AdalFi, a Pakistan-based digital lending infrastructure provider, announced on Thursday that it has raised $7.5 million in seed funding. This round was led by COTU Ventures, Chimera Ventures, Fatima Gobi Ventures, and Zayn Capital, along with participation from angel investors.
This funding announcement comes amidst Pakistan’s deepening economic crisis and is the first major corporate funding announcement since the start of the year. AdalFi’s mission is to promote financial inclusion by providing people and small and medium enterprises access to credit. According to the press release, the startup aims to facilitate loan disbursement in real-time.
AdalFi scores the financial transactional data already possessed by banks and enables personalized digital marketing to qualified prospects. It provides the customer journeys that are embedded within the bank’s digital presence and allows for real-time disbursement of loans.
The startup operates on an asset-light, revenue-sharing model with banks. This captures any downside risk exposure to banks such that any loan losses are accounted for, pro-rata, in fees due to AdalFi. The company’s deep partnerships with banks ensure that they are completely aligned. AdalFi only makes money from loans that are paid back.
“In essence, we have built better underwriting models for banks. Not only have we lowered the cost of credit scoring and underwriting, and therefore the cost of credit, but we also changed their outlook and got them to change their approach,” Co-Founder and CEO Salman Akhtar said.
The startup aims to enable banks to tap into the huge, latent customer base in Pakistan. Currently, only 5% of deposit customers in Pakistani banks are also borrowers. AdalFi provides an efficient solution for banks to process loan requests, which reduces the time taken to process the requests.
“Without our platform, banks typically take two weeks to process a loan request,” Akhtar told Reuters. He pointed to a study by the State Bank, which found that long lead times for loan disbursements were one factor behind consumers turning to informal credit markets instead.
Since its launch in July 2021, AdalFi has grown the gross loan volume (GLV) by 30% month-on-month for the last 19 months and enabled a cumulative amount of Rs1 billion in GLV through December. Over 70,000 loans have been disbursed, with a default rate of under 0.1%.
“In January 2023 alone, AdalFi generated Rs390 million in lending and is on track to exceed Rs1bn within Q1 2023,” according to the press release. The company has signed on 14 banks, including United Bank Limited (UBL), Habib Bank Limited (HBL), Meezan Bank, among other banks and microfinance banks operating in the country.
The CEO commented on the company’s rapid growth, saying, “Our rapid growth is a testament to the need for such solutions in the lending space, and we look forward to continuing to drive positive change in the industry.” With this new funding, AdalFi aims to further its mission to promote financial inclusion in Pakistan.
