Halima Iqbal, a Canadian investment banker for 10 years, returned to Pakistan in 2017. She quickly learned how difficult it was for women to get financial services. It was really difficult to open a basic bank account. TechCrunch told Iqbal that it took her three and a quarter months to open a basic bank account. Iqbal began to research how Pakistani women manage money. For example, how do they save for credit or borrow it?
Farwah Tapal, a product designer and entrepreneur, was then introduced to her. The two of them created Oraan in 2018 as a way to assist women with accessing financial services. Today, the startup announced that it raised $3 million in funding. It was co-led by Wavemaker Partners and Zayn Capital, a returning investor. Other participants included Resolution Ventures and i2i Ventures. Haitou Global, Plug & Play, and Angels Claire Diaz-Ortiz (an ex-investing partner at Magma Partners who was also an early employee of Twitter).
Oraan has raised over $4 million in funding. Tapal and Iqbal said that they were the first female entrepreneurs to raise seed rounds in Pakistan's fintech sector.
Iqbal stated that there was a huge opportunity.
Oraan chose to begin with ROSCAs, which are rotating credit and savings associations. These are committees of people who contribute money into a pool that is distributed each month to a member. The company plans to expand its financial services and eventually become a digital bank.
According to Oraans research, only 7% of Pakistani women have a basic bank account. Many women face social and logistical barriers when trying to access financial services.
Iqbal stated that when a woman enters a bank, they first ask them why. This is especially true if the woman is a freelancer, micro-entrepreneur, or unemployed homemaker. She also said that many women are asked to give information about their husbands or male relatives so they can act as guarantors. These restrictions have prevented women from gaining the financial mobility they need to make a contribution to the country's economic growth.
ROSCAs were traditionally formed in communities among friends and family. Each person then contributes a fixed amount each month. The committee decides who gets the monthly pool of money. Sometimes, it is by random draw or vote.
Tapal and Iqbal decided to begin with ROSCAs as almost everyone they knew had participated in one. According to Oraans research, approximately 41% of Pakistan's population participated in ROSCAs and $5 billion is rotated through them annually.
Iqbal stated that the scale of the use and the benefits it brought to the user were simply amazing. This is an opportunity to create something valuable for end users as well as a business possibility.
Oraan formalizes ROSCAs, offering five-month or ten-month plans. Oraans ROSCAs are different from informal ones in that users have the option to choose which month they would like the money pooled. The apps treasury management backend creates committees based upon members' needs and ability.
Oraan users can also join ROSCAs and form committees with other people from their community. Oraan vets applicants before accepting them onto its platform. It also manages ROSCAs, collecting and disbursing money.
Tapal stated that credit scoring is not a common concept in Pakistan. This makes it difficult for people to access liquidity or financial inclusion. Oraan works with other providers to assess creditworthiness. This is done based on verified IDs, proof of income, and personal references.
Iqbal stated that some of the reasons Oraans members have taken part in ROSCAs are to finance their children's education, pay for IVF treatments, or leave abusive relationships.
Participating in Oraan's committees allows people to build a payment history that can be used for other financial services. Iqbal stated that the ultimate goal of startups is to become an online bank.
Iqbal said that we take the culturally, religiously and socially acceptable tool of committees, digitize them, and bring women into a more formal space to open bank accounts. Oraan also plans to launch verticals such as savings, credit and insurance, and investment products that allow women to invest in mutual funds or other asset classes. It plans to create online communities for its customers.
We would like to be a fully-fledged Neobank, and heavily based upon community as that is where we see women need a sense of belonging. They feel that they lack a sense of belonging when it comes to financial transactions.
