Man and woman with large check

Unlocking Innovation in Pakistan’s Private Sector .

In Pakistan, promising small and medium-sized enterprises are turning their innovative ideas into reality — and improving livelihoods — with a boost from a special grant fund.

In isolated areas of Pakistan, women face a variety of challenges to improving their health and livelihoods. Habiba, a mother of four daughters, treks the mountains of Mansehra to visit the nearest doctor, 10 miles away; she’s in her second trimester of pregnancy. Many young people lack access to quality secondary education due to their gender, geography, or income. Female artisans, dominating a handicraft industry that touches 15 percent of the total population, are unable to receive their fair share of revenue due to exploitation by middlemen and illiteracy in information and communication technology (ICT).

Across this nation, populations require services absent in their region: services that small and medium enterprises (SMEs) could provide if they were not facing a lack of resources themselves.

In Pakistan, SMEs represent 98 percent of the 3.2 million businesses. However, most of these SMEs function in the undocumented informal sector. As in other countries, these SMEs face tremendous operational constraints. This includes legal, regulatory, and policy barriers; limited access to financing; low competitiveness; outdated technology; and restricted access to markets — which limit incentives or means to growth.

In Pakistan, SMEs represent 98 percent of the 3.2 million businesses. However, most of these SMEs function in the undocumented informal sector.

A Challenge Fund to Catalyze Growth

In response, USAID is supporting Pakistanis in their efforts to resolve these problems indirectly through the Pakistan Small and Medium Enterprise Activity (SMEA), implemented by Chemonics. This activity provides targeted assistance to 6,000 SMEs, including 600 women-led enterprises, through an array of customized, demand-driven services that improve their competitiveness and unlock their growth potential. During its five-year implementation period, SMEA’s efforts are expected to yield thousands of new jobs and significant increases in revenues and exports among the SMEs in six targeted sectors.

A $7.5 million Pakistan Challenge Fund forms the centerpiece of SMEA’s assistance. The fund provides entrepreneurial mentorship and performance-based grants to SMEs to support development and marketing of new technologies.

The Challenge Fund includes a biannual, two-tiered Innovation Grant program. Awardees initially receive $20,000 to $50,000 to further develop and pilot their ideas. The project may then award a second opportunity (worth up to $400,000) — called the Scale-Up Grant — to SMEs that have demonstrated the ability to design, launch, market, and scale their products. The Challenge Fund also has twice-yearly SME Growth Grants, which provide additional funding to SMEs with the most growth potential in targeted sectors to increase their competitiveness.

What makes the Challenge Fund different from other kinds of funds is that grant awards are tied to activity performance, not paid in full up front. Grantees, along with the donors, agree to a list of achievements, or “milestones,” throughout the design and implementation of the grantee’s solution. After finishing and verifying a specific milestone, a tranche payment is made to the grantee.

Female entrepreneur at training event
Female entrepreneurs from Punjab participate in a SMEA training on business growth and marketing in Lahore. Such trainings are part of SMEA’s strategy to improve the operational and financial performance of women-led and owned businesses across Pakistan. (Photo credit: SMEA; September 2018)

Star of the Show: Challenge Fund Gets a TV Boost

Ambitious in concept, the Challenge Fund had to overcome some difficulties in its design and implementation phases, according to SMEA Chief of Party Farrukh Khan.

“Being the first SME development initiative of its kind in Pakistan, the Challenge Fund struggled with name recognition in its first year,” Khan said. “As a new program, there was speculation from participants as to whether the grants would actually come through.”

As part of its strategy to increase the Challenge Fund’s name recognition and better promote its opportunities, SMEA partnered in September 2018 with Idea Croron Ka (ICK), Pakistan’s technology start-up reality TV show, similar to the American TV show Shark Tank. ICK provided Challenge Fund applicants the chance to pitch their innovative business solutions to a panel of judges, which included a leading venture capitalist, USAID’s director for Punjab, and SMEA’s chief of party.

“Since then, a few grant participants have appeared on [ICK] … boosting the program’s publicity,” Khan said. “As a result, the program has received hundreds of applications and to date has given out 45 Innovation and Growth Grants and three Scale-Up Grants.” SMEA has continued its partnership with ICK in 2019. Eight grantees have been featured on the show so far, including three women-owned enterprises.

