LightCastle Leads a Validation Workshop on the Regulatory Sandbox for CMSME Sustainable Development for UNDESA 

The Validation Workshop was attended by key stakeholders in public and private institutions as well as the LightCastle Investments team

In collaboration with LightCastle Partners, Aspire to Innovate (a2i), and the United Nations Department of Economic and Social Affairs (UNDESA), the “Frontier Technology Policy Experimentation and Regulatory Sandboxes for Sustainable Development” project was initiated. To identify developmental gaps for Cottage, Micro, Small, and Medium Enterprises (CMSMEs), LightCastle spearheaded a validation workshop on July 25th. This marked the beginning of the project’s second phase, bringing together key stakeholders from both government and private institutions at a2i’s office in ICT Tower.

Public sector participants included the Regulatory FinTech Facilitation Office, Bangladesh Bank, and the SME Foundation. In contrast, private sector finance and FinTech experts like BRAC Bank, IDLC, Sheba, and Wagely were also present.

Sheba, an online platform offering on-demand services to empower SMEs in Bangladesh, and Wagely, Asia’s most prominent and fastest-growing financial wellness platform, were highlighted for their commendable efforts toward financial inclusion.

Fariha Kabir, Sr. Business Consultant, and Project Manager at LightCastle, commenced the discussion by providing an overview of regulatory sandboxing, the project timeline, and background information on the CMSME issues in Bangladesh.

Following virtual and in-person workshops discussing six different focus areas for the regulatory sandbox, the live pilot project aims to tackle the challenge of access to finance.

The session focused on engaging stakeholders in discussions regarding potential concerns during the operational stage, encompassing participants’ willingness to participate, data sharing, protection questions, and a roadmap for sandbox implementation and success measurement.

The pilot platform will aggregate data from banks, NBFIs, fintech enterprises, and microfinance institutions, assigning each CMSME a Smart Bangladesh Business Number (SBBN) linked to various business identification numbers.

Onboarding will occur in tier stages, and participating financial institutions and fintech players will have access to the platform using the SBBN as a unique identifier to access standardized and central CMSME data, facilitating more accessible and cost-effective lending to smallholder businesses.

Below are the key takeaways from the interactive discussion:

1. Technological Capacity of CMSMEs
   • The platform should consider varying technology adoption levels among different CMSME categories, which may influence registration numbers.
   • Post-pilot integration of capacity-building solutions is essential for the successful mass roll-out and onboarding of CMSMEs.
2. Data Authenticity & Verification Mechanisms
   • Financial institutes highlighted the importance of authenticating financial documents and verifying listed addresses while managing data-sharing concerns.
   • The pilot platform needs built-in functionality to cross-check duplicate business location inputs to enhance data accuracy and compliance checks.
3. Inclusivity & Targeted CMSME Approach
   • Ensuring inclusiveness among different CMSME groups, including micro and cottage enterprises and larger institutions, is crucial for success.
   • The pilot’s sample size is vital in generating heterogeneous results, guiding the platform’s scalability in the long run.
4. Rebranding the Smart Business Profile Platform
   • Concerns about applicant confusion due to multiple digital identification numbers require carefully evaluating stakeholder benefits and the need for convergence in a long-term approach.
   • The pilot should be framed as a holistic platform for CMSME growth rather than just an additional regulatory number.
5. Demand Side: Willingness to Participate
   • CMSMEs must be incentivized beyond access to finance to encourage active participation on the platform.
   • The pilot platform should have a user-friendly and seamless onboarding process for CMSMEs, while the long-term plan should explore options to provide access to markets to drive adoption further.

In conclusion, Bijon Islam eloquently presented a comprehensive rundown of the lively dialogue during the validation workshop and provided a concise summary of the issues that need addressing going forward.

The team is enthusiastic about continuing to collaborate and organizing a successful launch event to enhance access to finance for CMSMEs through the transformative Smart Business Profile Platform.