Future of Work
SCALING INCLUSION
A ccording to the World Bank, roughly a third of adults in developing countries do not have a bank account. This compares with less than five per cent 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 firm 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
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 telephone companies (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 and 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
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. “Entrepreneurs often find it difficult to scale these digital platform projects to deliver widespread benefits” 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 Iqbal Quadir, joined forces with Bangladesh’s BRAC Bank, a subsidiary of Bangladesh-based international development organisation Building Resources Across Communities (BRAC). The BRAC connection gave bKash a grassroots presence in rural Bangladesh with a network
bKashing in How Bangladesh’s bKash balanced profit and purpose to become a billion-dollar fintech firm
by Joe Nandhakumar
by leveraging their network infrastructure and access to customers.
Instead, bKash, backed by BRAC Bank, was able to persuade the main
Warwick Business School | wbs.ac.uk
wbs.ac.uk | Warwick Business School
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