World Bank proposes $50m fund of funds for Pakistan startups

The World Bank has proposed a $50 million financing package to set up a Pakistan Fund of Funds, a vehicle that would place public money in professionally managed venture capital funds in an effort to pull private investors into the country's thin startup financing market.

The money would come from the International Bank for Reconstruction and Development (IBRD) and covers the entire estimated project cost, leaving no financing gap, according to the initial project information document reported by TechJuice. The scheme is titled the Pakistan Entrepreneurship and Private Investment Catalyst Project and would be implemented by Ignite, which operates under the Ministry of Information Technology and Telecommunication.

A review is expected on January 20, 2027, and the project is scheduled for approval consideration on March 24, 2027.

Rather than financing individual companies, the fund of funds would invest public capital in venture capital funds run by professional managers, using state money as an anchor investment meant to draw in additional private capital.

The document sets out the scale of the shortfall: venture capital investment per capita in Pakistan is less than one-tenth of the levels recorded in Egypt, Indonesia and Vietnam. Access to patient equity capital and to professionally managed funds remains limited, it says, leaving many startups and high-growth businesses without risk capital.

The operation has two components: the capitalisation and investment of the Pakistan Fund of Funds, and the project management arrangements needed to establish, operationalise and oversee it. The design draws on international experience, including the Innovative Startups and SMEs Fund in Jordan.

The World Bank expects the initiative to support business expansion, productivity, innovation and job creation. It comes as Islamabad places digital transformation, artificial intelligence and innovation-led growth at the centre of its economic agenda; the document cites a commitment to invest $1 billion in the national AI ecosystem by 2030.

It also flags obstacles. The bank identified limited institutional capacity in the domestic venture capital industry and weak environmental and social risk management among local fund managers as challenges to implementation. Past startup investment in Pakistan has clustered in fintech, e-commerce, health technology, education technology and logistics technology.

While those sectors have a limited direct environmental footprint, the document points to risks around consumer protection, data privacy, gig-economy labour conditions and unequal access to digital services. The project must also address gender disparities in access to finance, digital services and entrepreneurship, and workplace harassment and exploitation in portfolio companies.

The World Bank has classified the environmental and social risks of the project as moderate and said appropriate safeguards will be required as the fund's portfolio develops.