1. Karandaaz News Bites
Quarter I - 2016
Issue No. 2
1www.karandaaz.com.pk
Participants at the Digital Credit Workshop hosted in Karachi by Karandaaz Pakistan and CGAP in February 2016
In this Issue..
Ÿ CEO's Message
Ÿ Promoting SME Finance with ORIX
Leasing Pakistan Ltd.
Ÿ Technical Committee Nominations
Ÿ Dr. Ishrat Husain Awarded Nishan-e-
Imtiaz
Ÿ Queen Maxima Meets with Karandaaz
Pakistan
Ÿ Digital Credit Workshop
Ÿ Financial Inclusion: Quarterly Showcase
Ÿ Featured Blog Post: Smarter Wallets,
Engaged Customers
CEO’s Message
Dear Friends,
It gives me immense pleasure to connect with you for the first time through this newsletter and share
some of the latest happenings at Karandaaz Pakistan. Our work over the previous quarter has covered
a broad range of initiatives aimed at increasing access to finance for SMEs via vendor financing
agreements, capacity building of the industry, and cutting edge research in user experience, user
interface design and person to government (P2G) payment initiatives across the world. I am excited to
report that Karandaaz Pakistan is providing technical input on financial inclusion as part of the State
Bank of Pakistan's technical committees.
Finally, I would like to take this opportunity to thank you for your ongoing support, and look forward
to receiving your feedback and suggestions.
Ali Sarfraz Hussain
CEO, Karandaaz Pakistan
Promoting SME Finance with ORIX Leasing Pakistan Ltd.
ORIX Leasing Pakistan Ltd. and Karandaaz Pakistan
Signed a Risk Participation Agreement to Provide USD 40
Million in Asset Financing to Small and Midsize Vendors
and Distributors in Pakistan. The innovative value chain
finance program which has been developed with financial
support from the United Kingdom Department for
International Development (DFID) will provide asset
finance for capital investment to small businesses operating
in organized supply chains of the economy that currently
do not have access to formal financing. The involvement of
large corporations will provide valuable alternate evidence
for identifying and evaluating credit worthiness of the
vendor in SME sector who do not have collateral and are
currently deprived of access to the formal financial sector.
(L-R) Teizoon Kisat, former CEO ORIX Leasing Pakistan Ltd., and from Karandaaz Pakistan
Asad Azfar, Chief Investment Officer, Imdad Aslam, Director Digital Financial Services and Dr.
Ishrat Husain, Chairman Board of Directors

2. Dr. Ishrat Husain Awarded Nishan-e-Imtiaz
For his meritorious services to the nation, Dr. Ishrat
Husain, Chairman of the Board of Directors,
Karandaaz Pakistan, has been presented the highest
national accolade, the prestigious Nishan-e-Imtiaz by
President Mamnoon Hussain on March 23, 2016.
The award was conferred in recognition of Dr.
Husain's outstanding performance in the field of
Public Service at a special investiture ceremony held
at the Aiwan-e-Sadr on Pakistan Day. The Ceremony
was attended by the highest civil and military
leadership, officials, federal ministers,
parliamentarians, diplomats and people belonging to
different walks of life. Dr. Ishrat Husain is a leading
economist and intellectual. He is the former Dean
and Director of the Institute of Business
Administration (IBA) and previously served as the
Governor of the State Bank of Pakistan.
Karandaaz Pakistan has been
nominated by the National
Financial Inclusion Strategy
(NFIS) Steering Committee
chaired by Governor State Bank
of Pakistan to three of seven
Technical Committees:
Ÿ Digital Financial Services &
Payment Systems
Ÿ Microfinance, Agriculture
Finance & Housing Finance
Ÿ SME Finance
The nominations are in line with
Karandaaz Pakistan’s areas of
focus. The ultimate goal of the
NFIS is to provide a basis for
coherent and sequential reforms
needed to address both demand
and supply side issues to help
tackle financial exclusion in an
integrated and sustained manner
fo improved results by 2020.
The Technical Committees are
expected to identify key actions,
propose detailed implementation
plans and recommend solutions
in their respective areas to the
NFIS Steering Committee. This
will enable Karandaaz Pakistan to
engage with policymakers and
play an active role in furthering
financial inclusion in Pakistan.
