Karachi-based CreditBook raises bet on digitising MSMEs with $1.5mn in seed funding

The digital bookkeeping startup has ambitious co-founders and a difficult road to tread

“Never has anyone been able to successfully digitise the MSMEs (Micro, Small and Medium Enterprises) because of a lack of user trust,” said Hasib Malik, co-founder at CreditBook. “Many have tried to build the trust but most have failed.”

The statement from the co-founder speaks of the perfidious nature of the road to digitising Micro, Small and Medium Enterprises. And yet, Malik with two other founders co-launched CreditBook in the mid of 2020 to “become the exception that successfully digitises this industry.” 

Since its launch, Hasib and the team have doubled down on the idea. And on Tuesday, the startup announced raising $1.5 million in seed funding from leading institutional and angel investors to help micro-entrepreneurs digitise and track all of their transactions and improve their cash flows. 

The seed round includes a mix of international and local investors, including Pakistan’s BitRate VC and the United Arab Emirates (UAE) based VentureSouq. US-based fintech fund Better Tomorrow Ventures, Ratio Ventures, Quiet Capital, Toy Ventures, and Pakistan-based i2i Ventures also participated in the round. The company is also backed by angel investors and leading founders from BukuWarung, Musha Ventures, and Rappi. 

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The startup, launched in June 2020 and founded by Hasib Malik, Iman Jamall, and Hisham Adamjee, plans to use the seed investment to scale its users and product offering. 

Digitising to improve cash flows

If you log into CreditBook today, the multilingual platform will allow you to monitor your lending and borrowing, with an augmented feature of sending intermittent SMS and WhatsApp alerts to remind you of your payments to your lenders, or payments that the borrowers owe you. The application will also keep a digital history of all your transactions. While there is no restriction on you to use the application, it is not really intended for you, unless you are a micro-entrepreneur, making business-to-business payments. 

You could be a Kiryana shop owner buying goods on credit from a small distributor, or you could be a small distributor selling goods to a Kiryana shop on credit. But essentially, you are the smallest stakeholder in the business chain.

“If we are talking about Abu Dawood Group, they are a huge enterprise. They won’t probably need the CreditBook kind of solution. But AbuDawood’s set of micro-distributors or wholesalers would be our customers,” says Hasib. 

According to a statement from the company, such micro-entrepreneurs use paper to keep track of all their transactions and often spend hours on account reconciliation and business management, eventually getting entangled into cash flow issues because of the inefficiencies in the manual bookkeeping methods. 

“In the MSMEs, there is a lot of credit. But because credit payments are not made on time and their margins are so small, this causes the cash flow cycle to go out of whack. This affects their ability to invest and reinvest in the business because their cash flows are unpredictable,” says Hasib. 

Hasib explained that from some of the experiments that they ran, their learning was that simple intervention around sending a reminder to customers on a weekly basis through Whatsapp and SMS, letting them know how much to pay back and when to pay back, helped users increase their cash flows. 

“Sometimes more than even 50%,” claims Hasib. 

This is essentially the value proposition of CreditBook: the entrepreneurs in Pakistan who predominantly use paper ledgers to note down their transactions, CreditBook converts their accounting to digital to make them more efficient. The tool is supplemented with features that nudge customers to pay back faster which helps with recoveries and improves cash flows.

“As the cash flows stabilise, these people, if they need to take credit, would be taking it not because they are desperate because they did not manage their cash flows properly. Instead, they would need the credit this time for improvement in business,” explains Hasib. 

As a consequence, CreditBook also helps them document the sales cycle, giving them more visibility about the business.

CreditBook vs all others

But CreditBook is not the first one digitising bookkeeping. More recently, B2B e-commerce marketplace Bazaar also launched Easy Khata to digitise micro-retailers. Then there are your traditional legacy accounting softwares like QuickBooks and Xero that an SME can simply buy or use free of cost in some cases. 

In the case of startups like Bazaar or even others like Digi Khata, Hasib says their value proposition them differs in the aspect of execution. “We are always very very close to our customers. We develop with them. We develop things for them. Everything is around experimentation.” 

Moreover, competitor startups such as Bazaar have a different core focus for their business, which is digitising retailers for deliveries and Easy Khata is simply an add-on service. Whereas CreditBook’s entire focus is on digitising bookkeeping.  

“This has allowed us to scale faster and also allowed us to have really good relations with our users,” he adds.

On the other hand, softwares like QuickBooks and Xero, which are fairly popular with SMEs, come with some restrictions. As Hasib explains, the use cases for the MSMEs in Pakistan are pretty straight forward whereas use cases for QuickBooks and the likes are nuanced and therefore not user friendly. 

Consequently, it translates into a difficult user experience on these softwares because the transactions are simple. Moreover, these softwares are not localised for the customer segment that CreditBook is focusing on. 

Monetization comes later

For now, CreditBook is free for all users. That is also perhaps why it has been able to gather huge traction. According to the company’s claim, it has reached close to half a million users.  

But while traction has increased, the road to monetization remains unclear. The barrier that the startup identifies is that the MSMEs haven’t really been successfully digitised before. 

“MSMEs are a segment that has garnered attention. It has a huge opportunity but it has always predominantly, and even still remains grossly underserved and ignored. Though we have had a good uptake of cell phones and internet penetration has increased, customers in this segment have typically used digital apps mostly for the purpose of entertainment or networking and not for financial management,” says Hasib. 

“So we do not want to create friction right now. There is a period of us learning about our users and learning with them as we grow. Right now, it is more about building trust with users,” explains Hasib.

The road to monetization is, therefore, unclear and uncertain for at least until the time users see their cash flows improving, and realise the material benefits that come with it. Until then, the startup plans to work on building the trust of the customer to graduate them to a paid service. 

Investors are confident

“Being on the ground, I have been moved by the team’s ability to move fast and ship features regularly. This marks the start of a very exciting chapter for the company, given what we have seen from them with limited resources has been incredible, but to see what’s ahead is truly exciting for the entire ecosystem,” BitRate founding partner Faisal Aftab remarked.

On the other hand, Suneel Gokhale, co-founder, and general partner at the United Arab Emirates (UAE)-based Venture Capital firm VentureSouq that has earlier invested in similar early-stage companies in the region, noted: “We are always on the lookout for founders that are deeply tapped into their local markets, and are utilizing a user-centric approach as an advantage. The team at CreditBook have demonstrated their ability as market leaders with their understanding of their customers while bootstrapping the company, which has made their growth all the more impressive.”


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Taimoor Hassan
The author is a staff member and can be reached at [email protected]


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