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CONTENTS 22

09 Brace for the budget - this week in Pakistan’s business and economics Twitterverse 11 Is financial inclusion overrated?

17 17 Cocomo conundrum: How Ismail Industries doubled their profit when the economy was shrinking 20 The urban upper middle class are desperate for the vaccines of their choice. Why don’t we let them pay for it?

27 27 Are you an influencer? Here’s how to avoid being held hostage by advertisers and platforms Hamza Nizam Kazi 29 ‘We’ll be back’: No you won’t, PECO

Profit

31 Willing to Fail: How Dr Sara Saeed built Sehat Kahani?

Executive Editor: Babar Nizami l Managing Editor: Farooq Tirmizi l Joint Editor: Yousaf Nizami Reporters: Ariba Shahid l Babar Khan Javed l Taimoor Hassan Abdullah Niazi l Meiryum Ali l Shahab Omer Regional Heads of Marketing: Muddasir Alam (Khi) l Zulﬁqar Butt (Lhr) l Mudassir Iqbal (Isl) Layout: Rizwan Ahmad l Photographers: Zubair Mehfooz & Imran Gillani l Business, Economic & Financial news by 'Pakistan Today' Contact: proﬁt@pakistantoday.com.pk

Readers Say The main problem in the long run for all non cash platforms (or EMIs) is that of determining an optimum transaction cost i.e. what will the price customers are willing to pay for a transaction. I have been using easy paysa for some time a few months ago they had no limit on the amount being transferred to any bank account suddenly they changed it and caped it at Rs. 5,000 which is such a small amount that one cannot use it for any business purpose however small it may be, further there franchises are not only charging on the withdrawal of the money but also at the time of depositing. Access to your own money should be a basic right. Why are we expected to pay for it? Apropos: War on cash – Will the real payments revolution please stand up? Fraaz Jamshed, Website Farooq, another excellent article. Informative and useful. Just to correct one point, HBL made an equity investment into Finja, PKR equivalent of $ 1.15 m, as part of Round Series A-1 of $10.1m. An additional debt investment may be considered in the future. Also, a clarification: By “internet-based payments” you mean mobile app-based payments, card-based e-commerce, desktop browser-based internet banking, and online B2B transfers? And non-Internet would be cash, cheques/PO, POS and ATM? And in Payment Service Provider, you include PSP, PSO, and EMI? Apropos: War on cash – Will the real payments revolution please stand up? Yusuf Hussain, Website Comparing 3 months data with 4 years and 3 months data to arrive at a flawed conclusion. No thank you. I disagree. Pakistanis are a cash-obsessed people. There are probably better ways to find out than wait for 5 yrs. how about asking all the Ecom companies the transaction breakup %age. or banks about their customer base using digital apps. Fintechs all around the world including in Pakistan may be valued highly, but they are not profitable. Apropos: War on cash – Will the real payments revolution please stand up? @TariqSayeedKhan, Twitter

facebook.com/Profitpk twitter.com/Profitpk linkedin.com/showcase/13251020 profit.com.pk profit@pakistantoday.com.pk

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Well i think any remittance under the car financing scheme will be netted off against the drop in remittance. Nobody sends money for the holy love of the country. Apropos: In its efforts to please expats, the govt gives a new lease on life to car manufacturers Fraaz Jamshed, Website 9.05% is still very high. Plus I think with expats bringing in so much remittances, that’s the least they deserve. They would normally be buying a car for their family and sending that money to Pakistan from abroad. Shouldn’t portray them as the villains! Apropos: In its efforts to please expats, the

govt gives a new lease on life to car manufacturers @Kallerz37, Twitter We all understand that a large chunk of the cost to manufacture an automobile in Pakistan is imported and results in an increase in the import bill. However, there is still a sizable chunk that is locally denominated (e.g. labor, electricity (sunk cost) and profit margin. If expats are repatriating US$s to buy a vehicle, technically they are covering the import bill and adding a net inflow of US$s so the scheme might not be so bad especially if it replaces local purchases. The question I have is: if the inflows are staggered in line with the financing of the asset, are we net beneficiaries or is the immediate increase in import bill going to cost us in the long run. The industry might not need a push but we do need US$s. And if expat purchasing (for their family obviously because they aren't going to be using the car themselves) can replace local purchasing to some extent, it's a win-win because we still net inflowing US$s. Apropos: In its efforts to please expats, the govt gives a new lease on life to car manufacturers AzamAKhan2, Twitter There is no doubt in the fact that the new car buying process in Pakistan is one of the most tedious and cumbersome processes anywhere in the world - the issues are endless like you have stated - and buying new cars is becoming a very expensive proposition indeed! That said, Pakistan is running a very thin current account surplus at the moment, which will convert into a current account deficit any day. Imports are once again touching $50 billion, whereas exports are inching up but are still at $24-25 billion levels. What bridges the gap is remittances. Until the time that Pakistan can get its act together and take its exports to the $28-30 billion level while also attracting $2-3 billion FDI and sustaining a $30-32 billion remittances level, it will continue to be hungry for USD. Therefore, any scheme which brings in an extra banknote with a dollar sign is welcome. Whether or not any of these schemes is successful or not, time will tell. However, the Roshan Digital Account has so far managed to attract $1.25 billion at a blended cost of ~5% p.a. as not all funds would’ve been deployed at the highest rate of 7%. Before Dec-21, RDA should cross $2 billion. Schemes such as the Roshan Apni Car, in my opinion, are legitimate as long as overseas Pakistanis commit to continue sending remittances to Pakistan through official channels and avoid the Hundi/Hawala systems that were being used in the past. I still believe the actual number should be $34-36bn today. Apropos: In its efforts to please expats, the govt gives a new lease on life to car manufacturers @FahdSheilh3, Twitter

COMMENTS

IN BRIEF The federal cabinet’s Economic Coordination Committee (ECC) is likely to allow operational losses up to a maximum at 0.5 per cent for gasoline transportation through the White Oil Pipeline (WOP) and Mehmoodkot-Faisalabad-Machike (MFM) pipeline through Inland Freight Equalization Margin (IFEM).

Finance Minister Shaukat Tarin has said that Pakistan will leverage military cooperation with the US over America’s withdrawal from Afghanistan in a bid to convince the International Monetary Fund (IMF) for extending the deadline to implement reforms as the country anticipates the next tranche of funding as part of a $6 billion loan programme.

Rs 7.95 billion:

The federal government has failed to disburse as much as Rs7.95 billion allocated for the development of the tribal districts in the outgoing year’s budget. The federal government had promised to provide Rs24 billion for this year’s development program but released only 67 per cent, Rs16.4 billion. The federal government has decided to allocate Rs3.1 trillion for interest-related payments in the upcoming budget. According to sources, the government had allocated Rs2.85 trillion in interest payments during the outgoing fiscal year. Sources said that the government is mulling to allocate another Rs1.35 trillion in defence budget which was Rs1.27 trillion during the outgoing year.

The federal government is likely to remove the age limit for the Kamyab Jawan Programme launched by Prime Minister Imran Khan to support the youth of the country. Presently, applicants that fall in the 20-45 year age bracket are eligible to get the loan under the scheme.

Rs 26 billion:

Remittances to Pakistan hit $26.7 billion in 11 months of this fiscal year (11MFY21), the highest level on record, increasing by 29.4 per cent compared to the same period of last year. Remittances in the first 11 months of FY21 have already crossed the full FY20 level by $3.6 billion.

Rs 20 billion:

The Economic Coordination Committee (ECC) on has approved a technical supplementary grant of Rs20 billion for procurement of 10 million doses of the Covid-19 vaccine in June.

Brace for the budget this week in Pakistan’s business and economics twitterverse

n this week’s social media round up, Ariba Shahid walks us through all the self declared economic experts as the budget looms. With talking heads everywhere and Profit preparing for budget, this week has been dominated by the impending proceedings on the floor of the house. Ecommerce, email etiquette, and more also feature in this week’s social media roundup.

Seasonal experts

Budget night

Truth be told, we’re partially jealous of Waqas’s hot girl summer because he does not have in front of him a long night full of stress, confusion over numbers, tears, at least two meltdowns, and deadlines hanging down his neck. That said, we are still on some level (partially) excited about covering the budget in detail. Budget night, much like election night, asides from the stress can also be a wonderful experience in a newsroom, and those eureka moments are almost always worth it. Stay tuned for Profit’s budget coverage. Think of it as a music festival but for nerds. Yes, we’re fun at parties. Please don’t judge us. {Editor’s note: The magazine assumes no responsibility for its reporters claiming they are fun at parties.}

SOCIAL MEDIA ROUNDUP

Talk shows in Pakistan aren’t really educational or informative. This is especially true when these shows are to do with the economy. Talking heads on TV are a dime-a-dozen and everyone seems to have gotten it in their heads that they know how to fix the economy. So when Hassan Nisar and Irshad Bhatti types decide to do economic analysis, we can’t help but sit by and watch in horror. Now, just to be clear, we don’t know quite how to fix the economy, and far be it for us to try and gatekeep analysis of the economy. But as everyone becomes an expert on the budget, we would implore you to be a responsible consumer of news, especially since most of its providers are absolutely not responsible. This isn’t centric to ARY mentioned in the tweet, but across most channels. What does profit suggest? Leave the business news and analysis to business journalists. It’s fairly simple. In addition, we suggest you read print and web for a better understanding of the budget than to learn from some talk show host that loves drama for ratings.

Condemned to become our parents

All fun and games until ...

Most of us will be able to remember this moment. Coming home from school or being out somewhere with our parents, seeing the board for a food joint we loved and making a farmaish to stop and get some snacks, only to be told that we have the same food at home and the one at home is actually better, not to mention free. Back then, many of us will have promised ourselves that when we grow up and have our own money, we would be more free with spending it. We would never say no. However, now that we actually have grown old and our disposable incomes are smaller than what boomers had, this generation has resorted to turning into their parents.

Waiting on that teleportation machine

Ecommerce is tricky. The worst part about it is having to wait for your order. If you’re anything like us, we like to check the tracker a hundred times a day hoping for the package to pop out of the screen. This is just one thing that e-commerce won’t be able to beat retail stores at: the feeling of walking out of a store with a brand new item you just bought, no delays. Well, that is until teleportation becomes a thing.

