Pakistan’s digital wealth management startup Mahaana Wealth announced today that it has secured regulatory approvals from the Securities and Exchange Commission of Pakistan (SECP) to introduce technology-led investment management in Pakistan.
This comes with another announcement from the company of closing a $2.1 million pre-seed round which will contribute directly to meeting the regulatory capital requirements.
Mahaana’s pre-seed round was led by Swedish investment firm Vostok Emerging Finance, SparkLabs Group, and local strategic partner IGI Holdings (JV Partner of Nestle in Pakistan). Mahaana was part of YCombinator’s W22 batch and received its initial investment from Mattias Martinsson, the founder of Tundra Fonder.
Mahaana is going to operate as an SECP-licensed non-banking finance company (NBFC) which would be able to accept money from customers for investment into products Mahaana will develop. The company says it will develop investment products for all kinds of customers and services available to the mass market.
Under another model, companies only operate as investment advisors such as KTrade which advises on investment in stocks, and Elphinstone Capital which advises on investments in stocks and bonds.
Asset management companies like Mahaana make money by charging investors a percentage of assets under management. Mahaana’s services, however, will be all digital which will set it apart from conventional asset management companies.
“In Pakistan, there are around 250,000 mutual fund accounts, 250,000 stock accounts and 40,000 pension accounts,” said Muhammad Shamoon Tariq, the founder of Mahaana and ex-partner of Tundra Fonder.
“So in Pakistan, investments do not happen at all and most of the savings are in cash form or go to the low yielding bank accounts. There isn’t enough investment whether it is your savings or pensions accounts, so unless that doesn’t improve, the financial situation of people will not improve.”
Mahaana plans to bring Swedish pensions and savings model into Pakistan based on digitisation and easy onboarding and KYC. The savings and pension model, such as in Sweden and the 401(k) in the US have been in practice for decades, Pakistan lags significantly behind in individual savings rate and has only ~250k individual investors base (0.02% population penetration) compared to 6mn in Sweden (60% penetration), the company said in a statement.
“In Sweden, 90% of the people have investment accounts. That’s why the social safety net is much higher,” Shamoon said.
Shamoon Tariq said that the company would be creating its own savings or retirement products but did not disclose specific details. Following regulatory approvals, Mahaana Wealth is expecting to go live in September.
“The key message we want to promote in Pakistan is to invest your money. That it is better to grow the money by investing rather than keeping it in your bank account,” Shamoon said.
“In a country where more than 50% of the population is under debt and spends 30% of their monthly income on repaying debts, the company sees opportunities for every person in Pakistan to create a financial security net in the form of building their savings and retirement funds,” said Muhammad Shamoon Tariq, the founder of Mahaana and ex-partner of Tundra Fonder (Sweden).
“Sweden’s savings revolution happened during the 80’s and 90’s and it has played an important role in achieving our status as a welfare state. Given its low savings rate and its young population Pakistan has a great opportunity right now that it needs to take advantage of,” said Mattias Martinsson, founder of Tundra and initial investor in Mahaana.
“With savings and pensions, Mahaana is addressing one the most important long-term financial issues that exist in Pakistan today,” said David Nangle, CEO of VEF.
The company will be leveraging the capabilities built by IGI Insurance’s financial infrastructure. “IGI is more than a key investor and is a strategic local partner of Mahaana. There are clear synergies between IGI Insurance, IGI Securities and a digital wealth management company like Mahaana, which has a team with a proven track record of fund management in global markets,” said IGI Holdings CEO Tahir Masaud.