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As Bangladesh’s Startup Scene Blooms, These Startups Are Poised To Thrive

Bar chart showing the top 10 countries with highest increase in Ultra High Net Worth (UHNW) population during the five year period between 2012 and 2017 according to data from Wealth-X. Bangladesh’s UHNW population grew 17.3% making the country with the fastest growing UHNW population during the five year period. Bangladesh was followed by China (13.4%), Vietnam (12.7%), Kenya (11.7%), India (10.7%), Hong Kong SAR, China (9.3%), Ireland (9.1%), Israel (8.6%), Pakistan (8.4%), United States of America (8.1%).

Bangladesh rarely comes to mind when thinking about startups but with a population of some 160 million (which makes it the world’s eighth most populous country) over 46% of which belong to the entrepreneurial and tech-savvy “Gen Z” generation of youngsters aged 24 and below (over 50% of the country’s citizens have internet access and 90% of them use the internet through their smartphones), and a stellar economic growth which has propelled Bangladesh to number one position in a number of indicators (such as the five year growth of UHNW people and per capita economic growth), could this rising South Asian nation emerge as a dark horse in the startup landscape?

Unlike its giant neighbor India, which is one of the most attractive countries for startup entrepreneurs and investors, Bangladesh doesn’t stand out as a startup nation and its startup ecosystem is at a relatively infant stage of development. However, with the frontier market having a number of ingredients that could potentially cook up a potentially vibrant startup economy, Bangladesh has potential to quietly emerge as an unexpected startup success story in the coming years.

Once one of the poorest countries in Asia, Bangladesh’s economy has been booming over the past few years so much that the South Asian nation has shot up to be the world’s fastest growing Ultra High Net Worth (UHNW) country according to studies by New York-based global UHNW market intelligence and research firm Wealth-X which measured the compound annual growth rate of UHNW populations across countries worldwide since 2012.

Bar chart showing the top 10 countries with highest increase in Ultra High Net Worth (UHNW) population during the five year period between 2012 and 2017 according to data from Wealth-X. Bangladesh’s UHNW population grew 17.3% making the country with the fastest growing UHNW population during the five year period. Bangladesh was followed by China (13.4%), Vietnam (12.7%), Kenya (11.7%), India (10.7%), Hong Kong SAR, China (9.3%), Ireland (9.1%), Israel (8.6%), Pakistan (8.4%), United States of America (8.1%).

Bangladesh’s HNW population is projected to grow at a CAGR of 11.4% between 2018 and 2023, the world’s third fastest growing HNW population behind Nigeria (16.3%) and Egypt (12.5%) but ahead of China (9.8%) and India (9.7%).

Bar chart showing the fastest growing HNW countries between 2018-2023 (CAGR %). Nigeria is expected to see the world's fastest growing HNW population with its HNW population growing at a CAGR of 16.3% between 2018 and 2023. Nigeria is followed by Egypt (12.5%), Bangladesh (11.4%), Vietnam (10.1%), Poland (10%), Kenya (9.8%), China (9.8%), India (9.7%), Philippines (9.4%) and Ukraine (9.2%). Data from Wealth-X.

Meanwhile studies from British weekly magazine revealed that Bangladesh registered a 45% increase in per capita income in terms of Purchasing Power Parity over the last five years, propelling the country to number one position along with China and India to emerge as the countries with the highest per capita economic growth globally during the period.

Bangladesh’s economic transformation has been helped in part by a thriving industrial sector (notably its garment sector which accounts for about 80% of the country’s export revenue and about 20% of GDP) as well as overseas remittances from Bangladeshis working overseas. The country’s economy grew 7.86% during FY 2018, up from 7.28% in 2017. The momentum is likely to continue with the country forecast to be the third fastest growing economy in the world in 2019 with a projected GDP growth rate of 7.4%, according to a report by the United Nations titled World Economic Situation and Prospects. Meanwhile, the country’s middle and affluent class (MAC) is growing at a rate of around 10%-11% per annum and if this pace of expansion continues, the MAC population is expected to nearly triple to about 34 million by 2025 (equal to about 12% of the population) from about 12 million 2015 (equal to about 7% of the population) according to Boston Consulting Group.

Apart from an exciting economic growth story, Bangladesh also boasts attractive demographics with a population of some 160 million (making it the eighth most populous nation in the world) over 46% of which are aged 24 years and younger. The median age is 27.1, making it the fourth youngest population in South Asia behind Afghanistan (which has a median age of 19), Pakistan (24.1), and Nepal (24.5) according to figures from the CIA. The total number of internet users in Bangladesh reached 91 million at the end of December 2018 over 93% of which are mobile internet users according to figures from the Bangladesh Telecommunication Regulatory Commission. Yet, with internet penetration at less than 60%, there is still ample potential for growth in internet users. This tech-savvy, youthful generation presents a potentially major driving force for the country’s digital economy and as they climb up the income ladder and their buying power grows, they could potentially drive Bangladesh’s consumer market as well opening tremendous opportunities. This suggests Bangladesh, which has so far been off the radar of international startup entrepreneurs and investors, could become an increasingly important market going forward.