Ah, that time of the year when everyone is an economist and analyst. It’s fun seeing how social media gives everyone the right to have an opinion on matters they have absolutely no clue about. And while in this instant it is all fun and games, we would like to give fair warning that some of these experts veer very quickly from the fun to the horrific.

Moral dilemmas To exclaim or not to exclaim?

We hate writing emails and are just as confused about exclamation points. It doesn’t get easier with time. There is a recent debate about how to drive up vaccination numbers. For instance, do we revoke CNICs? Block sims? Stop salaries? Or do we incentivize vaccinations? It’s an ethical debate. However, a country like Pakistan that still hasn’t defeated Polio will always find it hard to prop up vaccination if left to personal choice.

SOCIAL MEDIA ROUNDUP

FINANCIAL INCLUSION

By Taimoor Hassan

hat does the life of a daily wage worker at a seth sahib’s factory look like in Pakistan? Let’s be blunt - if you’re privileged enough to be reading this magazine, you probably have no idea. Thankfully, here’s where the Pakistan Bureau of Statistics comes in handy. According to Household Integrated Economic Survey 2018-19 data, the bottom 20% of the Pakistani population in urban centres earns Rs24,365 per household per month, and consumes Rs23,515. In rural areas, the average income per household drops to Rs22,819 per month, while monthly consumption is Rs21,430. Most of that monthly ‘consumption’ is spent towards rent, food, and utilities. As you can imagine, this does not leave much money left over for miscellaneous items. And considering that inflation has averaged at 9% in the last 12 months, savings are a distant dream. So, what happens if the daily wage worker has an important financial expense to make, say a child’s education, or a child’s marriage? Who will fit the bill? Easy: either a previously set up committee, or (more likely) a local lender in the community who gives out loans for immediate use. Now the conventional thinking is this: that these lenders are B-A-D. In the minds of policy makers and bankers, predatory lenders and loan sharks charge horrendous amounts of money to the financially vulnerable members of the society for financing their needs. Think, for instance, of the farmer who is exploited by the middlemen who buy his crop at their whims at arbitrary prices. If only we had more financial inclusion, say the perfectly well-meaning policy-makers

and bureaucrats. If only low-income households have access to the formal financial system, they are able to better finance their needs, without establishing exploitative relationships with players in the informal sector that eventually adds to their poverty. If only more low-income Pakistanis opened a bank account, and took loans from the formal sector, be that banks or mobile wallets. Now, to be clear, financial inclusion is a massive problem. According to the latest numbers from the State Bank of Pakistan (SBP) for June 2020, the numbers of bank accounts were 57.7 million in a population of 220 million. That is a little over a quarter of the Pakistani population is banked. But that is the total number of bank accounts: after all, there are people who maintain multiple accounts and therefore the number of unique bank accounts would even be less than that. Another dataset from World Bank’s Findex Database puts the percentage of the adult population that is banked at 21% for 2017. That is already a dreadfully low number of bank accounts if you compare with regional peers. India, for instance, has 80% of its population that is banked. When the central bank announced its National Financial Inclusion Strategy (NFIS), less than a quarter of the population was banked. Five years on, it’s still only a quarter or a little more that is banked. And According to SBP’s Access to Finance Survey 2015, only 7% of the adult women in Pakistan were banked. So clearly, there’s a problem. And well-meaning policy makers are trying to change this. But why are low-income so resistant to opening a bank account, or taking a loan from a bank? It helps if one steps and stops thinking about a government and its obligations to citizens. Instead, think of a company. Ultimately, companies flourish when they design

the end-consumer in mind. They fail, when they keep thinking they know better, and stop asking what the hurdles are for the consumer, or what they even want. And so it shows here. Let’s consider that so-called bad ‘loan shark’ that operates in the informal economy, which proponents of financial inclusion believe rip customers off. In an example shared with Profit, a farmer from a village in South Punjab took out a Rs48,000 loan for his marriage for six months, and paid back Rs62,000, translating to an interest of 25% paid for a six-month period. In another example, a lender from the same village charged 30% interest for the amount that he lends. But here’s the kicker: in the same district where the village is located, the National Rural Support Bank (NRSP) Bank charges a whopping 39% on personal loans. Which do you think the end-user is going to use? Do you think he cares about government year-end goals for financial inclusion, or will bother trying to set up a bank account, a process that will take weeks? No, he will go to the lender. In this narrative, it is the formal channels that are the predatory loan sharks. Between the three, the mobile wallet, the bank and the private lender, a low-income person who does not have a formal bank account is likely going to take out a loan from a private lender other than banks or wallets because these loans are easy to get; no need of formal paperwork or processing times or the prerequisite usage of wallet or telco services. The interest rate is also less than what the banks charge. From the perspective of the low-income household, financial inclusion is overrated, because the services offered, and the hassle of engaging with the formal sector are simply too much. The government, and the banks in Pakistan have not figured out how to improve their systems. In this article, we will point out the

In the absence of a documented banking account, they move towards informal financial services. If it is remittance, they move towards hundi or hawala networks. If it is savings, it becomes savings under the mattress. If it is investments, they will get some gold or some cattle for which there is no paperwork. If it is lending, we have loan sharks in the market Omar Moeen Malik, Head of Digital Wallets at EasyPaisa

two separate options available to a customer - mobile wallets and banks - and then look at how easy it is to set up an account.

Option 1: the mobile wallets

he story of how EasyPaisa started also reflects the need for a bank account for everybody in Pakistan. Back in 2008-9 when EasyPaisa was launched, people working in cities did not have any options to send money back home. If the hometown was close to the city, the earning member would visit family members frequently and give the money back home when he would visit. If the distance would be longer, he’d have it delivered back home by paying some bus driver to do it for him. Alternatively, he’d give the money to some acquaintance or some extended family member visiting the city and request them to deliver the money if they were also to travel back at the same time. All in all, it was a pretty shaky and not very safe system. In the above arrangements, the transfer of money back home would only happen if the earning member himself or any of his friends or family members visited. The practice still goes on today. Low-income groups try to save expenses by requesting friends or acquaintances to carry money along with them if they are travelling back home at the same time. Alternatively, they could deliver money via buses, but this can be time-consuming, carries a charge and may still carry the risk of fraud. In 2008, the State Bank of Pakistan introduced Branchless Banking regulations that would enable EasyPaisa and JazzCash

to have a network of agents that would act as a bank, without the presence of a physical branch, to carry out financial transactions like transferring of money from one place to another. They would do the same thing that the bus driver or conductor does, except that this transaction would now be almost instant and less expensive. Be it bank accounts or wallets, the movement of money through these formal channels would help keep track of and document transactions. In turn, it would also helps curb the use of cash. Easy Paisa clearly sees itself as a solution to the problem. As Omar Moeen Malik, Head of Digital Wallets at EasyPaisa said,“In the absence of a documented banking account, they move towards informal financial services. If it is remittance, they move towards hundi or hawala networks. If it is savings, it becomes savings under the mattress. If it is investments, they will get some gold or some cattle for which there is no paperwork. If it is lending, we have loan sharks in the market,” he adds. Services like Easy Paisa aim to correct this narrative. So, for instance, another reason why mobile wallets are attractive is because they offer credit on demand and guarantee almost instant access to loans of Rs 10,000. However, this is not as smooth as it seems. To access these loans, first you must have a sim of Jazz or Telenor, the telcos behind EasyPaisa and JazzCash, and must already have a wallet with them. The company then decides how eligible you are for the loan depending on your usage of the telco services and wallet. Because of all these caveats, most people still prefer going to the much simpler

but much more deadly loan sharks. Where it gets more difficult is that the loan, that can be given out at a maximum limit of Rs10,000, has to be repaid in a month at a 5% of the total loan charged in fees each week for the credit service. So if you took out a Rs10,000 loan on EasyPaisa, you’d be paying back Rs12,000 at the end of the month, translating in a 20% rate for a month, or 240% for a year, if you were to take out the same amount of loan each month for a year. If the outstanding loan amount is not repaid within a month, the deadline is extended on a weekly basis for another four weeks. Failure to repay even after the extension of the deadline would result in the wallet blacklisting you and cancelling your eligibility for future loans.

Option 2: the bank

ould Rs10,000 be sufficient for someone, who, let’s say, has to take out a loan to get one of his children married? Who can they turn to? Well, the banks. The loans from the banks are actually more costly. This reporter’s own bank that was called to learn about charges associated with taking out a personal loan told us that for a loan of Rs50,000, the minimum limit of a personal loan, can cost as much as KIBOR plus 24%. The 1-year KIBOR rate nowadays is almost 8% which means that the loan would be charged at 32% for a year. The bank further charges a few thousand rupees, Rs3,500 in the case of the reporter’s bank, as the processing fee for the loan and the loan takes a few days to process.

FINANCIAL INCLUSION

“The interest rates at banks and even microfinance banks are high. In the case of microfinance banks, they try to justify high interest rates by saying that they have high operational expenses. While they are borrowing these loans from commercial banks at roughly 10% interest,” says Ali Sarfaraz, CEO of Karandaaz Pakistan, an online data portal with aggregated data on financial services and selected socioeconomic indicators for the country. It is a non-profit organisation that aims to bank the unbanked population and provide access to finance to small and medium sized businesses. It is startling that Pakistan’s top bank, Habib Bank Limited (HBL), does not offer personal loans at all, unless you are working with a company that has an account with HBL and your salary is deposited directly into the account that your company opened for you with Habib Bank (Editor’s Note: That might soon change, if HBL ends up acquiring the consumer lending portfolio of Silkbank). This is despite having a designated chief financial inclusion officer in HBL’s management. Profit reached out to HBL for comments about the role of the chief financial inclusion officer at the bank and measures taken by him to promote financial inclusion. No response was received till the filing of this report. Of the remaining banks surveyed by Profit, it looked enormously difficult to get a loan for the unbanked, unless, ironically, one was part of the formal sector already. Most banks require a prior relationship of a few months to a year with any bank to be eligible for a personal loan. Most of them also further required to furnish bank statements if one had an account with any other bank, and salary slips. The question here is this: can a daily wage labourer or a driver working at someone’s house in urban Lahore provide salary slips or bank statements to apply for a loan at a bank? “No!” is the most likely answer. Some banks even have minimum salary requirements of Rs50,000 for someone to be eligible to get a bank loan. Financial inclusion proponents point out that private lenders have no uniform charges; but there is also no uniformity of charges when it comes to commercial banks. All the banks

It is true that traditional brick-and-mortar banks have very little seriousness towards financial inclusion Ali Sarfaraz, CEO of Karandaaz Pakistan

have their own set of offerings, with arbitrary rates. In-principle, both are the same: predatory.

