Pakistan is home to the third-largest population of unbanked adults in the world. More than half of the country’s population — 100 million adults — lack access to the fundamental financial tools they need to manage their daily lives, grow their businesses, and seize opportunities. Recognizing the vast opportunity to advance financial inclusion in the country, Accion Venture Lab has decided to make our first investment in Pakistan in Tez Financial. Tez aims to be an all-digital bank — the first of its kind in Pakistan. It will provide a full suite of banking services within one mobile application to the vast underbanked population of the country.
While financial services are still out of reach for too many in Pakistan, mobile connectivity is on the rise. GSMA estimates that by 2025 over 70 percent of the world’s population will have mobile phones, driven by developing countries like Pakistan, creating a vast potential for digital banking.
Tez intends to expand financial inclusion in Pakistan by leveraging this mobile infrastructure. It will initially offer its nano-credit product (short-term, small ticket loans), followed by three other products: nano-savings, nano-insurance, and nano-investments. Tez’s mobile application will collect phone and social media data to underwrite and disburse the loans instantly, via a digital wallet. By using these digital and mobile rails, coupled with its proprietary technology, Tez can make financial products feasible for the underserved at a large scale.
At Venture Lab, we’re most excited about a few core areas of traditional banking that Tez is poised to disrupt:
Making financial products for the underserved viable at scale: Tez is committed to helping those who haven’t been served by traditional financial products or even microfinance, where costly brick and mortar business structures make loans below a few hundred dollars unviable. By using an all-digital platform for acquisition and underwriting, Tez may be able to significantly lower costs and open up underwriting in a way that drastically expands financial access. It will be the first financial institution in Pakistan to use primarily digital means to acquire customers and purely digital means to underwrite and disburse loans. This digital-first loan process should allow Tez to bring increased transparency, affordability, access, and convenience to low-income Pakistanis.
Offering a comprehensive suite of financial products: The power of Tez lies in the potential of its quick, on-tap credit product to serve as a gateway to a full suite of financial products, including savings, insurance, and money management. With financial health in mind, Tez will also offer affordable life and health insurance bundled with its nano-credit product, eventually expanding to make these discrete and separate products. Elsewhere, neobanks such as Moven and Simple are leveraging similar all-mobile platforms to provide a full suite of lower-cost banking services. We are excited about this model’s potential to help users reach and maintain financial health in an incredibly underserved market.
Financial inclusion in a country that has a high need: As noted above, Tez will be Accion Venture Lab’s first investment in Pakistan, a country where inclusive financial innovation is sorely needed. In Pakistan, only about one in seven people have formal credit histories, and this valuable data is particularly scarce among the vulnerable population Tez hopes to serve. Given the low penetration of banking services, this population segment ends up relying on informal sources for financial help, which are often expensive and reliant on subjective lenders. Given Tez’s all-digital platform, it will help remove discrimination based on interpersonal subjectivity and make accessing affordable financial services less dependent on formal credit scores.
At Venture Lab, we’re glad to be working with the Tez team on their mission to provide banking services and financial products to low-income customers across Pakistan. Founder Nadeem Hussain is a veteran in the inclusion space, having founded and acted as CEO of Pakistan’s first and largest microfinance bank, Tameer Bank. Other founders, Naureen Hyat and Humza Hussain, bring both startup and impact experiences to the team.
There is a massive market opportunity to support Pakistan’s vast underbanked and underserved population, and we’re excited to support Tez’s effort to transform this space. We believe in their forward-thinking model and inclusive vision, and we look forward to supporting Tez as they provide products that can enable financial security for those who need it most.