Pathao And Financial Services

On October 30th, 2018, BRAC Bank and Pathao signed an agreement, the first collaborative rider financing in the country, to finance motorbikes for Pathao riders. Pathao has been working on bike financing for a while now in different forms. Previous financing initiatives were more on the side of improving bike liquidity. This time it looks more like a financing service. This could be considered as the second stage of Pathao’s attempt at building financial services.

• Previously, Pathao has worked with Hero to finance bike for drivers at 15% downpayment and twelve months installment. Part of the goal for Pathao to get into bike financing in partnership with relevant entities is to improve the liquidity of bikes by enabling more people to buy bikes and join its fleet. It is a worthy goal because there is a supply gap in the market. At the same time, it also allows Pathao to control over liquidity by having a stronger relationship with its drivers.

With its partnership with BRAC Bank, Pathao is helping its bikers to get finance for buying motorbikes. From the press release sent after the agreement:

“BRAC Bank Limited and Pathao Limited signed an agreement to finance motorbikes for riders. This is the first collaborative rider financing in the country involving a bank and a ride-sharing company. Under the agreement, BRAC Bank will provide loans to Pathao riders. The easy access to financing will help Pathao increase its pool of bikers and provide more convenience to the commuters. The collaborative financing will also help generate employment, especially among Bangladesh's youth.”

• ‘Under the agreement, BRAC Bank will provide loans to Pathao riders’, this is the important line. Pathao considers its drivers as entrepreneurs who are doing something of their own and earning. From Pathao, at least rhetorically, perspective, through this partnership it is going to help more entrepreneurs. And it is helping BRAC Bank to find those entrepreneurs who would use their fund and grow.
• In this deal Pathao has the entrepreneurs and data about these entrepreneurs, about their earning and potential earning, that could help BRAC Bank to efficiently disburse the loan.
• What we are talking about is essentially equivalent to credit scoring. Since Pathao gets to know the earning of its drivers it is entirely feasible for Pathao to build credit scoring for them and then use that to develop financial services over the time.
• If that is the case and it works, Pathao could apply the same model for restaurant owners and dramatically expand the service.

This is not something unique to Pathao. Companies with a similar operational model have been doing it for many years. For example, Amazon. The question for Pathao, however, would be when it begins to move away from promo codes and start making money out of its ride business, would it still make sense for bikers to ride for Pathao and what are the corrections going to take place once that happens. For now, this is an intriguing development.