‘Dreams are too expensive – We cannot afford to dream’
Khalida Bibi, a female home-based worker, expressed her despair during one of our customer surveys to assess the needs of lower- and middle-income individuals in rural Pakistan. Khalida is a 45-year-old, mother of three who runs a small home-based embroidery business, which provides an inconsistent income stream to support her family. Her husband is a factory worker, and his daily wage barely covers their expenses.
Financial Exclusion: An Unbridged Gap
My experiences of working on the ground in the microfinance sector have shown me what poverty means first-hand; from compromised health to a lack of opportunities for education and no means to fund emergencies, which can result in debt traps, keeping families stuck in the poverty cycle for generations. Field interviews with female borrowers revealed education fees and reducing the number and quality of meals were amongst the first expenses to be cut back on during times of financial difficulty.
Like Khalida and her husband, there are over 100 million people in Pakistan without access to basic financial services. These are people living on the edge – where minute fluctuations in cash flows could prevent them from meeting their day-to-day needs. And yet, as little as $10 could help them cope in times of financial difficulties and pay for basics including food, medicine and school fees.
Most unbanked and under-banked people in Pakistan use a variety of informal instruments to manage their financial needs, often at the risk of fraud, loss or depreciation. This segment continues to be under-served by conventional financial institutions owing to lack of credit histories, suitable collaterals, high operating costs and weak risk rating tools. On the contrary, the digital landscape varies significantly whereby Pakistan has one of the highest teledensity (the number of telephone connections per 100 people in an area) in the region, supplemented by high smartphone penetration and 3G/4G coverage across most parts of the country.
Towards a solution: Financial inclusion
“Entrenched poverty and prejudice, and vast gulfs between wealth and destitution, can undermine the fabric of societies and lead to instability. Where poverty holds sway anywhere, people are held back everywhere. Lives disfigured by poverty are cruel, mean and, often, short. Our goal must be a world of dignity, opportunity and well-being, where no one is left behind.”
– Ban Ki-Moon, Former UN Secretary General –
Financial inclusion is about human development and empowerment. It is evident that financial inclusion is a vital pillar for the achievement of the United Nations’ Sustainable Development Goals (SDGs) with a direct impact on poverty, health, education and gender equality.
We believe that the most sustainable mechanism to alleviate poverty is economic empowerment. If meaningful work is to happen towards this goal, greater income-generating opportunities must be created, as well as cost-effective, sustainable access to financial services.
Tez – A Full Stack Digital Bank
Tez Financial Services (Tez) is the first fully digital financial institution in Pakistan, providing frictionless financial service access via a smartphone application. At the heart of Tez lies Artificial Intelligence, used for credit underwriting, churn reduction and optimising customer experience. As the name implies in Urdu, Tez provides “swift” access to financial services, fulfilling customer needs in a matter of minutes at the click of a button. Tez aims to reduce the financial vulnerability of the masses through comprehensive financial services including credit, savings, insurance and investments.
Currently, women in Pakistan are largely excluded from the formal financial system; only 7% of adult females have a formal bank account, compared to 34% of males. Mobility and social interaction limitations can restrict women’s access to bricks and mortar financial services. Tez aims to enhance the financial inclusion of women by providing them with access to financial services and enabling them to conduct digital financial transactions from their homes. Remarkable impact has been observed in the decisions women make as a result of having access to a bank account: they invest in businesses and use the proceeds to invest in their households.
In just 15 months, Tez has approved over 100,000 loans, across 142 cities. With the support of the Visa Everywhere Initiative – not only is Tez being provided with global visibility, but it has also allowed us to tap into the connectivity and numerous partners at Visa. The prize money from this Challenge will support us in our development efforts to build new financial products and functionalities for the masses, thereby serving their financial needs and contributing to the wider cause of financial inclusion.
Our ambition is to serve five million customers within the next three years. We aim to create financial identities for the unbanked masses so that they can be empowered to improve their quality of lives, women can have the financial freedom to build and grow small businesses, and communities can be made inclusive and have the power to build their futures.
The Visa Everywhere Initiative is a competition calling on entrepreneurs to submit innovative and impactful solutions to solve specific challenges. Its Women’s Global Edition for the first time specifically celebrates the work of women entrepreneurs around the world, inviting entries in two categories: Fintech and Social Impact. The Fintech Challenge sought applicants who leveraged their companies’ unique ability to solve or transform consumer and/or commercial payment experiences locally, regionally or globally. The overall competition received nearly 1,300 entries from around the world, of which six Fintech Challenge applicants were selected as Regional Finalists, and Naureen Hyat emerged the winner. Recently, Tez was also recognised as a winner of the first Inclusive Fintech 50 – a competition by the Metlife Foundation, Visa Inc., Accion Venture Lab and the International Finance Corporate to help early-stage fintech companies attract capital and resources to benefit the world’s three billion financially underserved people.