Queen Máxima of the Netherlands Met with
Karandaaz Pakistan
Queen Máxima of the Netherlands, in her capacity
as the United Nations Secretary General's Special
Advocate for Inclusive Finance for Development
(UNSGSA), met with the senior management team
of Karandaaz Pakistan in February 2016 where the
team briefed Queen Máxima about the aim of the
company to increase financial inclusion in Pakistan
by employing technology enabled digital solutions
and catalyzing SME financing. Imdad Aslam,
Director Digital Financial Services introduced the
DFS strategy being employed by the company to
achieve 40 percent financial inclusion of the adult
population of the country by 2018, while Asad Azfar,
Chief Investment Officer discussed the company's
approach towards improving SME access to finance
for strengthening broad based economic and
employment growth in the country.
Workshop on Digital Credit and Analytics
Karandaaz Pakistan in conjunction with the Consultative
Group to Assist the Poor (CGAP), a member of the World
Bank group, held a one-day workshop in Karachi titled
Digital Analytics and Credit: Resources to Plan a.
Facilitated by Jamal Rahal, an internationally renowned
digital credit expert and Gregory Chen, Senior Financial
Sector Specialist, CGAP, the aim of the workshop was to
provide participants with a detailed introduction to digital
credit essentials, opportunities and requirements. A total
of 54 industry players from telcos, banks, microfinance
banks and fintechs attended the workshop. (L-R) From DFID-Pakistan (UKAid): Waqas ul Hasan, Sr. Private & Financial Sector Adviser,
Dr. Louise Walker, Group Head, Economic Growth, Joanna Reid, Head of DFID Pakistan and
Dr. Ishrat Husain, Chairman Board of Directors, Karandaaz Pakistan
Issue No. 2
2 www.karandaaz.com.pk
Technical Committee
Nominations

3. Issue No. 2
Global Findex 2014
(World Bank)
There are SMEs in Pakistan, but only
about SME loans outstanding on banks'
books.
3.2 million
188,000
Financial Inclusion in Numbers
Quarterly Showcase
A2F Survey 2015
(State Bank of Pakistan)
Access to financial services has improved from of
population in 2008 to in 2015.
12%
23%
Mobile phone
ownership
Mobile wallet
usage (transaction in last 90 days)
100
50
0 Kenya Tanzania Bangladesh Pakistan India
Using Mobile Money to Promote
Financial Inclusion 2015
(Karandaaz Pakistan)
Pakistan lags behind leading countries in terms
of uptake of in comparison tom-wallets
phoneownership.
State of the Industry Report on
Mobile Money 2015
(GSMA)
29 19
52%
cross-border mobile money initiatives connected
countries, with cross-border remittances growing in
volume over the last year.
14%
47% 39%
Agri Produce
In-Kind Consumption
Non-Agri Produce
Upto different financial tools used by sampled small-
scale farming families (living on < USD 2/day) in Punjab
to diversify household income.
18
47%
23%
of Pakistani women make important financial
decisions in consultation with their husbands;
Pakistani men make important financial decisions in
consultation with their wives.
1www.karandaaz.com.pk
Smallholder Diaries 2015
(CGAP)
Access to Finance Opinion Poll 2015
(Gallup Pakistan)
3

4. User Interface, User Experience in the Digital Finance
Space
Mobile wallets in Pakistan are currently based on the
Unstructured Supplementary Service Data (USSD) channel
providing a user experience with limited ease of use. This
limited usability is a challenge for providers as it adversely
affects their ability to sustain traction and active use of wallets in
the market, especially among less literate segments of the
population. Smartphone penetration in the country currently
stands at 31 percent. This statistic is expected to increase given
that low cost smart phones are increasingly available and
improved 3G/4G services are likely to reinforce uptake among
income strata previously able to afford only feature phones.
Karandaaz Pakistan recognizes the benefits of providing
enhanced customer experience to the end user in the form of a
viable, user-friendly alternative to the USSD channel which has
the potential to ultimately contribute towards increasing mobile
wallet activity significantly. Karandaaz Pakistan has therefore
commissioned a research study aimed at developing user
friendly designs responsive to the local market, with a special
emphasis on the less literate.
GRID Impact, a global research, innovation and design
company, is currently carrying out the second round of in-depth
research with Pakistani mobile money users and providers
based on the Human Centered Design (HCD) approach.
