion of Pakistani women

After working as an investment banker in Canada for a decade, Halima Iqbal returned to Pakistan in 2017 and quickly realized how difficult it is for women to access financial services. “I had a hard time opening a basic bank account. It took me about three and a half months, ”Iqbal told TechCrunch. She started researching how Pakistani women deal with money, for example, how do they save or take out credit?

Then she met product designer and entrepreneur Farwah Tapal, who recently returned to Pakistan from Spain, and the two created Oraan in 2018 to help women access financial services. The startup today announced it has raised $ 3 million in funding, co-led by return investor Zayn Capital and Wavemaker Partners, with participation from Resolution Ventures, i2i Ventures, Hustle Fund, Haitou Global, Plug and Play and angels like Claire Diaz-Ortiz, former investor partner at Magma Partners and former Twitter employee.

Oraan has now raised just over $ 4 million in funding. Iqbal and Tapal said they were the first women entrepreneurs in the Pakistani fintech space to raise a round table.

The founders of Oraan Farwah Tapal and Halima Iqbal

“There was an opportunity, how can we understand the space economy and the informal economy in Pakistan, and where can we grab that? Said Iqbal.

Oraan decided to start with ROSCA (Rotating Credit and Savings Associations), or committees of people who contribute money to a pot that is distributed to a member each month. It will expand to more financial services, with the intention of becoming a digital bank.

According to Oraan’s research, only around 7% of Pakistani women are financially included, meaning they have at least one basic bank account. For many women, trying to access financial services means encountering logistical and social barriers.

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“When a woman walks into a bank, the first question we get is’ why do you even need a bank account? “especially if you are a freelance writer or a micro-entrepreneur or an unemployed housewife,” Iqbal said, adding that women are often asked to provide information about their husbands or male relatives so they can serve of guarantor. “These types of restrictions have prevented women from having the kind of financial mobility they need to be able to contribute equally to the economic growth of the country.”

Traditionally, ROSCAs are formed within communities, for example among family members, friends or neighbors. Then each person pays a fixed amount of money per month. Who receives the mass of money each month is decided by the committee, sometimes by vote or draw.

Iqbal and Tapal decided to start with the ROSCAs because almost everyone they know had attended an informal meeting. According to Oraan’s research, around 41% of the Pakistani population has participated in a ROSCA and $ 5 billion is transferred there each year.

“The scale of use and what it provided to the user was just fascinating,” Iqbal said. “It’s a gold mine to create something valuable for the end user, as well as a business opportunity. “

Oraan formalizes the ROSCAs, by offering packages over five or ten months. One of the main differences between Oraan ROSCAs and informal ROSCAs is that users can choose the month they want the money pool, as the app’s cash management backend forms committees based on member needs and ability to pay.

By participating in ROSCAs through Oraan, users also have the opportunity to join committees with people outside their communities and social networks. Before accepting people on Oraan, the app reviews them and also manages each ROSCA, raising and disbursing funds.

“Usually in Pakistan there is no concept of credit rating and that is why financial inclusion or access to liquidity becomes an issue,” Tapal said. Oraan partners with other providers to assess creditworthiness based on verified identities, users’ location of residence, proof of income, and personal references.

Some of the reasons Oraan users participated in ROSCAs include funding their children’s education, paying for IVF treatments, or leaving abusive relationships, Iqbal said.

When people participate in committees in Oraan, they also build a payment history, which may open the door to other financial services in the future. The startup’s ultimate goal is to become an online bank, Iqbal said.

“We take this culturally, religiously and socially acceptable tool of committees, digitize them and bring women into a more formal space where they can open bank accounts,” Iqbal said. Other verticals that Oraan plans to launch include savings, credit, insurance and education finance, as well as investment products that will allow women to save money in funds. mutual funds and other asset classes. It also plans to create online communities for its users.

“We want to become a full-fledged neobank and very strongly community-based because that’s where we see women want a sense of belonging,” Iqbal said. “When it comes to financial transactions, that’s one of the things they lack, that sense of belonging.