June 7, 2021Bangladesh
Fintech ecosystem in Bangladesh
Bangladesh has been one of the surprises in terms of economic growth despite the great political instability, corruption, natural disasters, famine and poverty experienced until a few years ago. At the beginning of 2020, a growth rate of around 8% was seen thanks to an economic boom accompanied by improvements in education and public health. However, there are still several points for improvement.
One of these is the banking sector, which, according to the editor of the Bengali Service, supports almost US $ 11,000 million in bad loans that will never be paid off. Moreover, lacking the resources, banks cannot give credits to those who need them: small and medium industry. At the same time, the government requires loans for its ambitious projects and is heavily in debt (BBC, 2020)
Fintech in Bangladesh
The Fintech ecosystem in Bangladesh is constantly improving since there are approximately 113 Fintech startups as of 2021. Even though Bangladesh ranks 61th in the Fintech World Ranking (Findexable, 2020), It is slowly becoming the rising Fintech star in Asia (Tracxn, 2021). The current startup ecosystem in Bangladesh is valued at $1.45 billion and has the potential to reach a $10 billion valuation. All FinTech processes $4 billion in monthly transactions (Gomedici, 2021).
Moreover, According to Bangladesh Bank, the average daily mobile financial services (MFS) transactions increased by 7% in the third quarter of FY 2019-20 from its previous quarter. So far, the MFS platforms have gained the most popularity. However, one of the obstacles for a faster growing of the sector is the fact that there is a lack of interoperability in Bangladesh (Light Castle, 2021).
Government also plays an important role in the development of the sector. Recently, the Digital Financial Services (DFS) Lab, a joint initiative by Bangladesh Bank and a2i has been developed. This helps to create more costumed products and services to assist rural e-commerce and increase financial literacy. Furthermore, during the pandemic, Fintech help business to pay salaries of readymade garments workers along with disbursing stimulus packages and safety net funds to remote areas (Light Castle, 2021). It is observed dedicated collaboration from the country in order to create a startup- and VC-friendly ecosystem.
In terms of financial inclusion, it increased from 16% in 2011 to 37% in 2018. However, it stills remains as one of the economies with the largest unbanked population. Another problem of the industry is that most SMEs are not unified under a formal financial system (Gomedici, 2021)The most popular segment is the one of payments followed by Lending and personal finance. Some of the most popular lending Fintech are iFarmer, an online crowdfunding platform for the farming community, and Danna Fintech.
Overall, the FinTech industry in Bangladesh enjoys an unsaturated market with opportunities for cutting-edge and innovative financial services. This can also help many SMEs to access financing and increase financial inclusion, something that the banking sector was not able to do correctly.
