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Pakistan faced some heavy political headwinds in May.
Imran Khan, the former Pakistani Prime Minister, was arrested on May 9th, 2023. Right after, protests and demonstrations broke out across the country. The Pakistani Government shut down the internet nationwide to curb the protests. It lasted a few days and disrupted businesses and individuals.
Below, under the heading May 9th, I have linked to a few articles that shed more light on the aftermath and reaction to the internet shutdown.
Originally, I was going to talk about the draft National AI Policy released by the Government of Pakistan (not a joke), but Mutaher explained the absurdity better than I ever could.
So let’s talk funding.
Amidst the chaos, there were two disclosed funding announcements in May (listed below). But just one was equity related.
I want to talk about the unique non-equity funding round.
Abhi issued a 6-month Sukuk bond of PKR 2 billion ($6.8 million or $7.1 million, depending on the source) at KIBOR plus 250-300 bps or 25%.
A Sukuk is an Islamic bond. It is fully secured by Abhi’s liquid assets, making the investment risk-free for investors. That’s one key difference between Sukuk and traditional corporate bonds. Sukuk are asset-backed securities, while corporate bonds are debt instruments.
Abhi sells invoice factoring, earned wage access, and payroll financing. Invoice factoring is its biggest revenue earner, not earned wage access, which it is primarily known for.
It has to earn 25% or more on the borrowed money to make it worth it. Sure, while being lent out, 50% of that money will sit in the bank (bond requirement), earning Abhi 22%. It must still earn 5% or more to break even after fees and admin costs.
Most startups are barely scraping by and would never go the bond route. This may be why Abhi is the first startup in the MENAP region to raise funding using Sukuk.
Long story short, Abhi’s invoice factoring product is a money-maker with very healthy margins.
Let’s do the numbers.
💰 Funding (disclosed)
Qist Bazaar raised $500k in equity and $1.2 million in debt funding.
Abhi issued a Sukuk bond worth $7.1 million.
💰 Funding (undisclosed)
🤝 Acquisitions
Abhi acquired 10% equity in BlueEx. This deal closed in May but was announced in March.
10Pearls acquired Colombia-Based Oiga Technologies.
📑 Report
Pakistan's Internet Landscape 2022
🗓️ May 9th
Imran Khan’s arrest. Pakistan's internet shutdown hits millions. POS payments slump. Gig workers suffer as internet disruptions continue. Entrepreneurs urge the Pakistan govt to lift internet restrictions. VCAP issues a statement. GSMA issues a statement. Some relief. Maybe not. Did the blackout work? Shutdown in numbers.
📰 Learn
Startup valuations are too high. Pakistan is one of the worst performers in terms of internet access and digital governance. IT exports decline by 3%. COLABS and Endeavor Pakistan partner to build a stronger startup ecosystem and PayFast partners with Euronet. Q3 FY23 digital payments update. SECP introduces framework for ‘Online Only’ brokers. Duty-free equipment imports for tech zones. New mobility kid in town. Cryptocurrencies will “never be legalized in Pakistan.” NADRA launches biometric verification for startups.
🧠 Think
Analyzing Abhi Sukuk. IT industry is a mixed bag. The key drivers of digital lending success in emerging markets. Sizing Pakistan's e-commerce market. Unpacking JazzCash and RAAST metrics.
🎙️ Listen
Conversation with Farooq Tirmizi (YouTube), co-founder of Elphinstone.
📺 Watch
A conversation between Naeem Sikandar and Shehryar Hydri, Managing Partner at Deosai Ventures.
Until next month, ✌️