LAHORE: Pakistan’s embedded financial services platform Neem Exponential has raised $2.5 million in seed funding to build and scale financial wellness focused Banking as a Service (BaaS) and lending services.
The funding came from local and global financial technology investors which include Korean SparkLabs Fintech, Arif Habib Ltd and Cordoba Logistics and Ventures Ltd., Taarah Ventures, My Asia VC, Concept Vines, and Building Capital.
The round was also joined by partners at Outrun Ventures and strategic angels as CSO of tech house BPC, founding partner at Mentors Fund, as well as fintech veteran and ex-CEO of Seccl and others. An internal document shared with Profit confirmed the amount of the raise.
Founded in 2019 by Nadeem Shaikh, Vladimira Briestenska and Naeem Zamindar, Neem is an embedded finance platform focused on providing financial wellness for the underbanked communities in Pakistan. The startup provides customised platforms for communities served by its partners for embedded financial services, and undertakes microlending.
Neem currently requires a license from the Securities and Exchange Commission of Pakistan (SECP) to operate as a non-banking financial company (NBFC) and undertake the lending business. The SECP has told Profit that Neem has not received an NBFC license yet.
Nadeem Shaikh, the cofounder and CEO of the company told Profit that they are currently lending through partners which have these licenses. While Shaikh could not name these partners, he confirmed that they were licensed and that Neem was lending through these associations. According to Nadeem, Neem is currently in the process of getting a license.
Pakistan has a very large unbanked population with an estimated 100 million adults without a bank account, and access to credit below 10 per cent.
Pakistan has, therefore, for long had a financial inclusion problem. Fintech startups in Pakistan have been focused on increasing this access to a bank account and credit facilities. There are other components too, however, which require control over for better decision making and consequently a better overall financial health. Neem does exactly that for consumers as well as MSMEs.
At Neem, financial wellness underlines control over four components for a better overall financial health: payments, where people have control over the finances and have an efficient way of doing it; credit facility which is reasonable in line with what they need to grow, for example for working capital; insurance which is a protection plan; and savings and investments for future.
“Our plan is really to enable all of those components over time,” Nadeem Shaikh tells Profit. “Some of the components we already have in place and we are building the tech structure and business architecture by creating the right set of partnerships to be able to provide that full spectrum of products to promote consumers as well as the SMEs.”
Neem works on the concept that since Pakistan’s underbanked population is very large and access to credit is limited, there is a big opportunity to provide services across the entire financial wellness spectrum.
Neem therefore builds speacialised platforms for its partners under its Banking as a Service (BaaS) vertical for distribution of financial wellness products. For instance, Neem has a joint venture in place with South African fintech company Kuunda with which it has developed a credit scoring platform for one of its partners to disburse working capital loans to kiryana merchants.
Similarly, Neem could build a specialised platform for certain requirements of a partner which is serving the underbanked in, for instance, the agriculture sector. Neem’s BaaS platform could pertain to having embedded payments, lending, marketplace and insurance solutions.
The company further has a lending arm for disbursement of micro loans to consumers and SMEs, and uses anonymised data from partners to assess credit worthiness for disbursement of such loans. The loans are provided to end customers of the same partners for meeting their working capital requirements, say for replenishing inventory at a micro retailer.
Neem therefore operates as a B2B2C business.
“We believe that especially in emerging markets, having spent a lot of time thinking and operating in other markets as founders, there is a very low level of trust when it comes to financial institutions and financial services,” Nadeem Shaikh, cofounder and CEO at Neem Exponential tells Profit.
“So you have to build that trust with people in communities, whether it is the agricultural community, the SME community; people in logistics or people in eCommerce and so on. You have to enable them on where they have already transacted. So we are building the platform based on access and trust to those communities to enable the right kind of products to those customers.”
Nadeem says both lending and BaaS are major business verticals for the company, which is seeking to be profitable within a few years. The company plans to spend the funds on building the technology stack, adding products and categories and completing some of the capitalisation requirements to grow the lending portfolio.