How does one open a bank account, anyway?

igh-charges that discourage customers from seeking loans are sometimes the least of a customer’s problem. Just opening and maintaining a bank account has remained an expensive task for low-income earner with the requirements of large deposits and minimum balance requirements that run in thousands of rupees. Therefore, the thinking with the policymakers at the SBP has been that if banks could be easily opened, financial inclusion would increase. Therefore, the policy has remained at the ease of opening bank accounts. The SBP has introduced low-tier accounts. For such users all the costs are absorbed by the banks. Take, for example, the Aasan Account. Remember that access to a bank account is what should open up avenues for other financial services like personal loans. That is the whole concept of financial inclusion. But even the opening of accounts has remained lacklustre despite the fact that the SBP has mandated accounts that do not even cost much to open and maintain. The Asaan Account is a type of current account that is targeted at common people

and is open to all low-income unbanked and under-banked masses who face difficulties in account opening due to normal account opening requirements or lesser means. But as it turns out, opening an Asaan Account remains arduous. Profit surveyed four banks and one thing was abundantly clear: not enough is told to prospective customers about the benefits that come with a bank account that they pitch. Neither do they tell customers what they will not get with the account that they are pitching to the customer. What is certainly there is the complicated set of documents like judicial stamp papers from the employer that a person has to submit to prove that he has a job. What is more ironic, however, is that with an Asaan Account, people do not get access to financial services that the central bank apparently wants them to get access to. Take personal loans again. The bank representatives at three banks categorically said that no personal loans or credit cards are offered to Asaan Account customers because of their low-income profile. The fourth bank was not offering personal loans at all. All they get is a debit card and a thin cheque book, all paid for by customers. And this does not end here. Bank charges for services like fund transfers to other accounts are high that can possibly create deterrence for consumers to use bank services. Take Interbank fund transfers, for example. Interbank fund transfers from a branch can cost you as much as Rs500 for a single transfer

regardless of the amount that is sent. It would be the same for sending Rs2,000 or Rs20,000. In case of interbank fund transfer using internet or mobile banking features of a particular bank can also be costly, with a single transfer costing Rs150. What is appalling, however, is that interbank fund transfers are enabled by 1Link that acts as a switch to make IBFTs possible. However, for IBFTs, 1Link only charges 1 rupee to banks for each transfer. Whatever the banks earn on top are discretionary and predatory charges, as in the case of debit cards. Another example are credit cards. Part of the reason why credit cards have been unable to take-off in Pakistan are high interest rates charged by banks on credit cards. “Direct charges by the banks are very high and they deter customers from using banks’ services,” explains Sayem Ali, a banker and an expert in finance. “Banking is expensive globally and it is expensive in Pakistan. Banks think that the charges are justified against the services they provide to customers,” he adds. Wallets, on the other hand, have been able to do well. They have actually been a hit among the low-income segments of the population but their usage has been limited mostly to the transfer of money through branchless banking agents. So what does someone who earns a small amount of money get by opening a bank account? One can argue that safety and security of money is what a bank account brings. Not really! Scams at banks are real and people have been defrauded of their money by scammers. The low-income category of population, that is mostly illiterate, is more prone to such scams. Skimming frauds are also not uncommon and thefts at ATMs are also a normal occurrence. All these instances mean that money in the bank is not as safe and secure as it is considered. So why should a low-income person pay for a bank’s services when he can still be defrauded and still can not access services

like personal loans etc.? And because of low literacy rates, among the unbanked, knowledge of how to make transactions through ATMs or even writing cheques is challenging.

The case of unused accounts

ven for the population that is banked, it has been reported that there is little usage on these accounts. Something similar is also faced by India. While the country has 80% of the population that is unbanked, 48% of these bank accounts saw no transaction, reported an Indian publication. In another instance, the government of India paid from its exchequer to encourage people to open bank accounts. Rs5,000 overdraft was made instantly available for persons opening new accounts. People in India rushed to open a bank account and after redeeming overdraft facilities, these bank accounts were never used. At least in Pakistan, part of the reason there are inactive bank accounts can be rationalised by the prevalence of high charges by banks for using their services that keeps customers from using these services. Part of it can also be blamed on the morbid fascination of Pakistanis with cash that won’t go away. And part of the reason for the fascination is the fear that people have that comes with the pains associated with becoming accountable to authorities after getting documented. Together, this makes cash a better alternative to holding a bank account. “People would be willing to visit a bank branch and exchange their soiled notes to get newer ones, but they won’t go in to open a bank account. It shows that the society still prefers to use cash,” says Omar Moeen Malik. But it can’t all be blamed on cash. While the policies have been focused on ease of access, not enough has been done to create use-cases for the low-income groups to prioritise using banking services over payments in

cash. That is to say where can the payments be made using a wallet or a bank account. The typical use-cases that are available on mobile apps of banks and wallets are mobile top ups and utilities payments. While these are important use cases, these are not the only ones. For low-income groups, they make frequent and small mostly grocery purchases. But there are no such use-cases that have been enabled on these platforms yet. It is therefore no surprise that people who do not make much in a month, even if they have a bank account, withdraw their entire salary in one or two ATM transactions and use cash for all transactions. While there are these use-cases that are not available on such applications, there are not enough smartphone users eithers that can use these applications. Majority of the users use feature phones that do not have wallets or banking applications. An effort was made by the SBP to introduce mobile money accounts called Aasan Mobile Account (AMA) that could be opened with any bank using a feature phone via USSD channels. The leadership of the fintech company that was mandated to start AMA, Virtual Remittance Gateway (VRG), in an earlier interview with Profit, had aspired to make use cases such as micro purchases with a vegetable vendor available for masses on their phones. “In absence of such use-cases, cash becomes priority and then financial inclusion becomes difficult,” says Ali Sarfaraz. “The scope of financial inclusion is massive and it has worked in

FINANCIAL INCLUSION

other countries. But we have a long way to go.”

Why banks are not invested in financial inclusion

“I

t is true that traditional brick-andmortar banks have very little seriousness towards financial inclusion,” says Ali. “In Pakistan, the majority of our banks are private banks whereas in India, most of the banks are public entities. We privatised our entire banking sector. Then we said that we should have a few big banks and they should serve all sorts of customers. These banks should be giving money to the government, they should give money to the SMEs, to corporates and they should do personal financing as well,” he adds. “The idea was that if a bank was large and if it had a large capital base, it would be able to introduce and manage different products that would include some products that would be risky, as well as some products that would be less risky. But banks would be diversifying. Now in theory, it was not a bad idea. And we created big banks. The top few banks have 80% industry assets whereas the remaining have 20% assets,” explains Ali. “But like everywhere else in the society, we have this elite capture in the banking sector as well [that is hindering financial inclusion,” he says. And the government is complicit. Most of the deposits of commercial banks go as loans to the government that needs to finance its deficit, leaving only little to be offered to low-in-

come people looking to finance their needs. “After the government, their priority is to finance entities like PIA and OGDCL, entities that have sovereign guarantees from the government of Pakistan,” explains Ali. “Banks would finance power plants that also receive payments from the government so it is also a low-risk investment. So really, personal finance takes a back seat when the government becomes the biggest borrower. Right now, if the government deficit reduces, the banks would then find people to lend money to. Then they will give mortgages and personal loans and financial inclusion will increase,” he adds.

And the government is not helping its case either

ere’s where it truly gets absurd: the government has a number of schemes designed to help low-income earners. The only problem is, you need to have an active bank account to qualify for them. These schemes are quite literally designed to alleviate poverty, and haven’t understood the basic underlying problem of financial inclusion. “If there is a government scheme, like housing schemes like Naya Pakistan Housing Scheme being launched by the government right now and G2P payments like Ehsaas Programme, to participate in that, you need an account. So in many cases, you will not be able to participate because you do not have

an account,” says Sakib Sherani, a prominent economist and CEO of Macro Economic Insights, a research house on economics. But all that is yet to bear any fruits for the segments of society that are supposed to be helped by this financial inclusion slogan. What does the ‘financially included’ get? If that financially included is moneyed, there’s a range of financial services available that are costly (high-interest rates charged by banks on personal loans and credit cards for example). Therefore, only the moneyed would get those services. For the ones that are not that well-off, the incentives for them to actively open and use bank accounts is simply not there. There are only costs of maintaining bank accounts that, being low on income, the underbanked would want to avoid. Simply opening a bank account gets you nowhere, when there are no incentives to open these bank accounts. Ali also concurs, and as is evident, that as things are structured right now, there is no melody in the financial inclusion ballad for the many that are unbanked. While there are policies and regulations focused on ease of access, what the policymakers choose to forget is that the majority of the population is not literate generally and for a population that is not literate, financial literacy is understandably low. So no matter how much you boast about policies that improve financial inclusion, if people’s incentives are not aligned or they don’t know about the benefits of having a bank account, how to operate a bank account or a wallet, the whole concept becomes overrated. n

FINANCIAL INCLUSION

By Ariba Shahid

n a recent press conference criticizing the state of the economy, former Finance Minister and PML-N stalwart Miftah Ismail faced a question from a reporter that was a little off beat. It was a bit polemic in nature, but it was fair enough. If the economy is really as bad as you claim, the reporter questioned, how come Ismail Industries (of which Miftah is executive director) doubled its profits? This was a bit of an awkward moment for Miftah. At the press conference, he had been railing against the state of the economy and what he saw as the mismanagement of the PTI government.