Insights from the iterations are being incorporated into two
concept designs that will be disseminated to the industry later
this year. The resultant wireframes from the design process can
be incorporated by providers within their specific mobile
financial services applications, thereby enabling their customers
to enjoy a richer and more user friendly interface.
Issue No. 2
4 www.karandaaz.com.pk
Karandaaz Research Showcase
Global Landscape Study: P2G Payment Initiatives
Person-to-government (P2G) payments are a significant part of
the overall payments landscape. Digitizing these payments
therefore, could have tremendous economic and social benefits
for governments, companies, and consumers alike. Despite the
significance of the opportunity, digital P2G payments are still in
their early stages and very little is known about them today. The
Global P2G Landscape Study is the first comprehensive study to
take a systematic look at the opportunities and challenges
associated with digitizing P2G payments.
The Study will identify current P2G initiatives and document the
most interesting ones with a particular focus on those targeted at
unbanked and underbanked customers. The objective of the
study is to distill lessons about the success elements of moving
P2G payments from cash to digital. For the purpose of the study
P2G is defined as the transfer of funds from a citizen to an
account of the government making use of a digital platform. The
initial global scan has identified a wide range of P2G payment
initiatives, including payment of taxes (income, property, etc.),
nontax government revenue (fees for government services such
as passports, company and vehicle registration, tolls, fines, etc.),
and others including utility fees, public school fees, and social
security and pension contributions. In addition to providing a
collection of global evidence about the current range of digital
P2G initiatives, the research study exploresa key question: what
does it take to set up efficient, sustainable, and inclusive
payment systems for government fees and services? Dalberg
Development Associates has been commissioned to conduct
the research with financial and technical support being provided
by the Consultative Group to Assist the Poor (CGAP).
Photo Credits: GRID Impact Photo Credits: Web.pk

5. Bilal Ali Qureshi joined Karandaaz Pakistan as an Associate, DFS
in 2015 and is mainly responsible for implementing Karandaaz
Pakistan's government digitization agenda. His interest lies in
influencing customers to try different mobile money channels.
Prior to joining, Bilal was a strategic planning specialist at
Easypaisa, Telenor. He also has experience working with leading
development agencies in the country such as UNDP and The
World Bank.
With increasing competition in the branchless
banking OTC (over the counter) business, this
segment has become highly commission
intensive, leading to diminishing margins for
MFS (mobile financial services) providers. This
reality has pushed mobile money providers to
focus on mobile wallets as an alternate service
delivery channel. Mobile wallets help providers
move away from troublesome agent commission
wars and allows them to offer customers a
relatively more convenient service at a
substantially lower cost. A major hindrance to this
strategic shift is that demand for and uptake of
mobile wallets remains low in Pakistan.
In the aftermath of the recent SIM reverification
drive, providers requested the State Bank of
Pakistan (SBP) to grant permission for remote
mobile wallet account opening via biometric
verification. This was approved, and mobile
wallet opening in Pakistan now takes less than 5
seconds in comparison to the old process which
took over 15 minutes thus dramatically increasing
account opening efficiency. The positive impact
of this new account opening process is clearly
reflected in recent industry data; the market
witnessed a 44% growth in total number of mobile
wallets registered in Q2 of 2015.What remains
problematic is that typically, 70% of all new
accounts become inactive within 90 days of
account opening.
To increase the mobile wallet activity ratio, a few
players in the market are seeking out new ways to
incentivize mobile wallet subscribers. For the last
year providers have been offering free P2P
(person to person) transactions on their mobile
wallets, and also tested bundling free P2P with
free GSM airtime, text and data on the basis of
customers' mobile wallet activity. These
campaigns have had limited success and have not
addressed one of the core issues of the mobile
wallet: the fact that it is a cumbersome device that
is difficult to use, particularly in a low literacy
environment. To change this, providers should
consider focusing their efforts on developing a
more user-friendly mobile wallet interface.
