Assessing the Opportunities of the Retail Credit and Digital Financing Landscape in Bangladesh

The Opportunity

Bangladesh, the 37th largest economy in the world, boasts an annual GDP growth rate of 6.8 percent in 2022. With a growing Middle and Affluent Consumers population and a young, tech-savvy demographic, the country is expecting to experience a continued rise in consumption. Complementing these changes is the growth in digital and financial inclusion, with more than half of 90 million unique mobile users using the internet, and 32.3 million people having a Mobile Financial Service (MFS) account. This puts the country in an ideal position to leverage the opportunities of retail credit, particularly digital credit, to boost consumption across the country. Mapping out the digital financing landscape in Bangladesh will create a pathway for the development of this market.

With this opportunity, LightCastle Partners on behalf of a Singapore-based tech startup conducted a study to assess the retail credit landscape in Bangladesh. The study was commissioned to take a deep dive into the financial system in Bangladesh by analyzing the current state of the financial landscape to subsequently derive a viable strategy for the client to enter the Bangladeshi market.

The Approach

The study undertook a mixed-method approach to seek a holistic view of the retail credit and digital financial market. To get a representative understanding, LightCastle Partners combined primary and secondary research tools to map an overview of the supply-side of retail and digital credit in the market. The team conducted Key Informant Interviews (KII) with stakeholders from regulatory bodies, financial institutions as well as embedded finance and Fintech players. The team further conducted in-depth focus group discussions with consumers of different segments to identify the demand for digital financing. Additionally, the study used data from various secondary sources such as the Household Income and Expenditure Survey (HIES) 2016, the World Bank Data, GSMA Report, Bangladesh Bank, and Microfinance Regulatory Authority.

The Future

The objective of the study was to gain an understanding of the retail credit market in the country, synthesize the insights from key stakeholders and obtain a comprehensive understanding of the demand for digital financing through the consumers. The key findings of the study were analyzed and validated to ultimately map out the landscape and identify the challenges and possibilities. Additionally, the study provides comprehensive insights on the success cases to ultimately state the strategic recommendations for market entry.