CONSUMER GOODS

And here the financial results of his own company were being used to disprove his pint. During the PML-N’s administration, in which Miftah was the Finance Minister, Ismail Industries was able to make Rs 350 million profit during PMLNs government. Since then, the journalist claimed, that profit had doubled. While he may not have been there as a representative of Ismail Industries, Miftah was well equipped to answer the question. He could have given a number of responses here. The former minister could have told a heartwarming tale about how he could not give attention to Ismail Industries because he was so busy as Finance Minister, or how the company since his return had actually performed well against the odds. Instead, he went for a simpler, less evocative explanation, saying flatly that the company’s profit had nothing to do with the economy of the country. But the question of Ismail Industries has been on everyone’s minds for a while. Mostly because of one product: Cocomo. It is one of those staple snacks that have defined the childhood of many Pakistanis, and which evokes not just nostalgia but a strong sense of ownership and protection. So when the amount of cocomos per packet started to visibly decline (at one point there regularly only being a paltry 3 cocomos in a single small packet), the public was in uproar. It was at this point that in an interview to The Current, Miftah Ismail responded to the controversy by saying the number of cocomos per pack had decreased because with the arrival of this new government, wheat, sugar, and other primary products that are used in making cocomos have all risen sharply in price. Yet the company has been growing, and perhaps because Ismail Industries is much larger than just cocomo. Yes, Can-

dyland is a big part of the group’’s appeal and business, but it is much more than that and Miftah and his brothers run a tight ship. One explanation for this increase has been that the government has improved economic conditions, which as we will show, is not the case. The other explanation is that by reducing the amount of product in their packaging, through shrinkflation, Ismail Industries have been able to turn a profit. But most importantly, it has been the increased focus on exports and growth in the plasti segment that has managed to mitigate the impact of a less vibrant local market.

Fact check: Have profits really grown?

ased on the available annual reports, a fact check shows that profits have not doubled in 2020. In fact, they have fallen by 35 million within the span of a year. In fact, Ismail Industries attained it’s highest ever profit in 2018, and the current profit levels are lower than what was

witnessed in 2016 and 2018. Gross profit, however, has managed to grow steadily over the years and so have sales. A quick glance at the charts show that Ismail Industries has not had it’s best years since 2018. Considering 2021’s financial statements are not out, Profit has annualized key indicators using the data available for the last three quarters ending March 2021 to make a comparison. Based on those numbers, Ismail Industries has witnessed a 33% growth in sales. This is largely driven by export sales rising 311% in 2021, whereas local sales decreased by 9%. Moreover, the share of export sales in the food segment has rapidly increased and has taken over local sales by increasing its share to 39%. Gross Profit remains largely flat, however, net profit has increased drastically by 129% after shrinking by 4% in 2020 and 32% in 2019.This suggests that the company has managed to reduce its costs such as a 42% reduction in finance costs as a result of lower interest rates, in addition to cutting costs through shrinkflation. Based on annualized numbers, the company has made it’s largest profit in 2021, which is approximately 50% higher than the profits made in 2018.

The economy and the snack business

he confectionary, cookies, and snack industry is tied to the economy much like any other industry would be. Considering the fact that such products are not essential, they are generally price elastic and income elastic. The extent of this varies from product to product and consumer to consumer based on preferences, habits, and, of course, how big of a dent it is in one’s consumption. What this means is that when a country is faced with inflation or economic uncer-

tainty whereby their purchasing power falls, households are faced with less disposable income. As a result, they change consumption patterns. To make it even simpler, if the economy is down and money is worth less, you have less money to spend. It is then up to you to decide how important cocomos are to you, and all other products. It becomes an analysis of weighing the costs against the benefits. For instance, if a household finds itself with lower disposable income, it is likely that they would substitute buying junk food in favor of staple food items. The ticket size of the item also needs to be taken into account. A household may not give much thought to a five rupee biscuit packet, but it might hesitate while buying an entire carton or a large box of that item. The company also talks about the impact of disposable incomes on its performance. In the third quarter financial statement ending march 2021, Munsarim Saifullah comments about the future outlook, “The management acknowledges the uncertainty emanating from Covid 19 and its impact on economy, high inflation is taking its toll on the disposable incomes and consumer spending is expected to remain in check during the periods ahead.” So yes, the question that was asked of Miftah Ismail made sense. People would need to have more disposable income for a confectionary company like Ismail Industries to have such a significant boost in profits.If the economy was performing badly as Miftah had been claiming, his company should have too. And as Miftah Ismail has explained previously, because of the country’s economic conditions, his companies have had to cut costs, and products have become a victim of what is known as shrinkflation.

Shrinkflation or should we say Cocomo: Mujhe bhi aur do

cocomos. Popsicles have gotten smaller, so have biscuits, and even rotis. This phenomenon is called shrinkflation. Shrinkflation is basically when the sticker price/ menu price for a product remains the same but the product quantity and or size shrinks. While the price of the product has not increased, customers find themselves paying more per gram or piece. This is most common in the food and beverage industry. This is done to raise profit margins. These changes are often negligible and not as apparent. Shrinkflation is a type of inflation but is not apparent from the consumer price index of a country. If we take shrinkflation into account, the inflation witnessed locally would most likely be much higher. In some countries, such as the UK, the Office for National Statistics keeps track of products that have decreased or increased their sizes. This helps keep a tab on shrinkflation. Whilst buying snacks, food, or beverages people often do not take the quantity or weight of the product into account. For instance, if your favorite burger joint reduced the size of its meat patty as opposed

to raising the price, you would probably not notice. Even if you did, you might right it off to a trick of the mind. This kind of gradual decrease will then continue to keep happening. Had the business increased the price of the product, consumers may have been deterred from buying the product, but despite the shrink, they may continue buying it. Another advantage of shrinkflation is greater consumption. For instance, people are now inclined to eat more than one pack of cocomo to satisfy their cravings or get the family pack instead. This also drives up sales. And while these are all reasonable assumptions, it would be fair to say that the government would be responsible for Ismail Industries doing better, even if that is by increasing inflation rather than performing well. The only problem is that very intuitively, even without the unavailability of data to this point, it seems unlikely that shrinkflation over such a short period of time would double the profits of Ismail Industries. The shrinkflation explanation makes much more sense when you consider that a lot of these new profits that are coming in are thanks to the increased focus on exports

e have discussed the outrage over there being fewer cocomos per packet. But is it possible that by such a minor adjustment it is possible to double profits? Think about it, gone are the days you could open up a small pack of cocomo and share with your friends. Why? Because now you’ll find four chocolate filled bite sized cookies in a pack, and if you’re having an unlucky day, you might find three. Have you noticed that the size of your loved snacks have shrunk over the years? Think about it, we now have fewer cocomo in every packet, and they contain less chocolate filling inside. And it isn’t just the

CONSUMER GOODS

A brief history of the Ismail Industries

that Ismail Industries have taken over. In fact, locally, the increase in profit in local sales for the food division increased by a meager 6.91%, plastic segment decreased by 9.27%, and cumulatively rose by 3.29% for the group. This is a paltry number, and both the increase and decrease are a routine affair. It could be due to shrinkflation, but it is not such a significant jump that it would make Miftah Ismail sing for joy. What has changed, however, is the group’s newfound focus on exports and the success they have found in this way.

Exports help Ismail Industries grow

s per the annual statement for 2020, “Ismail Industries has achieved nearly triple growth in export business volumes as compared to the previous fiscal year, despite the challenges faced due to the pandemic.” The company has managed to increase its export sales by 130.46% from 1,589 million in 2019 to 3,662 million in 2020 for its food segment, and 90% from 836 million to 1589 million for the plastic segment. Cumulatively, this means a 117.65% increase from 2,425 million in 2019 to 5,251 million in 2020. What has become very clear is that Ismail Industries has both focused on and succeeded in increasing the export of their products to grow their business, a technique they will most likely want to stick to now that it has proven so successful for them, and also growing its plastic segment. And this has been a deliberate strategy. As we mentioned earlier, there have been audible complaints about the quality of cocomos and the number of them found in any given packet from people in Pakistan, something we have argued may have contributed to significant shrinkflation. However, it has been reported that the cocomo packets that are being exported from Pakistan, mostly to countries with large expat populations, are of a better quality, are packaged better, and

have more cocomos in each packet as well. This is a clear sign that Ismail Industries has found a more profitable segment in expat communities compared to local customers. And while it is ironic that Miftah Ismail’s company is treating the expat community with the same favouritism that the incumbent federal government does, it also explains why the company was able to increase its footprint in other countries. The business’s improved performance can be attributed to thegrowth in export sales which are not impacted by local economic conditions. And while local sales had increased, the growth was not impressive enough to draw the conclusion that the economy was not suffering at the hands of inflation. n

Ismail Industries is a Pakistani conglomerate run as a family business with a diverse portfolio dealing in the business of confectionaries, biscuits, snacks, packaging, nutrition, pharmaceuticals, banking, and power generation. They began operations in 1988 as a confectionery company and went public in 1989. The origins of the group go further back in this. It started with Haji Ahmed Chandia setting up a factory in Sukkur. This did quite poorly, so in 1964, that factory was scrapped. After this, along with his four sons, Chandia founded Union Biscuit Private (Ltd) in Karachi. While this venture was successful, it was dealt a heavy blow by the early death of Chandia’s son and heir, Mohammad Ismail in 1980. The family again regrouped and set-up Ismail Industries in 1988. Miftah would join the family business in 1994 after finishing his PhD at Wharton and a short stint in the IMF. In addition to Candyland and other confectionery brands like Bisconi, the group has a 24% stake in the Bank of Khyber, has added Hudson Pharmaceuticals to its portfolio with a 78% stake, and a Wind Power Project.

CONSUMER GOODS

VACCINES

By Ariba Shahid

n March 17th this year, AGP Limited received a shipment of 50,000 full doses of the Russian Sputnik-V vaccine from the United Arab Emirates (UAE). The Russian vaccines had been privately bought by the Pakistani pharmaceutical company from the private office of a Prince of the UAE Royal Family, and at a rate much higher than at which the same vaccine was being sold to some other countries. The purpose was for AGP to privately vaccinate people willing and able to pay for it, while the government would use COVAX consignments and vaccines they procured themselves to inoculate the rest of the population. What followed the arrival of the Sputnik-V vaccines from the UAE was a process nearly as chaotic and confused as the chain of events that led to AGP securing the imported vaccines. First, there was the complex maze of international parties and middlemen representing the Russian vaccine developer. Then, when the shipment finally arrived, the Pakistan government had no idea what to price it at, but it had already given permission to AGP Limited to import the vaccine. So when AGP set a price and the government disagreed with that price, the dogs of war were let loose. Court cases raged, AGP threatened to sell the vaccines to some other country, and the government stepped in and stopped them from administering the vaccines until AGP took the government to court as well. All this while, the country’s urban upper-middle class waited with bated breaths to see if they would manage to get the vaccine. Today, after all this, the Sputnik-V vaccine is not available in Pakistan either privately or through government channels because a reasonable compromise on price has not been achieved till the filing of this report. Despite this, the demand for private vaccination in Pakistan remains high. This entire murky, failed experiment with private vaccination has raised questions about how the vaccine was procured,, why the government allowed the vaccine to be imported before they established a base price with the importer, and most importantly, why the UAE Royal Family (not the UAE government) got involved with the sale of Covid-19 vaccines in Pakistan. And while this story focuses on how AGP imported the Sputnik-V vaccine and only managed to ever administer 50000 doses, it will also look at how and why private for profit vaccination works, and whether after this initial experiment with it, it should be given another shot. Profit investigates.