MOVING AWAY FROM TRADITIONAL
USSD
MFS providers in Pakistan have based their
mobile financial services on the Unstructured
Supplementary Service Data (USSD) menu
which has worked superbly for the OTC model,
where an agent is trained to use a cell phone to
conduct MFS transactions. However, it is very
hard for customers to carry out similar
transactions on their phones. The USSD menu
has multiple layers, and is hard to operate, prone
to human errors and time consuming. In order to
extend mobile wallet uptake to presently
unserved markets, it is important to offer an
interface which is more understandable and thus
potentially more useable. If we map out the
global scenario, we see that in addition to USSD
and Interactive Voice Response (IVR), a growing
numbers of mobile money providers are making
their services available through apps. According
to GSMA, 62% of services are now available via
an application, a percentage that is likely to
increase as smartphone penetration rises.
With increasing smartphone penetration in
Pakistan, currently at 31%, we see a great
opportunity for mobile wallets to become the
primary MFS delivery channel. Smartphones
offer substantially more screen space and
technology capacity which lends these devices to
greater user friendliness. Smartphone apps for
mobile wallets can potentially address some of
the user experience limitations of USSD,
including session time-outs and user error.
Beyond improved user interface and experience,
smartphones offer other benefits that enable
customer retention. Providers for example, can
make necessary periodic updates to their mobile
wallets at a relatively lower cost thereby enabling
continual improvements. Moreover,
smartphones can help providers resolve some of
the problems customers face within the OTC
model such as frustration associated with a lack of
proximate and liquid agents. An agent locator
feature could be particularly useful for new
customers, along with features that enable
customers to rate agents on customer service and
liquidity metrics.
When it comes to designing smartphone apps, it
is important for providers and designers to take a
customer-centric approach. For this, app design
firms need to integrate strong research elements
within the design process. Human-centered
design is a technique that has proven successful in
incorporating customer insights into smartphone
user interface design. Once design firms have
successfully identified the need of each of the
targeted market segments, providers can
brainstorm different ways that the final app can
address those needs. Ideas being implemented in
other markets include:
Ÿ The introduction of local languages in the
MFS application interface.
Ÿ An interface that offers different symbolic
imageries and voice assistance for low literacy
markets like Pakistan.
Ÿ In effect, the feature-rich interface and
flexible functionality of smartphones can
offer a better customer experience that the
old USSD menu, and potentially ease the
adoption and usage of mobile wallets.
Read more blogposts at www.karandaaz.com.pk/blog
Issue No. 2
5www.karandaaz.com.pk
SMARTPHONE ADOPTION FORECAST BY REGION (2013-2020)
80%
70%
60%
50%
40%
30%
20%
10%
SUB-SAHARAN AFRICA
0 2013 2014 2015 2016 2017 2018 2019 2020
MIDDLE EASTLATIN AMERICAEUROPEAN UNIONASIA PACIFIC
Featured Blog Post
Smarter Wallets, Engaged Customers

6. from the British people
Karandaaz Pakistan, a Section 42 company established in August 2014, promotes access to finance for small businesses
through a commercially directed investment platform, and financial inclusion for individuals by employing technology
enabled digital solutions. The Company has financial and institutional support from leading international development
finance institutions; principally the United Kingdom Department for International Development (DFID) and the Bill &
Melinda Gates Foundation.
The Company has three work streams:
Ÿ Corporate Investment and Credit (CIC): The CIC line of business provides wholesale structured credit and equity-
linked direct growth capital investments in small and mid-size enterprises with compelling prospects for sustainable
growth and employment generation in Pakistan
Digital Financial Services (DFS): The DFS line of business focuses on expanding the poor's access to digital financial
Ÿ
services in Pakistan by working across the ecosystem with all stakeholders including regulators, policy-makers,
government departments, businesses and researchers and academics with activities arranged in four key work
areas–Policy and Regulation, Seeding Innovation, Experimentation and Solutions Development, and Scale and
Outreach.
Knowledge Management and Communications (KMC): The KMC line of business supports the company's coreŸ
financial inclusion goal by developing and disseminating evidence based insights and solutions to influence market
and the financial inclusion ecosystem.
Karandaaz Pakistan is sponsored and governed by eminent Pakistanis, and is managed by an experienced team with core
expertise in international investment management and digital finance.
1E, Mezzanine Floor, Ali Plaza,
Nazimuddin Road, F-6/4, 44000, Islamabad
Tel:(051) 8449761
Email: info@karandaaz.com.pk
facebook.com/KarandaazPK twitter.com/KarandaazPK linkedin.com/company/karandaaz-pakistan
www.karandaaz.com.pk