Fintech Alif raring to enter Pakistan’s ‘underbanked’ market

Karachi: Tajikistan-based Alif is looking to tap Pakistan’s fintech space to cater Pakistan’s large ‘unbanked’ population, said Mahmood Shamsher Ali, Country Representative Alif Capital Holdings, during an exclusive interview with The News International.

Alif was established in Tajikistan in 2014 by Abdullo Kurbonov, Firdavs Mirzoev and Zuhursho Rahmatulloev as a microcredit organisation.

The company is also among around 20 companies and startups, which have applied for a licence after the State Bank of Pakistan launched the digital banking framework.

“The central bank’s initiative has gained tremendous interest from players from around the world,” said Ali, billed as the CEO of Alif Digital Bank after the approval of license, adding, “It is rumored that over 20 applications were submitted on the 31st of March, 2022.”

“This makes for interesting times ahead with legacy banks being pushed to reinvent themselves, and the participation of fintechs making for a new ecosystem that should achieve the many objectives of the State Bank of Pakistan.”

Ali has been working alongside the founders of Alif to explore the market, and come up with solutions that could add the most value to the underbanked, and the overlooked SMEs of Pakistan.

According to reports, banks’ access had only been Rs6-7 trillion, while Rs17-18 trillion transactions remain undocumented.

“Alif is also Shariah compliant,” said Ali.

“Alif has immense potential to serve a market such as Pakistan for its stints with similar markets, although smaller markets, of Tajikistan and Uzbekistan.”

Omer Bin Ahsan, founder and CEO of another Shariah-compliant fintech Haball said there was immense potential in the country’s fintech space, but most of transactions were undocumented. One of the main factors for low banking penetration in Pakistan is lack of Sharia compliant products for people, Ahsan said.

According to Ali, Alif looks to offer BNPL, short term loans (month), B2B finance and remittances services. The company plans to invest a paid-up capital of Rs1.5 billion in the beginning and eventually Rs4 billion at full operations.

Alif started out with four employees of which two were part-time. Since the company did not have any Core Banking software.

Alif later decided to develop its own Core Banking system in-house, which laid the groundwork for building one of the strongest IT-teams in the Central Asian region.

By 2017, Alif’s in-house core banking system was up and running. The products were created and accounted for in a Shariah compliant manner. By 2018, Alif increased products and services to include, alif mobi (the largest and most widely used finance mobile application in Tajikistan). By then, they have become the members of cross-border money transfer systems and launched online.alif.tj, an online banking solution in Tajikistan for individuals.

In 2019, Alif entered Uzbekistan. Within a space of 3 years, Alif became the largest Buy Now Pay Later (BNPL) service provider in Uzbekistan.

In 2020, Alif got a full banking licence from the central bank in Tajikistan, becoming the first Central Asian fintech company to enter into a strategic partnership with Visa.

In 2021, Alif emerged as the fastest growing retail bank in Tajikistan, having an e-money and payments licence in Uzbekistan.

In September 2021, the founders of Alif visited Pakistan to explore the market. The discovery led to an understanding of the credit ecosystem for BNPL, the banking offering, and an overview of the gaps that could be supported by a fintech, particularly one with a Shariah compliant and strong customer centric mindset. Alif used the last quarter of the year 2021 to prepare itself to enter the Pakistan market.

At the same time, the SBP shared the Digital Retail Banking framework, for potential applicants in Pakistan.

“Alif had already identified that the situation was ideal. There was a large number of unbanked and underbanked population and SME players, women were massively underserved, migrants’ families were underserved, and the growing young population of Pakistan did not have a bank that would cater specifically to their behaviours,” Ali said.

“Yet, it was obvious that the young force, be they freelancers or individual contributors, were tech-savvy. They were frequent users of smartphones for communications, for learning new things and for serving their international clients.

A disruption was inevitable. At the same time, one of the most positive invitations was a regulator that was ready to innovate, partner with the local players, and find innovative solutions to help Pakistan shift from a cash-based economy to a digitally enabled economy,” he added.

Ali added that Alif’s founders had recognised that the local solution would need to be one that was fast evolving, and strongly technology and customer focused.

It would need to be one that was designed specifically for the Pakistan market, he added.

“Alif was well-placed to do this, with its entirely in-house developed solutions. Alif could now boast having their own Core Banking System, Customer Relationship Management system, and an android and iOS enabled application,” Ali explained.

“Unlike traditional entities, Alif’s sole focus is to deeply understand the ecosystem of the customer, and find ways to integrate, add value, and contribute to helping customers save, and manage their financial needs through a single “application” solution,” he added.

According to the company official, Alif’s goals in Pakistan are consumer financing, mobile payments, SME financing, and mobile remittances where Alif is one of the fastest growing market leader.