The upper-middle class wants the jab

ne has to ask the question, what in the world is the point of private vaccination when the government is offering to one by one vaccinate everyone for free? The only problem is that the government wants to prioritize people like healthcare workers and the elderly that need the vaccine more. Meanwhile people mostly belonging to the upper middle class whose lives of leisure and socializing have been interrupted by the pandemic want a solution and they did not mind paying to cut in line. Already, even in the free vaccinations that the government has conducted up until now, it has been people belonging to a certain class that have mostly gotten vaccinated. In an observation made on June 1st, LUMS Assistant Professor and columnist Umair Javed in a tweet said “Vaccine hesitancy/misinformation is so pervasive here in Pakistan, and uptake increasingly appears to be stratified by class. Moving the needle on this is going to be such a tough task for the government. Most people I know (professionally/socially) have received at least one shot. Many here on twitter too. Yet total vaccines administered are only ~8 million (in an adult population of over 100 million). Hope this picks up.” In fact, this seems to be how it is in the developing world. Compare Pakistan to the United Kingdom and the United States, for example, which are the two countries with the highest inoculation rates in the world today. The UK recently opened up registrations for

the 30-32 age bracket after more than 50% of their population had received at least one dose of the vaccine. Pakistan opened the registration for the 30+ demographic after only 2% of the population had received at least one dose. While Pakistan has a much smaller population of people that are above 50 years than the UK and the US, the move by the government to open registration up to anyone indicates low interest. The trend this points towards is that in Pakistan, it is generally the urban elite that have been lining up to get vaccinated. This was perhaps most on display in the way that people registered for the Sputnik-V private vaccine. This started, as all chaotic things worth their salt do, with a Whatsapp forward. A message containing a google form for registration started making the rounds, and despite looking seedy and whatever the opposite of officious is, it was promptly shared beyond count. Without much concern, people filled in their names and ID card numbers and waited for confirmation. Within hours, the spots had all gone. Similar messages spread throughout Karachi and Islamabad as well. The price that was being conveyed was Rs 12,000 for both doses. Desperate to have some sense of normalcy back, Pakistan’s urban upper-middle class was ready to pay that amount of money for some relative safety. It is worth mentioning that while vaccine uptake has improved significantly now with the government making the vaccination process much more efficient, back in March, Pakistan’s vaccine uptake had been the slowest in the region by a long way. Just over 70,000 frontline medical workers had

been inoculated with the 500,000 doses of the Sinopharm vaccine that had arrived from China, and the vaccination registration for the at-risk group of those aged 65 and above was only just starting. It was in this environment that mostly young and mostly upper-class people were looking for ways to get vaccinated as soon as possible. Seeing this, a number of companies including AGP decided it would be worth getting into the business of importing and providing private vaccines. However, it was only AGP that ended up managing to import vaccines and sell them to the public. This permission granted by the government was conditional. Because the vaccines had never been sold privately before, the government had no idea how to cap the price, and told AGP they could import the vaccine and that the government would tell them the ceiling price later. This is where the trouble started, because the government seems to have been unaware of just how many middle-men and hoops AGP Limited was going through to get the Sputnik-V vaccine here, and that people were also more than willing to pay a lot of money to get their shots. On paper, in a country like Pakistan, it makes a lot of sense for there to be privately available vaccines. The government needs to make sure that people across class categories are getting vaccinated, and to do that, other

You would expect that AGP Limited would import the Russian Sputnik-V vaccine from, well, the Russians. Instead, they struck a deal with the private office of Sheikh Ahmed Dalmook Al Maktoum. The involvement of the UAE Royal Family in this entire affair has been strange and shrouded in mystery than awareness they are going to have to provide incentives as well. Private companies are already doing this, while the Sindh government is making it mandatory for everyone to get vaccinated. So if the government were to focus on segments other than the urban upper middle class and above getting vaccinated, those that could afford to pay for the vaccine would do that, especially since a lot of people would prefer to get vaccinated by the Russian Sputnik-V vaccine than the mostly Chinese vaccines otherwise available in Pakistan, because of the incorrect perception that the Chinese vaccines might not be as efficient or safe. Moreover, there is also some hesitancy amongst locals to get Astra Zeneca due to the reported clotting side effects. In a nutshell, the privileged lot in Pakistan decided to go vaccine shopping to pick out their preferred one. But at the same time, a balance needed to be struck to make sure that companies and individuals were not heedlessly profiteering.

The UAE connection

ou would expect that AGP Limited would import the Russian Sputnik-V vaccine from, well, the Russians. Instead, they struck a deal with the private office of Sheikh Ahmed Dalmook Al Maktoum. The agreement was signed on the 10th of March and documents obtained by Profit show that AGP was to import 1 million doses of Sputnik V at $45 per unit on cost and freight basis. This excludes taxes and duties which were to be borne by AGP. This makes the total price on cost and freight basis to be $45,000,000. The deal also stated that AGP could pay partially for 1 million vaccines and will receive their order within a specified time period. The reason AGP had to go to the Sheikh, according to them, was that the Russian developers of the vaccine had given the rights to sell and distribute Sputnik V in certain countries and territories, which included Pakistan. Now, it is important to note that AGP here is not dealing with the UAE or the Dubai government. They are being provided the vaccine by Sheikh Ahmed Dalmook Al Maktoum, the grandson of the late Sheikh Saeed bin Maktoum bin Hasher Al Maktoum, who was the longest reigning ruler of Dubai up until his death in 1958. Sheikh Al Maktoum, a nephew of the Emir of Dubai, currently runs and operates a portfolio of privately held group of companies that focus mainly on Infrastructure Development, Energy Projects, LNG Terminal Development, Commodity & Oil Trading, Water Desalination, Water Recirculation as well as Education and Agricultural Projects. He has wide interests in Africa, South America, and South Asia. The involvement of the UAE Royal Family in this entire affair has been strange and shrouded in mystery. The Sputnik-V vaccine was developed by the Gamaleya National Center of Epidemiology and Microbiology of the Ministry of Health of Russia. This was done through funding by the Russian Direct Investment Fund (RDIF). The RDIF is a sovereign wealth fund by the Russian Federation and has invested in the mass production of the vaccine by its portfolio companies in order to distribute it across the globe. “Human Vaccine” is a limited Liability

VACCINES

company that is under the umbrella of the Joint Stock Company “Management Company of RDIF”. Human Vaccine has authorized Aurugulf Health Investment, Abu Dhabi to sell and distribute the vaccine in several countries which include Pakistan. And it doesn’t end here. Aurugulf has then appointed the private office of His Highness Sheikh Ahmed Dalmook Al Maktoom of Dubai to develop, distribute, and market the vaccine in Pakistan. The private office has then appointed AGP to register, market, distribute and sell the vaccine in Pakistan. Naturally, this begs the question of why the Pakistani government made no attempt to procure directly from the Russians? In fact, even the recent announcement that the Pakistan Army is to procure Sputnik V also states that they are to get their vaccines from the UAE. The only thing that procuring vaccines through these elaborate connections of middlemen does is raise prices, causing unnecessary strain on developing countries. These middlemen too are doing little else other than trying to make a quick buck out of people’s desperation to get vaccinated. A source claims that the UAE royal family has invested in the development/ production of Sputnik V and therefore got distribution rights for it. In fact, in Pakistan’s case, the source has further alleged that the UAE royal family has made private equity investment in AGP. While this cannot be proven through the shareholding list, if true, it would mean that the private office of Sheikh Al Maktoum would first make a profit selling the vaccine to AGP, and then again when AGP sells the vaccine to people in Pakistan. However this does not mean that there is no chance of an investment. It can be made through an investment in a company that has further invested in AGP. When asked, AGP denied any knowledge of it. The reason such an investment (if any) needs to be disclosed is because it leads to the thought of transfer pricing. Transfer pricing would be likely in that scenario considering AGP already knew it would only be allowed 40% above the landed cost. However, it is also important to note that Aurugulf is an authorized vaccine distributor for various countries and is also a seller to the Pakistan Army. Therefore, the notion of transfer pricing is questionable. Moreover, the reason these distributors are charging $45 for the vaccine could probably be attributed to the fact that they are accounting for their costs. This could include the investment cost, if they have funded the research of the vaccine through RDIF, or the cost incurred to get distribution rights.

It was through this murky chain of confusing connections that AGP Limited finally managed to strike a deal, a couple of days after which the Pakistan government also approved the Sputnik-V vaccine for emergency use. The problem was the price. As per documents available with Profit, AGP was initially told that the price of the vaccine was to be $30 landed cost, which would be around Rs 5000. However, AGP claims that this was the price they were quoted back in January when Sputnik V had not been approved in many countries and it was not in high demand. But within the next few months it was registered in more than 50 countries, which meant that its price suddenly went up. And according to AGP, the landed cost of the vaccine ended up being $45, or Rs 6900. Now, despite this $45 landing price, AGP Limited announced that it was going to be charging $83.95 or PKR 13,600 for the vaccine. From the very outset the government indicated that the price was too high, so AGP Limited went ahead and revised their prices, dropping them down to Rs 12,226. This was

also met with disapproval from the government which wanted the vaccine to sell at Rs 8449, or $54.

