ImpactAlpha, October 1 – Halima Iqbal didn’t plan to start her own fintech company when she returned to Pakistan in 2018, after years as an investment banker, consultant and entrepreneur in Toronto and New York. When it took her more than three months to open a bank account, Iqbal’s entrepreneurial brain started working.
“If people like me, who are slightly more sophisticated financial product users, are having such a hard time accessing a bank account, what is the reality in terms of the rest of the population?” she says. She found that only 7% of Pakistan’s adult female population has access to formal financial services.
Iqbal joined forces with Farwah Tapal, an industrial and product design expert familiar with tech solutions for underserved communities. The pair launched Oraan to digitize savings circles, one of the most common forms of financial services for the world’s unbanked, especially women.
This week, Oraan raised $3 million from Pakistan-based Zayn Capital and i2i Ventures, U.S.-based Wavemaker Partners, U.K.-based Resolution Ventures and others.
Digital community finance
Savings circles, more formally known as rotating savings and credit associations or ROSCAs, let groups of trusted community members pool their savings and lend out the capital to each other in turn. Oraan is among a growing crop of startups using technology to digitize these community-based savings groups and, in turn, bring their members into the formal financial sector. Others include Bankly and Chamasoft in Nigeria, Alibre.io in Mexico, and MoneyFellows in the U.K.
Many other digital savings startups have launched, then faced challenges with customer acquisition and recreating the personal experience of traditional ROSCAs members. Such models are nevertheless promising as a means to financial inclusion, observes Amee Parhboo of Accion Venture Lab, because they “build off of customers’ base of understanding, comfort, and trust.”
She adds: “They’re meeting customers where they are to bring them into the formal financial system.”
In Pakistan, more than 40% of the population relies on ROSCAs, known locally as ‘committees,’ which transact an estimated $5 billion each month. Oraan has on-boarded more than 10,000 customers, 84% of whom are women.
For members, it offers Islamic finance-compliant five and 10-month savings plans. When it’s time for each member to receive their loan, the funds get deposited into an online bank account through Oraan’s partner bank, Dubai Islamic Bank.
ROSCAs are a natural entry point for a women’s financial journeys, because they are well-established and understood, explains Tapal. “She doesn’t have to it explain to anyone. She can just do it. And then when she starts seeing the benefits, she’ll take on more, or ask for coaching, or say, ‘Please provide me with a bank account.’ She’ll start asking for additional things along her financial journey.”