Whereas banks are responding to traditional businesses on increasing demand, the financing needs of tech start-ups are being met by local and foreign citizens, not-for-profit development finance companies and venture capital firms.

From an online real estate market, home repair service, health and lifestyle e-commerce portal to online fruits and vegetable delivery networks, many start-ups raised sizable funds in 2016, market reports reveal.

According to these reports, at least a dozen start-ups raised their angel investment or received the second or third tranche of committed funds, chiefly from abroad, but in some instances also from domestic sources.

However, they either avoided borrowing from banks or, according to the common perception, banks skipped venture financing opportunities. Whatever the case may be, “the reality is that start-ups are coming up and some of them even have strong business potential for banks but bank financing in this area remains imperceptible,” laments a former head of the National Bank.

In 2016, e-hailing service Careem announced plans to invest $100m in research and development over the next five years: for expanding Careem services in Pakistan and the UAE and for opening new R&D services in Egypt and Germany. Facing stiff competition from Uber, it is expected that a sizable chunk of the $100m will be used in Careem Pakistan. The way Careem Pakistan has started expanding and upgrading its services, shows that the promised money is actually flowing in, industry sources say.

Mangobaaz, an online news aggregator service that began operating in 2014 is also believed to have so far raised no less than $115,000 in seed funding backed by Fatima Ventures, a local venture fund that has also invested in BeautyHooked, a beauty service providing platform. BeautyHooked founded in 2015 has so far raised about $280,000.

Pakistan Microfinance Investment Company (PMIC) that began operations last year is committed to providing financial support to microenterprises including start-ups in lots of areas, its officials say. “But I guess start-ups in the fields of renewable energy and value-chain can be entertained more easily by PMIC since the scope for start-ups in these areas is immense,” one of the officials told this writer.

Karandaaz, a not-for-development finance company established in 2014, is also in a position to finance tech start-ups through its investment vehicle Karandaaz Capital. Officials of Karandaaz say business start-ups that are developed for employment generation in rural areas would get priority. However, so far only SMEs and start-ups in small businesses have benefited from Karandaaz Capital. Viable funding proposals from tech start-ups have not landed at Karandaaz Capital, officials say.

The 2016 launch of Karandaaz Rs50m innovation challenge fund is believed to have supported a number of tech start-ups; the company launched a second fund just last week to focus exclusively on women-owned enterprises and start-ups.

Changing lifestyles are giving birth to online businesses that have hitherto remained unheard of. Last year’s launch of PerkUp is an example. It is basically a customer loyalty web portal and works with businesses to help them retain their customers and boost their sales. In 2016, PerkUp raised Rs15m in seed funding with the help of DotZero Ventures and Crescent Ventures.

RepairDesk also raised $40,000 funding last year from Revamp Wholesale that offers online services to users of smart phones. Set up in 2014 as an alumnus of LUMS centre for entrepreneurship, RepairDesk develops cloud-based point of sale terminals and customer relationship management software for local small and medium-sized cell phone repair shops.

Just how fast technology savvy people are realising the changing requirements of 21st century individuals and coming up with active solutions is evident from the launch of KarloCompare last year. It is a finance start-up co-founded by two former bankers and provides online insight into the salient features of consumer finance and insurance products of banks and insurance companies.

KarloCompare claimed that it had raised a seven-figure investment from two individuals in 2016 without disclosing the exact amount. Now, a couple of banks and insurance companies are in talks with it to see how their services can help boost sales of credit cards, auto loans, personal loans and insurance policies.

Health and lifestyle e-commerce start-up, Well.pk, also managed to raise $1m last year from two local individuals, one of them a renowned banker. The company says it is going to use this amount for strengthening the technology aspect of its business.

Popular e-commerce store Sabzi.pk that struck a deal worth $7.5m with a chain of local retail outlets is successfully delivering fruits and vegetables at consumers’ doorsteps. Initially a success in posh localities of Karachi, the company is now planning expanding its business in other cities as well.

Travly, an online rickshaw and bus booking service also raised $200,000 from CresVentures and a well-known management mentor last year. It is doing well in Lahore, according to market sources, adding that this start-up will have to come up with a more innovative business model amidst growing market competition with Uber.

Executives of Islamic banks and microfinance banks say they have been closely watching the developments in tech start-up businesses and see enough potential in this field in the future.

An Islamic bank and a microfinance bank have already joined hands with a not-for-profit development finance company in financing tech start-ups, market sources say. For commercial banks tech start-up financing is a bit difficult, at least presently.

“Unless big start-ups come up with terrific business plans, commercial banks already enjoying a surge in credit demand and constrained with capacity to assess viability of tech start-ups may hardly get excited,” says head of one of the top five banks.

Published in Dawn, Economic & Business, April 17th, 2017