The pricing war

ere is what we know up until now. Back in March, the government was only vaccinating people on a priority basis, but there was a significant enough demand from the upper middle class segment of society that AGP imported an initial 50000 doses of the Russian Sputnik-V vaccine from the private office of a UAE Prince. The doses arrived and people signed up for them, but the government and AGP disagreed on what these doses should be priced at. The first thing to happen was that Transparency International wrote to the prime minister stating that the vaccine was too expensive, and that it should be priced around $20. Now, it has already been established that the landing price of the vaccine in Pakistan was at least $45, so the estimate by

Transparency International was low, but once the figure of $20 was out there, it quickly entered the public’s imagination that AGP was selling the vaccine for 300 times the price it was in other countries. But even if the landed price in Pakistan was $45, the contention became that AGP was still selling the vaccine for too much. The government wanted to sell at Rs 8449, or $54. To this, AGP said that they would be unable to make any money. Regardless of whether it would be profitable for them or not, it is important to note that drug companies are allowed 40% margin on life saving drugs and $54 would mean a 20% margin for AGP. According to AGP Ltd., the vaccine is priced higher considering the supply chain and distribution constraints. While most vaccines have to be stored at 2-8 degrees Celsius, the Sputnik vaccine needs to be stored and transported at -18 degrees Celsius and that comes with a higher cost. The product is frozen and then is later converted for usage. An official from AGP said that the vaccine is specially packaged in dry ice which keeps it in required temperatures for 72 hours. There are also data loggers in the package that monitor the drug from the manufacturer to the destination. The official further explained that on top of the landed cost of the drug ($45

Today, after all this, the Sputnik-V vaccine is not available in Pakistan either privately or through government channels because a reasonable compromise on price has not been achieved. Despite this, the demand for private vaccination in Pakistan remains high or roughly Rs 6,900), there is a 40% margin build up on the drug that is distributed among the storage facilities, related taxes, logistics and distribution and the margin for the importer. On top of the 40%, 15% of the margin goes to healthcare facilities, like hospitals that administer the vaccine, whereas 6-7% is taken by the government in the form of taxes. Therefore, according to the company, the only way to make the vaccine commercially feasible is if it is priced at Rs 12,268. However, a simple calculation does show that $45 + a 40% margin is equal to $63. $63 after a 15% margin for hospitals is $72.45 or Rs 11,389.14, still higher than the MRP at which the vaccine is available for. While this is more than what the government wanted AGP to sell at, it is still significantly less than the $80 price at which AGP was selling. Some of these explanations have already been covered, including by Profit. But there are some details about this entire deal that have widely been ignored in the media. The company was to make a $1,125,000 payment into Sheikh Ahmed Bin Dalmook Al Maktoom’s bank account in the Commercial Bank of Dubai. The exchange rate as per the documents was 1 USD = 157.2 PKR. The vaccine was shipped from Abu Dhabi, UAE through Emirates Airline. DHL Global Forwarding was the logistics service provider. As per an invoice Profit was able to receive, the vaccines weighed 1800 kilos in weight and the transportation charges were 17,820 AED, or approximately Rs 750,000. The shipment was to be packed with dry ice and gel packs to maintain the required temperature of -18 degrees for transport. If we divide this by 25000 doses, the transport cost comes down to rs 30 per dose. [It is unclear whether the invoice is for total shipping of 50000, or partial of 25000.] This example alone shows you how the price of a vaccine or any commodity does not rise drastically due to logistics. Moreover, the company cites keeping the vaccine cool as a reason behind it being expensive. Sputnik V is one of the cheapest vaccines in the world not only because of its pricing but also due to the fact that it is easy to transport. -18 degrees is not a very low temperature. In fact, it is roughly the same as your domestic freezer, and probably the same

temperature at which ice cream cycles store their ice creams all day. The only reasonable explanation for all of this are the various middle men and the logistics behind it.

AGP goes to court and wins … kind of

t this point, the government had already allowed AGP to import 50,000 doses without setting a ceiling price. But when they heard the price at which AGP was planning to sell, they rescinded their exemption and said they would tell them how to price the vaccine. At this point, AGP decided to take the government to court. During the proceedings, the lawyer for AGP was on the offensive, first claiming that the government and DRAP were in cahoots to try and help a different company import the vaccine and sell it in Pakistan. The pharmaceutical company’s lawyers also threatened the court and the government by saying that if it was not allowed to sell the vaccine in Pakistan for this price, they would simply sell it to another country that was willing to buy it. The court was shocked at everything. They were shocked by the blatant attempts by AGP to profiteer off the vaccine and their willingness to waste vaccines or sell them to another country rather than budge on the price. They were shocked at the government for being so slow to set a maximum price and allowing AGP to import the vaccine and sign agreements before. Astonished by all of this, the court decided that vaccination must take priority and allowed AGP to sell at the Rs 12000 price for now, and said that a fair price could be determined later, and any monetary adjustment could then be returned and balanced. In a written answer, the government has said “It is astonishing that the private health sector in Pakistan rather than learning the lessons from their contemporaries in other countries seek predatory rates of inflated profits from the provision of life saving vaccines. The impugned Order by allowing the private sector to earn supernormal profits from miseries of the people, will damage the reputation of Pakistan internationally and in civil society.” So in a way, the AGP won the case, but

VACCINES

since there has been no decision about pricing, AGP has not imported any more doses of the Sputnik vaccine, meaning currently the only way people can get vaccinated is through the government. When a price will be determined is hard to say. But what is clear is that the government is well within its rights to do this, and setting a maximum price is also in both the letter and spirit of the law since this is currently a public health emergency. It is important to note that the government had mentioned the following when allowing AGP to import the vaccine: “fixation for MRP for COVID 19 vaccines is under process, thus DRAP shall be contacted before sale to the hospitals/ institutions for MRP of the vaccine.” As a result of this sentence and the fact that AGP did not challenge it or ask for amendments in it during correspondence, that there is no blanket exemption on the possibility of the vaccine price being regulated. As per the government, they never communicated or agreed with AGP that the price of the vaccine would not be regulated. Moreover, the government also claimed that AGPs attempt to sell the vaccine prior to fixation of the market price of the vaccine was a direct violation of the terms and conditions agreed upon in registration letters. Under Section 12 (1) of the 1976, the Federal Government is vested with the power to fix Maximum Retail Price (MRP) of a drug

through a notification in the official gazette. The government Formula for imported vaccines in finished form is trade price = landed cost + Markup @ 40% The formula for imported vaccines in bulk form and local repackaging is Trade price= landed cost + packaging cost + markup The Maximum retail price shall be calculated by grossing up trade price to provide retail discount @ 15%. The Government also feels that it is “against public policy to allow any private party to exploit and gain windfall profits from this unprecedented calamity facing mankind.” The reason why the government and AGP were confused about the pricing is because The wholesale price/ procurement price is not available for India, Bangladesh, Indonesia, Philippines, Sri Lanka, and Malaysia.” Same goes for UK, MIMS/BNF, Australia PBS, and New Zealand Pharmac. The trade price of this vaccine in Russia is also not available as its supply (free of cost) is under strict control of the Russian government. As a result, there is no real basis to make a fair comparison.

If the rich want to pay, why not let them pay?

putnik V was not imported for the rich. It was essentially imported for people that were willing to pay in order to skip waiting time. While the rich were

more likely to do so, the ability to skip lines and pay for it also caters to individuals with weak immunity, exposed because of their jobs but are not frontline workers, or suggested by their doctors to get vaccinated ASAP. There was ample demand for the vaccine despite the high price. This can also be seen by the fact that Sputnik V is out of stock and is no longer available for private vaccination. Moreover, just because the rich are paying does not mean one can or should be exploited. It is the government’s job to safeguard consumer rights especially in matters relating to life and death. While the government of Pakistan has taken the task to vaccinate everyone themselves, the existence of Private sector vaccination was good for those that wanted a specific vaccine and wanted to avoid wait times (which are no longer applicable for 30+). With mass vaccination for everyone 19+, the government has reduced the need for the private sector to step up. However, going forward there is a likelihood of citizens choosing to buy a certain vaccine if allowed. If that is to happen, the government has to do a better job at price determination and communication with the private sector. More importantly, it should look into procuring the vaccine itself and selling to the private sector rather than letting the private sector purchase at higher prices from middlemen. This is where the government needs to step up and deal with G2G. n

VACCINES

OPINION

Hamza Nizam Kazi

Are you an influencer? Here’s how to avoid being held hostage by advertisers and platforms The influencers have a lot of negotiating power, which means due diligence is key

This is particularly important in a country like Pakistan where TikTok got banned last year for a brief moment and then this year till the Honorable Courts granted relief and asked the Pakistan Telecommunication Authority (PTA) to let the Chinese app operate in Pakistan but make sure that “immoral content” is not uploaded

endorsements and apps like Bigo, and SnackVideo are now proactively trying to attract celebrities and influencers by paying them money to be active on their platform. Once these celebrities and influencers are there, the general public will follow and the money will follow them naturally. But there is a catch here. In the shiny offers that these apps make celebrities and influencers, there can be problems, especially if you are an up and coming influencer. Celebrities like actors and musicians usually have agents and experience with making endorsements and collecting pays. For young, self-made influencers, the field can be a little more tricky. The influencers and celebrities signing up for such apps and attracting viewership may be aware that there comes a time when such apps, especially the very new ones, tend to become boring and users tend to engage themselves in other things. Now, for the purpose of this article, we will define an influencer as someone that has the power to affect the purchasing decisions of others because of his or her authority, knowledge, position, or relationship with his or her audience, and also have a following in a distinct niche, with whom he or she actively engages. The size of the following depends on the size of his/her topic of the niche. With the advent of the term influencer, comes influencer marketing, which involves endorsements and product placement from influencers, people, and organizations who have a purported expert level of knowledge or social influence in their field. New social media platforms try to seize on early heat to get clout and marketing, but these apps are also likely to go bust very quickly. So influencers should ideally not tie themselves to a platform that could very rapidly go the way of Orkut, MySpace, and many more. So where should these celebrities and influencers start? Say a new platform has

oney attracts money, you’ve probably heard of that one. And it certainly seems to be the case as social media evolves. The pioneer on this front was YouTube, which made it possible for content creators to monetize their views, and once people got used to this kind of a platform that pays them for their success, newer social media applications caught on. TikTok has made it possible to make money through brand

