Fintech startup Adalfi lands $7.5M in funding to help millions of Pakistanis get credit and gain access to loans
Globally, about 1.7 billion adults remain unbanked — without an account at a financial institution or through a mobile money provider, according to data from the World Bank. A large portion of the underbanked is in developing countries.
China has the world’s largest unbanked population, followed by India (190 million), Pakistan (100 million), and Indonesia (95 million). Currently, less than 4% of Pakistani consumers and businesses take bank loans because banks lack the data on customers’ credit histories required to decide whether to lend. That’s why one fintech startup wants to help banks offer their customers real-time loan products.
Enter Adalfi, a Lahore, Pakistan-based fintech startup that has developed AI-powered credit scoring and underwriting models solutions to help break the credit-loan logjam. AdalFi solves the chicken-and-egg money lending problem by building critical lending infrastructure to power smart, instant loans for consumers and SMEs in Pakistan. These include the offering of unsecured loan products such as term loans, credit cards, and revolving finance facilities for consumers and SMEs respectively.
The AdalFi tech stack also includes pre-built, bespoke customer journeys and integrations with major banking platforms. AdalFi has quickly signed up 14 banks (including 7 out of the top 10), on its mission to promote financial inclusion as it unlocks access to credit to millions of people and small businesses.
To further grow its first end-to-end digital lending infrastructure platform, AdalFi announced today that it has raised$7.5 a million funding round led by COTU Ventures, Chimera Ventures, Fatima Gobi Ventures, and Zayn Capital alongside angel investors including execs from Plaid.
AdalFi’s proprietary technology scores the financial transactional data already possessed by banks enables personalized digital marketing to qualified prospects and, finally, provides the customer journeys which are embedded within the bank’s digital presence to enable real-time disbursement of loans.
AdalFi operates on an asset-light, a revenue-sharing model with banks which captures any downside risk exposure to banks such that any loan losses are accounted for, pro-rata, in fees due to AdalFi. These deep partnerships ensure banks and AdalFi are completely aligned in that AdalFi only makes money from loans that are actually paid back.
Commenting on the funding, Salman Akhtar, CEO and co-founder of AdalFi said: “Pakistan has 50 million bank accounts yet only 2 million of these individuals and businesses have any credit relationship with their bank. The high cost of loan origination driven by physical verification of identity, assets and financial health (in the absence of credit scoring) has restricted credit access to thin, top-tier customers. AdalFi’s digital lending platform allows partner banks to instantly credit score the other 95% of their existing customers who have never been lent to and cross-sell loans to them.”
Salman Akhtar added: “In essence, we have built better underwriting models for banks. Not only have we lowered the cost of credit scoring and underwriting and therefore the cost of credit but we changed their outlook and got them to change their approach. Banks have been drawn to AdalFi because we offer rigorous credit scoring to ensure portfolio quality with zero cost customer conversion (from depositors to borrowers). Moreover, we enable a breakthrough in customer experience with instant, smart loans which completely transform customer value delivery.”
Since its launch in July 2021, AdalFi has grown the Gross Loan Volume (GLV) enabled by its Digital Lending Platform at 30% month on month for the last 19 months. Over 70,000 loans have been disbursed to date with a default rate well under 0.1%. Through December 2022, AdalFi enabled a cumulative Rs. 1 Billion in GLV. In January 2023 alone AdalFi generated Rs. 390 Million in lending and is on track to exceed Rs. 1 Billion within Q1 2023.
“Salman excited us from our first interaction. He and his team’s level of experience and track record building software for financial institutions is a rarity in this space. When you combine that with the innovative solution that AdalFi offers, specifically with its AI-powered scoring model that is scalable and frictionless, you have all the ingredients to massively transform the credit industry. The fact that they have already secured partnerships with the leading banks in the country, and have already facilitated new unsecured lending channels for their clients in such a short space of time, gives us confidence that they have an incredibly exciting future ahead of them.” said Amir Farha, Managing Partner at COTU Ventures
AdalFi’s vision for the future is to continue to drive innovation in the lending space, providing consumers and SMEs with the best possible experience by powering the lending infrastructure across a wide range of products and channels. The company aims to be the premier digital lending solutions provider in the APAC region and beyond.
Salman Akhtar concluded: “Our rapid growth is a testament to the need for such solutions in the lending space, and we look forward to continuing to drive positive change in the industry.