Bangladesh is the heartland of a four decades old microfinance industry. CGAP’s 2013 research indicated that nearly any household that wants a microfinance loan could get one. At the same time, basic mobile payments and savings accounts have spread like wildfire since first introduced three years ago.
The fastest growing provider (by far) is bKash, a specialised company in Bangladesh focused on mass market mobile financial services. Launched in July 2011, bKash reached 11 million accounts by the end of 2013, just 30 months after launch. This happened in a market where a massive microfinance industry already operates. bKash has been able to succeed alongside the microfinance industry in part because mobile financial services meet a completely different need. Microfinance in Bangladesh has focused primarily on small-scale unsecured credit, while bKash provides a tool for sending payments quickly to others.
Not only is bKash is the fastest growing mobile money deployment in Bangladesh, but CGAP also estimates that it was the fastest growing mobile financial services business globally during 2013. In our newly published brief we identify three broad institutional factors that have combined to drive a fast start for bKash in Bangladesh.
bKash is neither bank-led or telco-led; it is a purpose-built company to provide mobile financial services. While it operates as a bank subsidiary it has minority investors from outside the banking industry. Moreover, nearly all of the staff come out of industries other than banking. This has given bKash a focus on its core business that is not an adjacent revenue stream to other banking or mobile phone services. bKash is built to focus on its own business at the start. Links to wider financial services could be developed in the future.
bKash combines a diverse group of investors, but they all at least share a vision for scale. While bKash is a part of the BRAC group of social enterprises, it has provided an unusually important role to its minority investors. The first minority investor is Money in Motion LLC, a US based company formed by Iqbal and Kamal Quadir, brothers who had an interest in mobile technology driven innovation. Money in Motion also includes Nick Hughes, who launched M-Pesa in Kenya, and Arun Gore of Grey Ghost, a venture capital fund. More recently the International Finance Corporation and the Bill and Melinda Gates have also come in as minority investors. Combined with the 51% owned by BRAC Bank this is a diverse investor group with many different skills and perspectives, but they do share a common sense that bKash itself ought to be a mass scale enterprise. These diverse investors have aligned behind this early goal.
Bangladesh’s central bank has been supportive and flexible in creating a regulatory environment. Bangladesh’s central wanted direct bank involvement in mobile financial services, however it has been flexible enough to allow a bank subsidiary like bKash to operate. This has provided bKash sufficient space to create a new line of business while still remaining within the broader umbrella of a bank. For instance, BRAC Bank (bKash’s parent and 51% shareholder) remains responsible for the regulatory compliance of bKash’s operations. Importantly, Bangladesh’s central bank has also advocated strongly for bKash and other mobile financial service deployments to gain access to the USSD channels of Mobile Network Operators (MNOs). This has opened up access to a large subscriber base (bKash can connect with 98% of the mobile phone subscribers in Bangladesh) and provided the connectivity necessary to grow fast.
These three conditions have provided underlying fundamentals that has enabled bKash to expand quickly. Elsewhere in other markets these conditions exist to varying degrees. In the case of bKash in Bangladesh these three fundamental drivers have come together in a single place to drive bKash’s fast start.