Hamza Nizam Kazi is a corporate and technology lawyer having experience in the telecom industry and advising digital startups. He can be reached on hamza.n.kazi@gmail.com for advice on legal and regulatory issues pertaining to the telecom sector and electronic media. COMMENT

asked them to come on board and promote their app with their presence and content. The first thing these influencers need to make sure is that the contract’s terms and conditions they enter into are airtight. The influencers need to be aware that it is because of their publicity and fame that these platforms are attracting them, and that their content and presence is a major source of revenue when a new user joins them, so they have significant negotiating power. Thus, endorsements and advertisements the influencers get into need to be verified and should not be misleading the masses. The contract should entail and cover the functioning legal aspects of the influencer marketing arrangement, for example, responsibility, liability when things go wrong, insurance obligations, the brand's and influencer’s adherence to consumer protection legislation, and relevant regulators' guidelines, and if termination rights are granted and under what specific circumstances do those rights arise, who owns the intellectual property in the deliverables produced, morality and ethics provisions that refer to public-facing behavior obligations and any reputational issues and any terms that are part of a standard legal contract. One of the utmost importance after a contract is due diligence, which must be treated as sacred by the influencer. For an influencer or celebrity, it would entail doing every possible thing to be sure of the claimed authenticity, quality & safety of a product before endorsing it. Recently, the Federal

But there is a catch here. In the shiny offers that these apps make celebrities and influencers, there can be problems, especially if you are an up and coming influencer. Celebrities like actors and musicians usually have agents and experience with making endorsements and collecting pays. For young, self-made influencers, the field can be a little more tricky Trade Commission (“FTC”) of USA issued its updated guidance Disclosures 101 for Social Media Influencers whereby the influencers need to comply with laws and disclosures when endorsing any brand. These platforms are not just utilized by the marketing industry but manufacturers, consumers, brands have all become a part of the Influencer Industry. In this very dynamic industry, it is the influencers that are the key players, which is why they ought to keep in mind multiple aspects while deciding upon a brand that they desire to endorse or advertise. Influencers/celebrities need to be aware of data protection and ensure that these platforms that they are engaging with have proper data security features. Just recently Octoly leaked 12,000 influencers personal information which were publicly accessible in Amazon Web Services S3 cloud storage bucket, the data breach has serious implications for influencers

and brands alike. Further, another important step is to ensure and be updated on the latest applications that are trending and upcoming. With most of these new platforms all hailing from Chinese markets and being monitored one should be aware that any restrictions globally has a direct impact on these apps. This is particularly important in a country like Pakistan where TikTok got banned last year for a brief moment and then this year till the Honorable Courts granted relief and asked the Pakistan Telecommunication Authority (PTA) to let the Chinese app operate in Pakistan but make sure that "immoral content" is not uploaded. Overall the influencers and celebrities engaging with these apps need to make sure that being public figures and having a mass following do not engage or associate with any such apps that bring or defame their or country’s name.

COMMENT

By Meiryum Ali

rofit spends an inordinate time on company websites: it’s often the most useful resource out there in terms of gleaning information. We have seen all sorts of websites: the slick, the janky, the suspicious, the ostentatious. But perhaps the saddest website we have ever come across is PECO’s (Pakistan Engineering Company Ltd). Just a pixelated shot of a lone transformer with the heading ‘Coming Soon’ superimposed on top. We will be back soon, PECO repeats, in a feeble attempt to convince the reader.

Will it, though?

ECO’s rise and spectacular fall is worthy of a few seasons of Netflix crime shows. We don’t have Pakistani scriptwriters sending off their best work to the network giant yet, but we have the next best thing: detailed Profit stories. As we wrote in 2019: this is the story of a company you may never have heard of, but one that includes just about every ingredient of corporate drama that you can imagine.

SCANDAL

There are allegations of embezzlement, corruption, potential insider trading and what may well be a high-stakes battle for the control of a publicly listed company with a substantial shareholding of the government. Exactly how many dramas can one company have? Since 2019, the company has simply gotten worse. There is no update to the financial data we printed three years ago, because there have been no quarterly or annual reports since then. But there have been numerous legal headaches since then. Primarily, this is a tale in three parts. We’ll start with the latest sorry tale, and work our way backwards.

Part one: The suppliers revolt

n May 26, 2021 - just a few weeks ago - the company secretary wrote to the Pakistan Stock Exchange a somewhat alarming development: that five different suppliers had filed a winding up petition in the Lahore High Court. Essentially, the suppliers were saying that the company was not fit to exist anymore. Why? In the petition, the suppliers accused PECO of the following: that it was

being run and managed by people who had failed to maintain proper or ture accounts; that there was “fraud, misfeasance and malfeasance”; and that cheques issued by PECO to petitioners were dishonoured. Who are the accusers? That would be Ishtiaq Steel Industry, Inam Steel Re-rolling mills, Al Majeed Ibrahim Steel Industries, AKK Enterprises (all based in Lahore), and Anwar Traders, (based in Gujranwala). According to their version of events, last year, the petitioners made a bunch of purchase orders and supplied materials to PECO. The petitioners also created several sales tax invoices, specifying the amount paid. Most of these were required to be paid after three months of receipt php the saif medical. Yet despite multiple reminders, these were not paid. There is now an overdue bill of Rs150.5 million not paid by PECO. Of that Rs77.8 million is to be paid to Ishtiaq Steel, Rs17.9 million to Inam Steel, Rs14.9 million to Al-Majeed, Rs16.1 million to AKK Enterprises, and Rs23.7 million to Anwar Traders. On December 1, 2020, they issued a notice of demand to PECO to make a payment within 30 days. On December 14, PECO sent a letter that said that it could not clear its

debts because of the financial duress of the company. On January 14, the suppliers gave another notice, with a grace period of seven days to receive the payment. And again, PECO maintained that it cannot clear its debts because of the state of the financial duress of the company. In response, the suppliers said that since there is no reasonable change of PECO recommencing its business, and because it is unable to pay its debts, it has become insolvent, its financial condition has deteriorated beyond any reasonable chance of recovery, let alone conducting business at a profit in the near future. “It is also just and equitable that PECO would be wound up by the honourable court.” the petitioners said. They also wanted the Lahore High Court to appoint an official liquidator to take over the assets of the company, Oh, and to bolster their case, the suppliers said that only makes sense to wind up the company, considering that the Securities and Exchange Commission (SECP) is also investigating them. What investigation?

Part Two: The SECP investigates

ntirely separately, and yet perhaps more alarmingly, the SECP opened an investigation into PECO’s affairs in March 2021. According to the documents, there are two major reasons why the SECP did this. The first is straightforward enough, and to do with basic regulatory requirements: the company has not been holding annual meetings, or filing reports. For instance, the SECP noticed that no quarterly reports were filed for September 2018, December 2018, March 2019, September 2019, December 2010, or March 2020. Additionally, no annual general meeting has been held for the year ending June 2019. There were also allegations that employees have not been paid sala-

ries, and that tax returns have not been filed. The second reason is a little more ridiculous. In December 2018, Mairaj Anees Ariff was removed as CEO by the board in December 2018, while his term was set to expire (anyway) in March 2019. But it seems, Ariff did not let go of PECO. Not only did he continue to act like he is CEO, and MD, but apparently he illegally leased PECO - yes, leased - to one of his friends, Tahir Bashir Khan , without obtaining approval from the board of directors, or the Ministry of Industries and Production. Since June 2020, it has been Khan who has been running the show. There are separate allegations that Ariff was illegally operating bank accounts in the name of the company, and siphoning off funds intended for the company. In a meeting held with the SECP in December 2020, Abdul Majeed, the lawyer for Ariff, denied there were problems. Instead, he said that Ariff had every right to fire directors, a rather unusual claim, as generally it is the shareholders that have the right to appoint or replace the board of directors. Meanwhile, the five directors who had been fired had a different view. They told the SECP in a hearing on January 20, that the MD has usurped all powers, and that the premises had been leased out to Tahir Bahsir Khan. Additionally, they alleged that Tahir Khan was using his personal connections in the police and the National Accountability Bureau (NAB) to harass the directors. The SECP saw this situation as untenable, and has opened an investigation.

Part Three: Exactly who is Mairaj Ariff?

hich leads to the final drama: who is this Mairaj Ariff who has been allegedly harassing and firing directors, despite not being in charge anymore? The issue began in March 2016, which is when the government appointed a civil servant – Mairaj Anees Ariff – as the CEO of PECO. It proved to be a controversial move. Many private shareholders believed that Ariff was unqualified for the job, and was running the company into the ground. Meanwhile Ariff took this personally, and well that no one was handing him control. In October 2018, he wrote a letter to NAB alleging that three senior company officials – the CFO, the General Manager Audit, and General Manager Works – were acting as “front men” of the private sector shareholders (it is up for debate what that means). He then went on to fire the three officials and have them physically barred from entering PECO’s offices. The CFO, Mian Anwar Aziz, apparently was forced to falsify accounts, and was fired when he refused to comply. Separately, PECO’s accounts in United Bank were suspended after some company officials submitted documents to the bank requesting a suspension of these accounts. However, these were restored in 2019, after NAB intervened. Perhaps none of these problems would have even surfaced if the company had been doing well. PECO’s revenue has plummeted in the period between 2016 and 2019. Shareholders blamed Ariff, while Ariff blamed ‘meddling officials’. Either way, Mairaj Ariff was removed from his position in February 2019 through a unanimous vote of the board of directors. One would have thought that would have stopped the drama. But apparently not: instead Ariff himself can’t seem to stop ‘meddling’ with the company. n

SCANDAL

By Profit (This article is based on an episode of Profit’s video series “WTF with Amer Pasha” )

n 2017, Dr Sara Saeed and Dr Iffat Zaffar found themselves responsible for a small new company. Without a brand name, with only seven employees, Rs 300,000 in their bank account, and a Rs 1 million payroll to pay off soon, things were not ideal. Add to that the fact that they had been forced to found this new company because of the ugly looking split of their original startup, DoctHERs. “We created the company from scratch, but later had to demerge it because there was a conflict between the co-founders. When we demerged the company and got it under Sehat Kahani, we were working without any brand name, and almost no

WTF

resources. We did not know how the salaries would be paid, or where the money would come from,” says Dr Sara, explaining the difficult state of affairs after the split and helming the new brand, Sehat Kahani. Conflicts between co-founders are a reality and so is failure. But getting back up is also real and while Dr Sara was battered, she was not vanquished. She had her chin up, eyeing things that she wanted to do with the new company. The question, of course, is that if you couldn’t keep the first startup intact, how would you be able to get another one up from scratch and get it going would keep many entrepreneurs, let alone a female entrepreneur, from starting a new venture. But for Dr Sara, things were different. Where there was failure, there was also motivation to do better. And that is the story we are here to tell. About how to survive after falling.

