Oraan Raises $3M to Empower Pakistani Women Financially

Financial Inclusion for Pakistani Women: Oraan's $3 Million Funding

Halima Iqbal, following a decade-long career in Canadian investment banking, returned to Pakistan in 2017 and promptly identified a significant challenge: the limited access to financial services for women. She recounted experiencing a protracted process simply to establish a standard bank account, taking approximately three and a half months to complete.

Driven by this observation, Iqbal initiated research into the financial behaviors of Pakistani women, focusing on their saving habits and credit acquisition methods. Subsequently, she connected with Farwah Tapal, a product designer and entrepreneur recently relocated from Spain, and together they founded Oraan in 2018.

Oraan's Seed Funding and Founding

Oraan’s mission is to facilitate financial access for women. The startup recently announced a $3 million funding round, jointly led by Zayn Capital and Wavemaker Partners. Additional investors included Resolution Ventures, i2i Ventures, Hustle Fund, Haitou Global, Plug and Play, and angel investors such as Claire Diaz-Ortiz, a former Magma Partners investing partner and an early employee at Twitter.

With this latest investment, Oraan’s total funding now exceeds $4 million. Iqbal and Tapal have distinguished themselves as the first female entrepreneurs in Pakistan’s fintech sector to secure a seed funding round.

Addressing a Critical Gap in the Market

“We sought to understand the existing savings landscape and the informal economy within Pakistan, pinpointing areas where we could effectively intervene,” Iqbal explained. This led Oraan to initially focus on ROSCAs – rotating credit and savings associations – commonly known as committees.

The company intends to broaden its service offerings, ultimately aspiring to establish itself as a fully digital bank. Currently, only around 7% of Pakistani women have access to basic financial services, such as a bank account, according to Oraan’s research.

Barriers to Financial Access for Women

Many women encounter both logistical and societal obstacles when attempting to engage with traditional financial institutions. Iqbal noted that women are frequently questioned about their need for a bank account, particularly if they are freelancers, micro-entrepreneurs, or homemakers.

Furthermore, women are often required to provide a male guarantor, such as a husband or relative, which restricts their financial independence and hinders their ability to contribute fully to the nation’s economic development.

Leveraging the Power of ROSCAs

ROSCAs are traditionally formed within close-knit communities – families, friends, or neighbors – where members contribute a fixed amount of money monthly. The recipient of the pooled funds rotates among the committee members, often determined by a vote or random selection.

Iqbal and Tapal chose to begin with ROSCAs due to their widespread prevalence; nearly everyone they knew had participated in an informal committee. Oraan’s research indicates that approximately 41% of the Pakistani population has engaged in a ROSCA, with a total of $5 billion circulating annually through these associations.

“The extensive usage and the benefits provided to participants were remarkably compelling,” Iqbal stated. “This presented a significant opportunity to create a valuable service for users and a viable business model.”

Oraan's Formalized ROSCA Platform

Oraan formalizes the ROSCA process, offering plans spanning five or ten months. A key distinction from traditional ROSCAs is the ability for users to select their preferred month to receive the pooled funds. The app’s treasury management system constructs committees based on members’ financial needs and repayment capabilities.

Through Oraan, users can also join committees with individuals outside their immediate social circles. The platform rigorously vets potential members and manages each ROSCA, handling fund collection and disbursement.

Building Creditworthiness and Expanding Services

“In Pakistan, a formal credit scoring system is largely absent, which creates challenges in accessing liquidity,” Tapal explained. Oraan collaborates with other providers to evaluate creditworthiness, utilizing verified identification, residential information, proof of income, and personal references.

Users have leveraged Oraan’s ROSCAs to finance various needs, including children’s education, IVF treatments, and escaping abusive situations, as shared by Iqbal.

Participation in Oraan’s committees establishes a payment history, potentially unlocking access to further financial services. The startup’s long-term objective is to evolve into a fully online bank, according to Iqbal.

A Community-Driven Neobank

“We are digitizing a culturally, religiously, and socially accepted practice – committees – and integrating women into a more formal financial ecosystem, enabling them to open bank accounts,” Iqbal emphasized. Oraan plans to introduce additional services, including savings accounts, credit options, insurance products, educational financing, and investment opportunities in mutual funds and other asset classes.

The company also intends to cultivate online communities for its users. “Our vision is to become a full-fledged neobank, deeply rooted in community, as that’s where we believe women seek a sense of belonging,” Iqbal concluded. “This sense of community is often lacking in traditional financial transactions.”