In 2023, remittances to Bangladesh will exceed $21 billion, a substantial portion of national GDP and a critical source of funding for many startups. Image: Matthew Stern/ Unsplash.
Bangladesh’s startup landscape is undergoing rapid transformation, fueled by significant inflows of international investments and the innovative capacity of local entrepreneurs. This growth is evident across sectors, with mobile financial services and tech-based startups leading the charge. With a strategic mix of global funding and local entrepreneurial skills, Bangladesh is carving out a niche as an emerging hub for innovation in South Asia.
Impact of remittances and foreign investments
In 2023, remittances to Bangladesh will exceed $21 billion, a substantial portion of national GDP and a critical source of funding for many startups. These funds are not just lifelines for families; They are also becoming seed capital for growing businesses. At the same time, foreign direct investment (FDI) in the country has increased, bringing the total to $3.61 billion with a remarkable 12.6% increase last year. These investments are channeled through various sectors with a substantial portion devoted to technology and innovation.
The interplay between local entrepreneurial spirit and foreign financial support is key. For example, bKash, a mobile financial services provider that revolutionized digital payments in Bangladesh, emerged from this ecosystem. Starting with seed capital from international backers such as BRAC Bank and Gates Foundation and Ant Financial, bKash is valued at close to $2 billion, highlighting the potential for local startups to achieve substantial growth.
Apart from its own success, financial technology startups like bKash are playing a crucial role in the startup ecosystem by facilitating seamless transactions between investors and startup founders, thus increasing the flow of capital within the sector. This capability allows startups to accelerate growth and scale and innovate quickly.
In a similar vein, services like Taptop Send are enhancing this financial landscape by enabling the Bangladeshi diaspora to send home efficiently and with low fees. This ease of transferring funds is more important as it supports startups’ liquidity and operational capabilities, further enriching the startup ecosystem in Bangladesh.
Case studies of innovation and success
Another illustrative example is Pathao, which is evolving from a ride-sharing service to a multi-faceted platform offering delivery and logistics services, demonstrating the startups’ scalability in addressing diverse customer needs. This growth was supported by strategic investments by international venture capitalists, including Indonesian ride-sharing giant Go-Jek, demonstrating the confidence of global investors in Bangladeshi startups.
Moreover, the tech startup scene in Dhaka is becoming a hub for software and mobile app development, attracting attention from multinationals looking to tap into the local talent pool. These startups are not only contributing to economic diversification but also spurring job creation and technological advancement.
Economic implications and the policy landscape
A growing startup ecosystem is significantly impacting Bangladesh’s economic indicators, with the ICT sector set to increase its GDP contribution to 5% by 2025 from the current 2.3%. This shift towards a knowledge-based economy requires strong policy support from the government. Effective strategies can include enhancing digital infrastructure, simplifying business regulations and providing tax incentives to further nurture startup culture.
To ensure the sustainability of this growth, there is also a need for educational reforms that emphasize skills related to the digital economy, such as coding, digital marketing and data analysis. Establishing more tech incubators and accelerators, especially in partnership with universities and international investors, will help accelerate innovation and entrepreneurial activity across the country.
Bangladesh’s startup ecosystem is on an impressive growth trajectory, driven by a mix of international investments and local innovation. As this sector expands, it plays a critical role in shaping the country’s economic future, making it imperative to align policies with the evolving needs of this dynamic sector. With continued support and investment, Bangladesh is poised to become a significant player in the global digital economy.
Imad Ahmed helped launch Taptop Send for Bangladeshi expatriates in 2022. It is now one of the largest app-based fintech companies for remittances to their home country.