A recent report “Pakistan Entrepreneurship Ecosystem Report 2021” by venture capital and insights firm Invest2Innovate (i2i) says, 2021 was an exceptional year for Pakistan’s startups who raised $352 million, compared to the $563.5 million in 2015.
A major contributory factor is the conducive environment that the government provided, with emphasis on the increasing reliance on fin-tech and innovation. The report says the dominant majority of the startup deals (60 of the 81 total) in 2021 were early-stage investments. As of now, the total market capitalization for all Pakistani startups presently lies between $1.5 – and $2 billion. This may rise to increase to $6 billion over the next five years and potentially to $30 billion by 2031.
Electronic Money Institution (EMI) regulations by the State Bank of Pakistan (SBP) and the Digital Banking Policy 2022 appear to be the primary drivers behind the growth. Additionally, Digital Pakistan Policy, National eCommerce Policy, GEM Board listing, and the Special Technology Zones (STZAs) are also seen as measures that have bolstered the start-up ecosystem.
The report points out that several regulatory bottlenecks persist, with taxation being a particular concern for startups. Taxation on capital gains in the case of exits, for example, is one area where clarity is needed, experts say. Repatriation of profits also discomforts old and potential new investors. Another issue is the big disconnect between the startups and the universities most of which don’t prepare or equip students adequately to launch a business. Despite the procedural and administrative challenges, the start-ups continue to rise, underscoring the vast potential that Pakistan’s big market offers. Continued growth and acceleration, according to fin-tech experts, require the government to ensure a seamless working environment for all start-ups as well as small and big businesses
