After expanding to Bangladesh and UAE, Pakistani startup Abhi has plans for ‘further growth’

Financial platform Abhi has shown itself to be one of the bright spots in Pakistan’s startup scene even when things have been dim - just $5.2 million was raised across eight deals in April-June this year.

But this Karachi-based firm that works with companies to enable their employees to access funds before payday has raised $21 million in venture capital (VC) funding, with investors including Dubai-based Global Ventures and VentureSouq. It has also raised $15 to $20 million in debt funding across its different markets.

Pakistan’s financial platform Abhi raises Rs2bn Sukuk bond, a ‘first in MENAP’

An August report says its valuation grew to $90 million during the last two years as it became one of the 16 startups that got into Abu Dhabi’s global tech ecosystem-Hub71 family. It was also recently selected as one of the Future 100 companies of the UAE, an initiative aimed at highlighting the top startups contributing to the emirate’s readiness for the future and competitiveness of the economic sector.

Another round: Pakistan’s Abhi raises $17mn in Series A funding

According to CEO Omair Ansari, its topline revenue is close to almost $8 million. Speaking to Business Recorder in an exclusive interview, he revealed that the company has been “very profitable this year”. He did not disclose actual figures.

One of its biggest markets, along with Pakistan and Bangladesh, is the UAE.

The Gulf country in general and Dubai, in particular, are “really trying to support new businesses, whether that be across fintech, health tech and other forms of technology to really disrupt and bring new sectors to the economy,” said Ansari.

“We’ve faced nothing but support from Dubai International Financial Centre, and Abu Dhabi Global Market. The regulators are very open to working with you to be able to bring you to market. It’s been a very pleasant experience so far,” he added.

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He says the local VC ecosystem is also very supportive: “I think that’s something that we’ve been very happy with and we look to cement ourselves further in the region.”

When asked to compare the startup and VC ecosystem in Dubai and Pakistan, Ansari said the UAE is “a more mature market because it’s existed for a little bit longer.”

“VC funds have a longer vintage over there. You’ve had previous exits, like the likes of Careem that have happened from that ecosystem.”

The UAE has another advantage: there are more second- and third-time founders versus in Pakistan, “because it’s just so new when it comes to a venture funding standpoint”.

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However, there are similarities as well: “We talk about some of the blowups that have happened in the past couple of years in Pakistan, to be honest, it’s happened in the UAE as well. The learnings happen and then people move on and the ecosystem continues.”

He also pointed out that one similarity in both countries is the lack of growth equity capital.

“There are pockets of growth equity capital in the UAE, but it’s nowhere like Europe or the US. And that’s a big problem, and I think Pakistan is very similar.

“The problem for us or any large company is that if you’re trying to grow the business beyond Series A, there is a lack of deep pockets to be able to support a business like that, to take it to the next level, to grow B, C, D onwards.”

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Helping SMEs with working capital issues

Abhi works with some 1,000 companies and through them is serving roughly 400,000 individual customers already, with more in the pipeline.

While its clients include some big names like Unilever, Bank Alfalah and Artistic Milliners, there is also a great focus on SMEs.

Ansari says Abhi’s Earned Wage Access (EWA) product does well because “the largest employer in the country are SMEs and they tend to face working capital issues” which means they often are unable to pay salaries on time.

The business does not just focus on EWA though. It has evolved since launching in 2021 during the pandemic - it now also helps companies with invoice factoring, payroll financing, and revenue-based financing for online merchants.

“We charge a flat fee for each product that we push out. And that’s how we generate our revenues,” says Ansari.

Launching during the pandemic came with a set of challenges. But COVID also “accelerated acceptance” for what they were building.

He explains that before the pandemic, Pakistan was not ready for a product like Abhi.

But COVID forced people to understand what it was like to only go through digital channels, acting as an accelerant for digital transactions and digital acceptability.

In 2021, Ansari and co-founder Ali Ladhubhai decided that “if Pakistanis aren’t ready for digital acceptance now, they never will be.”

Paving the way with Sukuk bonds

Fast forward to May 2023, Abhi raised a Rs2-billion Sukuk bond, a first for a fintech in the MENAP region.

Explaining the thinking behind this to Business Recorder, Ansari said Abhi wanted to prove “there is a nascent debt market in Pakistan that we can tap into to be able to grow the business without continuously funding with equity.”

It also wanted to prove “that we are using our true raw material, which is cash, to be able to fund the business and still being able to churn a profit.

Looking forward, Abhi plans to double down on issuing more Sukuk bonds.

“We raised around Rs2 billion in our last round. We will be doing closer to Rs4 billion to 5 billion in Q1 2024.”

As it looks to raise debt in its international markets, on the equity front it has “already started having conversations, but given we’re profitable, we’re not really in a rush to raise capital at this moment in time, given where market valuations are.”

Plans for future growth

As for what else is in store for Abhi next year, Ansari’s answer is “further growth”.

The company has just received the green light from the State Bank of Pakistan to pursue the due diligence of FINCA Microfinance Bank in partnership with TPL Corp, as they look to acquire a majority shareholding in the bank.

Although Ansari did not wish to comment on this, he said that while 2023 was a very tough year, “we came out of it larger and profitable and I think hopefully 2024 looks a little bit even stronger, specifically from a Pakistan macro perspective.”

It also wants to increase focus on international expansion, getting Bangladesh and UAE “into a larger proportion of our overall business”.

Copyright Business Recorder, 2023