Catalytic Finance: Mobilizing Capital for Inclusive and Sustainable Development

Bijon Islam
November 23, 2023
Catalytic Finance: Mobilizing Capital for Inclusive and Sustainable Development

This letter was originally sent to LightCastle Bimonthly Newsletter subscribers.

Bangladesh has achieved remarkable success in the last decade with a higher than South Asia average GDP per capita, an economy touching almost half a trillion dollars and a growing middle and affluent class.

However, inequality is at an all-time high and we are in the midst of growing inflation and economic exclusions. Bangladesh is not an exception. How do we change the status quo and progress from here? This requires a concerted effort from all of us. One of the tools that we can use to create more collaboration and synergy is “catalytic financing”.

Catalytic financing (CF), leveraged the right way, can use existing financial provisions to mobilize additional capital and investments from different sources thereby “catalyzing” development and impact.  CF can be used to initiate programs for Bangladesh that can help in inclusive development in a variety of ways; however, we do not have sufficient capital to get started.

So what are three key sectors in Bangladesh where catalytic financing can help?

  • Climate Change and Sustainability: Engagements and business models in alternative energy, climate-smart agriculture and circularity are often at an early phase of development and can benefit from initial catalytic capital. The capital would help show tractions and proof of concept thus helping certain de-risking for later investors and operators. For Bangladesh which is 7th in the climate vulnerability index and given the government’s targets in energy sufficiency and food security – this can be a game changer.
  • Financial Inclusion: Whether it is getting the unbanked population to have access to not only payments but value-added financial services like credit, savings and insurance or providing better access to capital for MSMEs (Micro, Small and Medium Enterprises) – catalytic capital can play an important role. 
  • Technology-Driven Service Delivery: Recent years post-COVID have seen an increasing uptake in tech-enabled services in education and health. Education tech Startups like 10 Minute School and Shikho are allowing students from all over Bangladesh to gain access to quality education through their after-school programs. Telehealth and medicine delivery startups are filling up a critical gap in the market. Startups like Arogga and MedEasy are distributing medicine while enterprises like Pravaa are leaders in online health consultancy and Amarlab conducts on-demand at-home medical tests. Catalytic funding can help jumpstart many such initiatives in the country and support their growth.

So what are some of the ways CF can help? Starting from performance payments for achieving measurable and sustainable results to providing matching funds with the private sector (thus reducing cost of capital to the enterprise and de-risking investments for private investors) to acting as first loss guarantee schemes for lending to enterprises working with vulnerable groups – catalytic capital can ensure critical innovations can flourish.

At LightCastle, we are committed to working with our partners and the broader ecosystem on supporting inclusive growth for Bangladesh and the world. I welcome you to our journey and if there is a way we can add value to you, do not hesitate to reach out.

WRITTEN BY: Bijon Islam

Bijon is the co-founder and CEO of LightCastle Partners, an organization that focuses on creating data-driven opportunities for growth and impact for development partners, corporates, SMEs, and Startups. Over the last ten years, Bijon has led the company in engagements across 150+ businesses/development partners, 650+ SMEs/Startups, and 40+ accelerator programs in multiple industries including Technology, Agriculture, Health, Ed-tech, Energy, E-commerce, Logistics, and Manufacturing. Previously Bijon has worked with Citibank, N.A. and Citi Foundation and oversaw the execution of Bangladesh's first Interest Rate Swap, Equity Convertible Bonds, Largest IPO, Microfinance Securitization, and Block Equity Trades. Due to outstanding performance, Bijon received the CEO Excellence Awards for two years in the organization. He completed his BBA and MBA from the Institute of Business Administration (IBA), University of Dhaka.

For further clarifications, contact here: [email protected]

Want to collaborate with us?

Our experts can help you solve your unique challenges

Join Our Newsletter

Stay up-to-date with our Thought Leadership and Insights