The sharing economy has helped millions of people worldwide with new income opportunities, especially in low to medium-HDI (Human Development Index) countries, where resources are not easily accessible and affordable to everyone.

It has become clear that these technologies also exponentially accelerate the rate of digital exclusion for unskilled, illiterate, and bottom-income earners.

Rise of sharing economy in Pakistan

Pakistan has fully embraced the route of the sharing economy, with a population of 220 million and a GDP per capita (US$1555) lower than India and Bangladesh. The country also faces the issue of unemployment of about 4.34 per cent, for which 64 per cent are younger than 30 years, and 92 million are illiterate. So, people who can’t find employment now have the opportunity of a flexible and honourable way of earning any additional income.

According to the research made by the NTU Business School. The ride-sharing economy in Pakistan has enabled more women to travel by themselves, as it is frowned upon, unsafe or unusual for them to do on their own.

Apps like Careem, InDriver, and Bykea are now the most prominent players in the ride-sharing economy, and they have set up the ground for catalysing social inclusion and mobility among many disadvantaged or excluded pockets of the population.

But on the other hand, 92 million people in Pakistan can’t read or write. And have difficulties interacting with the apps as they can’t type in English or Urdu.

I met with Muneeb Maayr, Founder of Bykea which is a homegrown ride-sharing startup. He mentioned how Bykea cares about building features and tackling use cases that the global competitors will not.

For example, the app is available in Urdu and enables voice notes and cues on pick-up locations to facilitate a smoother interaction between drivers and customers. Making the app more inclusive to a bigger user base.

Bykea only operates in Lahore, Karachi, and Islamabad, but only 37.2 per cent of the population lives in Urban areas. Pakistan has a low HDI of 0.544, making it very challenging for growing tech startups and having positive unit economics, as a high percentage of the population in low HDI countries remains unbanked and illiterate.

Also Read: How the app sharing economy is keeping up with the current trends

However, Bykea unit economics remain positive when subtracting the driver’s incentives/bonuses plus marketing from their total revenue. Yet, they expect to build enhanced product features to increase organic revenue growth. But to build killer features, they will require a deeper understanding of their user base and a more intuitive and easier-to-use interface.

Now, considering the current risk-off environment in capital markets. VC’s investments are fleeing to more conservative allocations for which only startups with solid and positive unit economics will get funded for further rounds. Frontier markets would be highly affected in this environment as less high-level talent will be retained, yielding a lower rate of innovation and experimentation.

Yet, while caution is widespread, some bold investors see opportunities in tech, green businesses, and impact funding. A January report from Silicon Valley Bank found that 79 per cent of family offices were making venture capital investments with impact or ESG strategies in place.

Rich individuals now see potential in impact investments. For example, Wall Street investment company KKR has raised a second global impact fund totalling US$1.3 billion.

Final thoughts

There is an open opportunity for startups to integrate ESG into their business strategy from the beginning before even achieving product market fit. And thinking about what KPIs around impact and social development could be extracted from their user bases will be incredibly important for startups in frontier markets, as survival in the current market will require a more comprehensive story of social inclusion, ways of getting there, and real metrics and proving it.

In conclusion, should the ride-sharing apps and newcomers in frontier markets position themselves primarily as ESG-focused organisation?

The work of tech startups, especially in these markets, requires much development on the infrastructural and educational side. A holistic approach is a must if these startups are to survive in the long term.

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