A city in Bangladesh

bKash has brought financial inclusion to Bangladesh, empowering women, and increasing household incomes

According to the World Bank roughly a third of adults in developing countries do not have a bank account. This compares with fewer than five per cent of adults in North America.

This lack of financial inclusion is a significant obstacle to economic participation, growth and prosperity in the developing world.

One promising route to improving financial inclusion in relatively low living standards, outside traditional banking arrangements, is through fintech solutions such as financial services delivered via mobile phones.  

Yet entrepreneurs often find it very difficult to scale these types of digital platform projects to deliver widespread benefits. One major reason for this is the challenge of balancing competing commercial and social objectives as the platform ecosystem develops. 

Bangladesh-based bKash, the country's first fintech to reach a $1 billion valuation, is one start-up that has managed to scale successfully. Launched in 2011 and guided by founder and CEO, Kamal Quadir, the firm rapidly rolled out basic mobile money services to a largely poor and rural population. In doing so, bKash delivered transformative innovation, improving the lives of millions, while also keeping its commercial and development driven partners happy. 

My research investigated bKash's transition from start-up to billion-dollar enterprise. We conducted interviews with a range of people involved in the bKash growth story and analysed more than 1,000 pages of associated information from regulatory material and technical specifications to financial inclusion data and user surveys.  

We found that three steps at least appear critical to resolving tensions between commercial and developmental objectives to successfully scale a digital services business in a developing economy.  

1 Choose partners strategically 

bKash was highly selective when choosing its partners, seeking both funding and specific technology, financial services and development capabilities. 

A good example was the need to quickly build legitimacy and trust by making a positive impact on social development. This meant solving the problem of how to reach and engage with customers in rural areas with low levels of financial literacy.  

bKash was formed when US-based firm Money in Motion, owned by brothers Kamal and Iqbar Quadir, joined forces with Bangladesh's BRAC bank, a subsidiary of Bangladesh-based international development organisation Building Resources Across Communities.

The BRAC connection gave bKash a grassroots presence in rural Bangladesh with a network of local agents to educate potential users about the bKash service. The start-up then brought in the World Bank's International Finance Corporation and the Bill & Melinda Gates Foundation, gaining additional funding plus development and governance expertise. 

On the technology side, agreements with telcos provided mobile network infrastructure (and more agents for the distribution network) while Visa subsidiary Fundamo supplied proven platform technology.   

In addition, Nick Hughes, who had previously set up mobile money venture M-PESA in Kenya in 2007, was hired as director of development by Money in Motion bringing his invaluable experience to bKash as a nominated founding board member. 

2 Control, orchestrate, incentivise 

To deliver its financial inclusion goals bKash needed to control the operational balance between innovation and development, structuring operations in a way that allowed it to orchestrate how value was created and apportioned within the mobile financial services ecosystem. 

At the time the Bangladesh Government was actively promoting financial inclusion. bKash was able to take advantage of new regulations that forced telcos to joint venture with banks if they wanted to offer mobile banking (to ensure mobile finance was within the banking regulatory framework). 

This prevented telcos from capturing the nascent mobile financial services market by leveraging their network infrastructure and access to customers. Instead, bKash, backed by the BRAC bank, was able to persuade the main telcos to join its platform gaining the mobile network infrastructure it needed and access to almost all Bangladesh’s 100 million mobile phone subscribers. For their part the telcos initially received seven per cent of the transaction fee revenues conducted across their networks. 

To broaden its agent network bKash incentivised firms that supplied consumer goods to thousands of small stores throughout Bangladesh to recruit the owners of these small stores as agents by giving them 77 per cent of their transaction fee revenues as commission. 

3 Understand the context, adapt and evolve  

At first, bKash tailored its service to the needs of rural farmers at the bottom of the pyramid. As nearly half of the population owned a basic mobile phone it began by offering a limited choice of services – cash in, cash out and in-country transfer – using a simple code-based technology, unstructured supplementary service data (USSD), that worked on these phones.  

By 2017 bKash's service had been widely adopted with close to 30 million account holders. Now bKash wanted to reduce reliance on both the telcos and network of agents, cut fraud, and move beyond its usual customer base to target other segments of the population.  

To accomplish this bKash changed the mix of partnership expertise. In 2018, bKash obtained investment from Ant Group, the owners of the one-stop-shop Chinese superapp AliPay, along with its help developing a similar type of superapp to provide bKash users with smartphone access to a wide range of app integrated services.  

It also licensed Chinese tech firm Huawei to provide the digital network infrastructure and cloud payment technology to enable the new superapp services (Huawei also took on the existing USSD service ecosystem). This encouraged Softbank to acquire a 20 per cent stake in bKash, securing bKash's future as a major player in the mobile financial services market. 

A decade after its launch and the bKash story shows how it is possible to scale a tech venture in a developing economy and still balance commercial and socio-economic objectives.  

A 2020 report by the Bangladesh Institute of Development Studies noted the positive impact of bKash in many areas of Bangladeshi life including empowering women, increasing household incomes, improving financial transparency and inclusion, boosting entrepreneurship, and facilitating creditworthiness and loans.  

In fact, bKash is so embedded in the day-to-day lives of Bangladeshis that the Government designated bKash an essential service when the COVID-19 pandemic struck

Despite its accomplishments, challenges remain for bKash. There is a risk, for example, that attention is focused on the revenue generating potential of the new smartphone ecosystem, to the detriment of the USSD-based ecosystem and bKash's financial inclusion objectives. After all, while 96 per cent of Bangladeshis have a mobile phone, in 2022 only 52 per cent possessed a smartphone.  

For now, though, bKash still seems firmly focused on its social mission. Take the memorandum of understanding signed between bKash and Huawei in March 2023 at an event titled 'Smart Fintech: Inclusive. Innovative. Inspiring Bangladesh’.  

As CEO Quadir stressed at the event that as the business moves into a new growth phase bKash and Huawei's joint efforts in Bangladesh aim to drive financial inclusion and provide innovative solutions to tackle poverty and meet the UN's sustainable development goals. 

Joe Nandhakumar is Professor of Information Systems and part of the Gillmore Centre for Financial Technology. He teaches Platform Strategy on The Warwick Executive Diploma in Digital Leadership and Digital Transformation on the Doctor of Business Administration. He also lectures on Managing Digital Innovation on the MSc Management of Information Systems and Digital Innovation.

For more articles on Finance and Markets sign up to the Core Insights newsletter here.