SMEA conducted a detailed analysis of all the targeted sectors before the distribution of the Challenge Fund, in addition to properly understanding growth opportunities and realities. However, the success cultivated in the program must also be attributed to the drive and ingenuity of the awardees.

Sehat Kahani is creating this all-female provider network that connects these home-based doctors to patients in underserved areas where health is still a dream.

Sara Saeed Khurram, Founder and CEO

SMEs: Meeting Community Needs

As a result of SMEA and the Challenge Fund, multiple SMEs have made progress toward increased employment, improved skills, and more prosperous communities. Whether it’s expecting mothers like Habiba, who lack access to trained doctors, children without the resources for supplementary secondary education, or female artisans in need of tools to access markets, communities benefit from SMEs that have prospered through Challenge Fund assistance.

Community Innovation Hub Pvt. Ltd – Sehat Kahani, a women-led, tele-health hub-based enterprise, used its SME Growth Grant to upgrade its technology platforms and develop a comprehensive “clinical module.” This allowed the group to cater to the essential needs of doctors, frontline health workers, and patients. As a result of these and other innovative changes, Habiba, who was walking 10 miles to treat abdominal pains during her second trimester, can now visit the local e-health center and connect with an online doctor for her concerns. Furthermore, “doctor brides,” female physicians whose families often request that they leave their careers midway to marry and have children, can practice tele-medicine from their hometowns, supporting female patients in marginalized areas.

“Sehat Kahani is creating this all-female provider network that connects these home-based doctors to patients in underserved areas where health is still a dream,” said Sara Saeed Khurram, co-founder and CEO. “It’s a difficult phenomenon to convince [patients] that the doctor is not physically present, but that the doctor is somewhere online, sitting in a room doing a consultation,” Khurram continued. But “that’s the beauty of the internet, that’s the beauty of connectivity, and that’s the beauty of virtual healthcare.”

EDKASA Pvt. Ltd. is a woman-led, ICT-driven educational tutorial services business that provides tutorial classes through a virtual learning platform. The company used a Growth Grant to scale its operations to 11 cities across Pakistan, serving over 500 paid customers. Through the grant, EDKASA created 30 new jobs, the majority of which are filled by female staff who facilitate girls’ education in centers across the country.

“Working with the SMEA Challenge Fund … has steered EDKASA to methodically achieving its business goals for the near future,” said Annum Sadiq, educator and co-founder of EDKASA.

Vceela Pvt. Ltd. is a SME focused on connecting artisans from smaller cities and villages directly to the market through an ICT-led e-commerce platform. Vceela used its Innovation Grant to develop a mobile application with an online payment system, allowing artisans, particularly women, to market and sell their crafts directly without unreliable middlemen. Furthermore, artisans can see their daily sales and payment details. As a result, 350 of the 800 participating artisans, working variable hours with Vceela, have transitioned into full-time employment positions.

“It has been a great learning experience. We had divided the country into 22 craft clusters and with the support of USAID SMEA, we have covered seven clusters during five months of project implementation,” said Akeel Khalid, CEO of Vceela.

Vceela-registered female artisan
Fouzia Bano, a female artisan from Gilgit Baltistan, participates in a training organized by SMEA grantee Vceela. Vceela has developed a village-to-world marketing model that allows artisans from smaller cities and villages in Pakistan to connect directly with global markets. (Photo credit: Vceela; March 2019)

The Way Forward

Since 2016, SMEA has provided SMEs with access to funds in a lower-risk environment while promoting lower-risk innovation. The activity has engaged Pakistan’s private sector and leveraged the sector’s resources by directly matching investment one to one.

No matter the path ahead, it is clear that engaging with the private sector through investment in promising SMEs can lead to a stronger Pakistan in which healthcare is not a dream, artisans earn a fair income based on their skills and not their gender, and more educated youth lead the next generation of innovation and entrepreneurial growth.

Banner Photo: Team members from Lahore New Media Labs, a SMEA grantee, pose with their grant award following their business pitch to a panel of investors during the recording of Idea Croron Ka(ICK), Pakistan’s first business reality show. (Photo credit: ICK NEO TV; December 2018)