Kiryana Stores” or micro-retailers are the lifeblood of local communities, bridging the divide between consumers and both local and international Fast Moving Consumer Goods (FMCG) giants such as Unilever, P&G, and National Foods. These Kiryana stores are 1 million in number and are spread all over the country. As a result, their impact on employment generation and economic activity is quite significant. Therefore, it is not surprising that the country’s wholesale and retail trade sector has experienced significant growth in the past decade. The share of wholesale and retail trade in GDP has consistently averaged around 17.5% during this period. Sales in the retail sector of Pakistan have nearly doubled over the last 10 years, reaching PKR 14 trillion in food sales and approximately PKR 6 trillion in non-food sales.

Supporting these micro-retailers are thousands of FMCG distributors, also spread throughout the country, serving as vital intermediaries between manufacturers and retailers. These distributors play a pivotal role in ensuring the seamless distribution of FMCG products to micro-retailers, enabling them to cater to the diverse demands of consumers across the country.

However, while the upstream segment of the retail value chain, encompassing FMCG manufacturers and distributors, has undergone a digital revolution through digital ordering and use of ERP systems, the downstream segment, where micro-retailers thrive, is lagging. One of the primary hurdles faced by micro-retailers pertains to accessing formal financing, mainly due to their presence in the informal sector and limited credit history
To unlock the potential of these micro-retailers and nurture their expansion, it is imperative to digitize the entire retail value chain. By embracing cutting-edge technologies and harnessing the immense power of data, a remarkable opportunity emerges to facilitate tailor-made digital lending solutions explicitly designed for micro-retailers.

Harnessing the potential of digital ordering systems between distributors and micro-retailers unlocks a treasure trove of valuable data. These advanced systems capture transaction histories, inventory levels, and customer preferences, establishing a strong foundation for digital lenders to evaluate the creditworthiness of micro-retailers. Data oriented financial institutions – digital lenders, including digital Non-Banking Financial Companies (NBFCs), emerging digital banks and innovative conventional lenders can make well-informed lending decisions and seamlessly onboard micro-retailers.

Parwaaz, a wholly owned subsidiary of Karandaaz, is a NBFC solely focused on lending to SMEs. With a eye on collaboration and leveraging existing digital infrastructure, Parwaaz seeks to forge strategic partnerships with key players in the retail ecosystem. Distributors, tech platforms, and pioneers of digitization like Haball and VizPro are good examples of potential partners in this transformative journey.

In this era of technological advancements, the convergence of digital solutions and retail opens exciting avenues for micro-retailers. With mobile connectivity and smartphone adoption surging in Pakistan, the stage is set for their digital transformation. As micro-retailers embrace digital platforms for ordering, payments, and inventory management, a world of previously inaccessible tools and resources becomes available. This digital revolution also increases financial inclusion, allowing micro-retailers to access formal credit and services, levelling the playing field while driving expansion, investment and sustainable economic growth.

This article was first published in the Business Recorder supplement on 26^th June 2023.