Money Matters

Startup fever

Money Matters
By Shahzada Irfan Ahmed
Mon, 11, 21

Prime Minister Imran Khan has recently announced that the government is providing small loans on soft terms to over four million families to start new businesses and focusing on skills development. All Pakistani residents, aged between 21 and 45 years with entrepreneurial potential are eligible to apply for the loan.

Startup fever

Prime Minister Imran Khan has recently announced that the government is providing small loans on soft terms to over four million families to start new businesses and focusing on skills development. All Pakistani residents, aged between 21 and 45 years with entrepreneurial potential are eligible to apply for the loan.

The Kamyab Jawan Programme (KJP), which is a flagship programme focusing youth, talks about this initiative and has different components. For example PM’s Hunarmand Pakistan Programme-Skills for All project has been implemented since February, 2020 and training cost to be incurred on trainees has been disbursed to all selected training institutes.

Besides, the government in collaboration with the State Bank of Pakistan (SBP) has launched ‘Prime Minister’s Kamyab Jawan Youth Entrepreneurships Scheme (PMKJ-YES)’ to empower Pakistan’s youth by extending affordable financing for new and existing startups. The eligible startups are both in the conventional category as well as the tech industry.

As per the Economic Survey of Pakistan 2020-2021, “21 banks are working as executing agency and shall be providing business loans to youth entrepreneurs ranging from Rs 100,000 to Rs 25 million at the mark-up rate of 3-5 percent per annum with the maximum loan tenure of 8 years”. Under PMKJ-YES, Rs 8,566 million have been disbursed till April 2021 for various businesses, the survey adds.

“Similarly, Prime Minister’s Startup Pakistan is flagship initiative of KJP taken by the government and envisioned to develop a national startup ecosystem that provides training to one million young people in entrepreneurship and launch 10,000 startups by 2023 as well as creates jobs and economic activities.”

The desire to start business is very common and according to a United Nations Development Programme (UNDP) study, around 23 percent of Pakistani youth want to own business. No doubt Pakistan has a huge percentage of youth population who cannot find jobs in the existing industries and the government sector. Therefore, there is a need to take initiatives that engage youth in productive businesses and create jobs.

The question here is that how can such programmes be implemented and ensured that they give the required dividends. Experts believe a complete ecosystem supporting startups must be there so there are minimum defaults or failures. In the case of previous governments, similar loans were granted and the results were mixed. So there is a need to learn from those experiences and maximum care be taken not to repeat mistakes of the past.

Nauman Kabir, president, Lahore Chamber of Commerce and Industry (LCCI) says it is a good sign that programmes have been announced to give financial support to new businesses and existing ones which may be called micro-enterprises. It is hoped that banks will offer such loans, he says, adding that in his meetings with private banks in the capacity of LCCI president, the latter showed reluctance to do so. He says banks are normally interested in financing big business groups which they feel are secure and collateral can be of high value.

On the prospects of new startups, Kabir says for a business to succeed there must be a product and demand for it. He says there is need to find new markets including the foreign ones because local markets are saturated. Kabir urges there shall be skills training and required human resource for a new business to yield results. Therefore, it should be a condition for an applicant to qualify for a loan.

Kabir suggests that the commercial attaches in Pakistani embassies abroad shall be from the private sector so that they can market Pakistani products across. If this happens, even new startups can go for manufacturing of exportable products.

Economist Kaiser Bengali believes to enter the international market, quality is a must which might be difficult for new businesses to ensure. He says the country is facing tough competition even in the region and to turn things in its favour quality control is a major requirement. “To market products in the developed world is even tougher.”

Economist and professor at the University of Central Punjab (UCP) Lahore, comments that entrepreneurs are risk takers and he terms small business owners entrepreneurs. These, he says may include vendors, bookshop owners, those selling goods on stalls, small shop owners etc. They are struggling and earning bread and butter for their families. If they can do this, hopefully the new ones will also be, he adds. “But what is important is that they shall be incentivized with tax relief, cut in tariff etc for a limited period subject to conditions.”

Coming to tech startups, one finds there has been phenomenal rise in amount of money coming in. According to a Bloomberg report, “more money has flowed into Pakistan’s nascent technology sector during 2021 than in the previous six years combined, with investors from the US, Singapore and the United Arab Emirates (UAE) joining the rush.”

In tech-based startups, mainly an idea is conceived and developed, matured in incubators and funding sought in the form of angel investment, seed funding or venture capital.

This means the idea is matured in incubation centers before they enter into the next phase. Currently, the government as well as the private sector is taking initiatives to develop incubators which will hopefully create environment for the youth to build unique startups.

Anyhow there is dearth of funding for startups which industry players can be taken care of by setting up of venture capital fund under the government umbrella and brining international venture capital companies to Pakistan.

The successful tech startups in Pakistan include Airlift Tech,, Bazaar, Bykea, Tajir, Cheetay and Dawai.

Sajid Latif, Director General (DG), e-Governance, Punjab Information Technology Board (PITB) shares it with The News that startup’s situation is very good in Pakistan and there has been 300 percent increase in funding over the last year. He says three startups were introduced to investors during Dubai expo who showed great interest in them. Latif lauds the PM’s initiative for startups and says it includes and focuses tech startups, which is very encouraging.

He says the number of startups is increasing and a proof of it is that 371 companies registered in 10 days on the portal built to connect them with investors. Twenty of these companies were ultimately shortlisted and taken to Dubai expo where they impressed the visitors and participants with their talent.

Besides, he says in 2014, 30 startups were graduating annually from PITB’s Plan 9 incubator plan which has risen to 470 this year. “This also shows where we are heading.”

He adds that the network of national incubation centers is being expanded all over Pakistan which is encouraging people from all over the country to enter this venue.

The writer is a staff member