Tech startups can potentially rewrite
Sabir Quraishi, a second-generation Afghan refugee would step outside his small two-bedroom rented house in Peshawar with nothing but hope to find work. He would wait on the greenbelt in drizzling rain and scorching heat, to secure some work in construction or plumbing but most other times nowhere. Going back to his aged parents, and a disabled older brother with a hardly Rs 150 in hand was Sabir’s everyday reality.
In Pakistan, the minimum wage is Rs 25,000 and millions are pushed even below this. With added barriers, such as gender, caste, and ethnicity the opportunities to work and progress narrow even more. However, Sabir changed his destiny by utilizing his smartphone and access to the internet. In November 2022, he took a leap of faith and borrowed Rs 2500 from his friend to enter the e-commerce industry as a supplier. “I really wanted to try my luck with e-commerce so I promised my friend to return his money in just a few weeks. I didn’t know how but I deep down knew this would work out for me.”
And so it did. His first supplies of fourteen facewashes were sold out in a day and he earned a profit of Rs 1680. Sabir did not stop there. He ventured to cutlery, cosmetics and clothes. Different products sell differently at different times. By understanding the market trends he is now able to earn at least Rs 40,000 with each batch of supplies. On average, Sabir earns Rs 120,000 every month, an income higher than the starting years of a white-collar job.
With internet penetration at 36.5%, the lifestyles of the masses of Pakistan are on the brink of change. Markaz understands this evolution and establishes itself among the pioneers of social e-commerce in the country. E-commerce in Pakistan is still in its nascent stages, but it is growing rapidly. According to the State Bank of Pakistan, the number of registered e-commerce merchants increased from 571 in 2015 to 1,516 in 2019. Similarly, the number of e-commerce transactions increased from 3.4 million in 2015 to 29.7 million in 2019. A report by eMarketer shows that e-commerce sales are projected to go up to $2.1 billion in 2023.
In an already promising industry, Markaz sets itself apart with it reselling feature. This means the users can resell listed products among their social circle by charging profit of up to 100% of the listed price. The packaging, delivery and all other logistics are taken care of Markaz, and the reseller can essentially create a passive income by zero investment.
Therefore, the kind of users Markaz targets are the ones who otherwise have no means of financial independence. 48% of the users on the app are female who mostly dont have formal education or work experience. One simple conversation with them quickly reveals their culture and social norms at home. “A lot of the women thank us for providing them an opportunity to work while maintaining their purdah (religious veil). Most of our women are not highly educated. They are housewives who never had any exposure outside of domestic chores. But seeing them earn money, and collect funds for major life events like children’s wedding assures us that we are doing something right,” recalled a customer service associate at Markaz.
Ecommerce startups are not alone. The technological boom in Pakistan is being utilised to address the crippling development problems of Pakistan. A Chitral-based startup, AIVestify, is working eradicate poverty in the valley with the use of artificial intelligence. “By leveraging AI technology, we can identify areas where poverty is widespread, assess the impact of our intervention and allocate resources more efficiently,” said Khairuddin Shaidani, CEO of AIVestify in a presser conference in February. The startup aims to create a trillion-dollar fund by 2030, and empower the Chitrali community by offering free courses on online earning and AI technology. It is targeted at the poor and uneducated youth, who otherwise do not have the means to enter the formal economy. “After losing Rs. 2.5 million and four years, I have created this program specifically for fresh or jobless youth and working professionals who are eager to learn online business and enter the exciting world of trading,” writes Shaidani while announcing a course on his Linkedin.
The roadblocks
Pakistan is largely a cash-based economy, with access to digital banking to only 21% of the population. With situation as such, it becomes difficult to pertain transparency in online businesses. It is not uncommon here for customers to not receive an online order to avoid paying when the time comes. “I placed 15 orders, and all of them were returned,” said Shazia Khan, a reseller in a Facebook group. It is impacting the whole ecosystem. “A lot of the orders were returned because they couldn’t be delivered” on time. People ordered clothes for Eid and they were delivered after Eid so a lot of them refused to receive them”, she added.
“Digital payments and logistics are the main pillars for e-commerce,” said Shoaib Khan, CEO of Markaz. “There is demand from the hills to the deserts, but not many delivery services are available only in big cities,” he added. Similar is the case with online payments. When there is a lack of trust in delivering the right products at the right time, a lot of the customers will not be comfortable making advanced payments.
Despite an impressive rate of digital penetration, e-commerce platforms haven’t gained a great deal of traction in Pakistan because most transactions are cash-based. Studies estimate that nearly 95 percent of companies in Pakistan receive payments for their online orders via cash-on-delivery—and a large unbanked population makes the transition to digital payments only more difficult. “Currently the system of non-bank digital payments is extremely tedious which demotivates the mobile wallet users from making a purchase,” suggests Khan. “This is something we have always prioritised. To capture the demand of the masses, we offer imbedded finance experience, such as Easypaisa and Jazz cash, which they use more than formal banks,” he added.
With many heights yet to be achieved the tech industry faces abysmal challenges from the state. It’s no news that due to political instability, Pakistan remains vulnerable to power and internet blockade. Although its monetary effect is usually recovered there’s a heavier price that becomes difficult to pay: the image problem. Tech startups, built on the fundamental model to attract FDI, often face reluctance from foreign investors due to precarious market conditions. “Every year, Amazon Web Services (AWS) studies Pakistan as a separate case study from clustered regions. The company is deeply interested to expand in Pakistan. There is massive potential due to a large population and availability of tech talent, but the company still isn’t here. Why so?” remarked Fawad Hussain, a former employee at AWS. “There are things outside the IT industry’s control such as stringent policy about data, energy and telecommunication limitation, security challenges which restricts an international company like AWS from expanding in our country,” he sighed.
In a country where universally popular platforms such as Wikipedia and TikTok have to constantly fight their case, there is a long path to tread to create a conducive investment environment. Last month, the internet shutdown following former Prime Minister’s arrest, led to an estimated loss of $3 million, according to P@SHA, an association for IT companies in Pakistan. But what followed was even more astounding. VPN usage closed at 1,329 percent more than on the previous 28-day average, noted Simon Migiliano, CEO of Top10VPN. Such a situation paints a clear picture, Pakistanis are tired, and thanks to technological advancement they are also very much well-prepared to write their own narratives.