Sehat Kahani is an online platform that connects patients with doctors in a virtual setting, through an online application and clinics. The platform claims to have 5,000 doctors on the platform that help the female doctors sitting at home, called doctor brides, to rejoin the profession that they left because their career journey took a turn when they got married. These female doctors check patients online via the Sehat Kahani platform that charges a fee for consultations. The startup has recently raised $1 million in pre-Series A round.

Building Sehat Kahani

“T

he first startup was made with a lot of love. The second startup I made with a lot of brains,” says Dr Sara. Sehat Kahani’s journey is one where when it started, Dr Sara

What we did not know was how to tell people about the decision we took of separating, why it was important and how we would gain that trust and how we would keep working with them. We went out to talk to people, explained the situation, managed to keep the partners working with us, managed to convince people to keep giving us money and eventually managed to raise money Dr Sara Saeed Khurram, founder Sehat Kahani

never let even a hint come into her mind that it could not be done again. Simply because if it could be done once, it could be done again as well, though some initial hardships. While the certainty about “we would do it” was there, what was also there was the confusion over how to answer for the earlier fiasco, convincing people that included corporate clients that it would work again. It could take a lot of toll on someone, if you are alone but Dr Sara was not alone. While there was a fallout with a cofounder earlier, the new startup had a cofounder that had the same vision and drive as Dr Sara, and who Dr Sara says stood by her all along and that proved to be really valuable for her journey to build Sehat Kahani. “What we did not know was how to tell people about the decision we took of separating, why it was important and how we would gain that trust and how we would keep working with them. We went out to talk to people, explained the situation, managed to keep the partners working with us, managed to convince people to keep giving us money and eventually managed to raise money,” explains Dr Sara. As the Sehat Kahani CEO, Dr Sara, explains to us, the key had been to keep looking forward, boosting things actually, and never looking back, except for under one circumstance: when there was some problem again that would have to be dealt with. “We compare every challenge that we face now with that situation. If some employees leave or if some corporations are not working with us, if there are times when we have no money, we simply look back at the situation we were in before when we started Sehat Kahani and we then say that we can manage this situation as well,” says Dr Sara gleefully.

The messy bits

hen things were rough back in 2017, the year Sehat Kahani was formed, it was all ruckus that had to be quelled and new

plans were to be made. The plans were pretty straight forward: the company needed some funds, it needed a name, some employees that would stick with the company and some clients that would stick for time long enough that they get enough work to keep a steady revenue coming in. The cofounder did exactly that: they found the team and some partners that would stick with them for a few months and also found some money to keep operations running. Except that the startup now was not going to be run like a startup. Instead, it was going to have run of things like there are in large corporations. From policies to procedures, operations, everything was well sorted and well managed. “But the questions we kept facing were how would we make the application for the platform. When we were raising money, people asked how we would be able to raise money, it is a big amount. When we made the corporate app, people said who would buy your corporate application,” says Dr Sara. None of that, however, kept Sara and Iffat from deterring from their path, and in fact reinforced their determination to get things done because people were questioning how would these be done. “We wouldn’t say anything to the naysayers, but we would get ourselves onto getting things done in any way possible and it all began with loving the work we did, the business that we were developing. How we believed in what we were doing and kept motivating other people as well,” says Sara. “When someone said that this could not happen, that is when we said that we need to do this. We need to show it to them that we will do it, we will build the applications and we will raise funds and we will make it happen. These clinics will provide healthcare to communities and we would have teleconsultations,” she adds. It all adds up to the fact that Sehat Kahani took the challenge seriously and worked really hard to make it work and as it appears, it seems

to have worked. “Behind every challenge that we took, if we had to make an application, we said that if we could not make the application, who in Pakistan would make the best application for us. And we did a three month rackee of companies in Pakistan and that took a lot of effort,” she says. “When we finally found the company that made telemedicine apps, they told us that they won’t work with us because they don’t work with Pakistani companies. But we had to get it done and we sat in the office of the company CEO and got his attention towards the impact the Sehat Kahani would create on the life and health of people in low-income communities. The CEO believed in what we were planning to do. He was convinced of the fact that it would help communities and he eventually said yes to making the application for us,” says Sara. From just having clinics that were not making money, Sehat Kahani went on to add preventive care portfolio and started making money from that. It was followed later on by a mobile application, an application for corporations that started generating money.

The investments

ailure comes in many forms and one form that it came in for Dr Sara and Sehat Kahani was rejection from investors for putting funds into the company. The company was new and unsettled and if it had to be kept from becoming another failure, it had to raise funds from investors, which was more difficult because the company was new and unsettled and convincing investors was going to be tough. In the words of Dr Sara, that rejection came from as many as 50-60 investors, with periods of disturbing lows for the co-founders and the failing desire to even raise funds, only to get back up again to write to the investors why they chose to not invest in the company. Failure is an option, only if one is willing

to learn from it. And that is what Dr Sara did. “One thing that we do is we never end the conversation with investors. We have failed to raise money from investors multiple times but that does not mean that if the investor did not give us his money, he is bad or we should shun them. We would actually ask the investor about what we did wrong. We always ask this question,” says Sara. That has led to Sehat Kahani doing multiple iterations of the pitch deck, rebuilding financial models that attract investors and working on the pitch each time the investor shows disinterest. And while that has been cumbersome, Dr Sara has not been unwilling to

learn the best way to do things when it comes to her business and that has paid off. Sehat Kahani received a $1 million in pre-Series A round in March this year. “You need to know your investor well and iterate your pitch according to that. So we learnt that with time. We had great people who did not put in the money but taught us because we asked,” she says. “In another instance, when we were fundraising, we had almost closed an investment that was huge and we got a call and the investor said no. At that time, we could not process the news and we just went into a shock. The problem was not that he had not

Life of a female entrepreneur in Pakistan means struggle and more struggle By Profit

female’s entrepreneurship lifecycle in Pakistan is struggle and more struggle. If numbers are to be considered, only 3% of female entrepreneurs in Pakistan get funded for their startups. That number is appalling not because the investors are shy of investing in female led startups. It is appalling because there are not enough women entrepreneurs in Pakistan to invest in. And most of that has to do with pains that come with being a female entrepreneur in Pakistan. Take Dr Sara Saeed for instance. The CEO of telehealth platform Sehat Kahani went through the med school to become a doctor, only to get married and see the dream of becoming a practising doctor crumbling down under the weight of family responsibilities. Again if numbers are to be considered, 60% of Pakistan’s doctors are female and according to Dr Sara, 1 out of 4 female doctors does get married and does not practice medicine for the rest of her life, massively burdening the entire healthcare system as a consequence. In a country of 200 million people, there are an estimated 90,000 doctors only, according to Dr Sara. Dr Sara is one of those rare ones in the female folk who decided to take the challenge of not quietly becoming a doctor bride and became an entrepreneur instead to actually help provide work to doctor brides at their homes. And it is this journey of Sara Saeed as entrepreneur that highlights the pains associated with becoming a female entrepreneur in Pakistan. “When I realised that I had become a doctor bride, that pushed me into depression and that stayed for a few months. This pained

me a lot,” says Dr Sara, talking about the initial days of her venture. Like the traditional families in Pakistan are, a female doctor sitting at home is understandable but an entrepreneur is not. And being traditional, female entrepreneurship is something new to them as well and Dr Sara’s venture was newer. In her words, her family initially did not understand what she wanted to do. They made her a clinician that was now running after a fancy idea of leveraging technology to connect at-home female doctors with patients in far flung communities. And while there are some who encourage, mostly there are detractors, more so if one is a female entrepreneur. But family, being family, eventually supports. “There is hard work initially which means a tough calendar and travelling and working in different settings. It is not easy when you have a family and a child to look after as well. But that needs to be managed along with work and my parents and family eventually started supporting me,” says Sara. In 2016, Sara got an award from UNICEF for being a global campaigner, which was a huge thing for the then 27-year-old entrepreneur. The problem, however, was travelling to America to get that award. Normally, for any male entrepreneur, it wouldn’t be a problem to travel to another country to get an award that simply adds to social prestige. But for females like Dr Sara, it was a back-breaking trip to the United States to attend the award ceremony and taking flight immediately back to Pakistan in only 72 hours, all to comfort her family. “If you follow a female founder’s journey and if you follow a male founder’s journey, you will find some key differences. When a female

invested but that we had to start all over again. That was something coming to our mind. But we could not stop there with that thought. Next day, we decided to reach out to all the investors that we did not reach out to earlier because we thought that we had the investment. And we literally started the next day. We also found strategies that could keep us going,” says the Sehat Kahani CEO. “Another thing that we are good at is damage control. We also don’t sit by doing nothing. If we have decided to do something, we would do it even if it leads to failure. But we won’t waste our time thinking if we should do it or not,” says Dr Sara. n founder starts her journey, she faces more challenges. There are more resentments from people around her, there are more questions. She needs to prove herself. She needs to find a concept to work, she needs to rent a place that requires money,” says Dr Sara. “Women are generally not told how to take care of their finances or they are not trusted with their finances. It is difficult for women in Pakistan to raise that initial funding. In that journey, a lot of women give up because when they are being questioned at their work, when they have limited funds to pull their business, when they are being questioned at their home about their inability to look after their child, or look after their house, I think it becomes difficult for some women at times. And that is when they give up. I think that is why early stage funding is critical and the mentorship that goes to spend them wisely,” she adds. It is also because since female entrepreneurs are not able to get that initial amount of funding, they are not able to gain traction to raise a mature financing round. They don’t reach that stage and because all of that does not happen, this startup eventually busts and there you have another female entrepreneur that is now discouraged from starting a new venture. “Me and my other co-founder have been big propagators of female employment and female empowerment. Female employment might not really be empowerment. Even if women are employed, they might not be making decisions. They would be working but they would not be autonomous in making decisions. One thing that we teach here to women is to make decisions, learn to stand by them, learn to defend them and seek opportunities to grow,” she adds. That also comes with businesswomen not saying yes boldly to things that they fear they might fail in. According to Sara, transcending those barriers is important and that is what makes her venture successful. In her words, Sehat Kahani would not say ‘no’ to trying new things. If it is difficult, it would take risks and try to build what’s not there for clients. But it would not say no to risks. n

WTF