Flight Expert

Founded by a company that has been an active player in Bangladesh’s travel industry for over two decades, homegrown Online Travel Agency (OTA) startup Flight Expert which helps travelers find, compare and book flights and accommodation, leveraged its advantage of being backed by a company with years of experience and knowledge about the local travel industry, as well as an established reputation in the country’s travel agency industry to successfully position itself as one of the most popular OTAs in Bangladesh.

Like most other emerging and frontier markets, Bangladesh’s travel market is on the rise and with Bangladeshis becoming increasingly digitized, the country’s nascent online travel market is taking off as well, propelled by a growing appetite for travel thanks to rising incomes and rising internet penetration among its young and increasingly tech-savvy workforce.

There is reason to be optimistic about the sector’s prospects going forward. With a direct contribution of just 2.2% to the country’s GDP as of 2017 (lower than neighboring South Asian countries such as Nepal (4%), Sri Lanka (5.3%), Pakistan (2.9%), India (3.7%), and Maldives (39.6%)), Bangladesh’s travel and tourism sector was valued at BDT 427.5 billion in 2017 (about US$ 5.3 billion) according to data from the World Travel and Tourism Council (WTTC) – suggesting ample potential for growth in the long run. The WTTC forecasts Bangladesh’s travel & tourism sector to expand by 6.2% between 2018 and 2028 to reach a value of BDT 824 billion (about US$ 10.2 billion), making it the fifth fastest growing travel and tourism market in the world during the 2018-2028 period, and the second fastest in South Asia behind India.

Bar chart showing the market value (in US$ billions) of the travel and tourism sector in 2017 and 2028e in selected South Asian countries. India’s travel and tourism market was the biggest with a value of US$ 91.3 billion in 2017. India was followed by Pakistan (US$ 8.8 billion), Bangladesh (US$ 5.3 billion), Sri Lanka (US$ 4.5 billion), Maldives (US$ 1.5 billion) and Nepal (US$ 0.9 billion). By 2028, it is estimated that India’s travel and tourism market will be valued at US$ 194.7 billion, Pakistan (US$ 16,4 billion), Bangladesh (US$ 10.2 billion), Sri Lanka (US$ 8.2 billion), Maldives (US$ 2.7 billion), and Nepal (US$ 1.5 billion).

This bodes well for OTAs and Flight Expert, as one of the pioneering OTAs in Bangladesh is poised to benefit. A report by ResearchAndMarkets expects Bangladesh’s mobile travel booking industry (which includes offline and online bookings) to witness a CAGR of 21.4% to reach US$ 9.65 billion by 2025. Meanwhile Flight Expert CEO Salman Bin Rashid estimates OTAs will account for about 45% of Bangladesh’s travel market by 2025, up from an estimated 3%-4% currently.

ShopUp

Bangladeshi social commerce platform ShopUp helps small businesses with online stores on social media (notably Facebook) automate their businesses by providing solutions to business processes such as automating inventory and order management, invoice generation, accounts, etc.

The startup’s automation services are provided free of charge, a godsend for the thousands of Bangladeshis who struggle to find a job and aspire to earn a living selling products online but are hampered by limited capital. ShopUp has helped jumpstart tens of thousands of social commerce entrepreneurs who used the platform’s services to automate the backend processes in online store management, enabling them to focus on other aspects of the business such as product development etc.

The company’s chief revenue stream comes from fees charged for marketing and delivery and there is ample scope for growth in this area as Bangladesh’s social commerce scene continues its upward march. Like many other countries in Asia such as Indonesia and Vietnam, social commerce, particularly F-commerce is a sunrise industry in Bangladesh and over the past few years, the country’s growing social commerce sector has given birth to thousands of social commerce businesses (estimated at over 150,000 compared to just about 2,5000 formal e-commerce businesses according to data from the E-Commerce Association of Bangladesh).

And the growth story is just beginning. Hootsuite’s Digital 2019 report revealed that despite having an internet penetration rate of about 55% (with an internet userbase of about 91 million), just 37% of these internet users (equal to just about 34 million) are active social media users, representing a social media penetration rate of just 20%.

Bar chart showing the active social media user penetration rate (%) as at January 2019 in selected Asian countries. Brunei has one of the highest active social media user penetration rates with 94% of its population actively using social media. Other Asian countries and their respective active user penetration rates are: South Korea (85%), Singapore (79%), Philippines (71%), China (71%), Vietnam (64%), Japan (61%), Indonesia (56%), Bhutan (51%), Myanmar (39%), Laos (39%), Nepal (33%), Sri Lanka (30%), India (23%), Bangladesh (20%), Pakistan (18%) and Afghanistan (10%). Data from Hootsuite and We Are Social.

And the number of internet users making online purchases is even smaller. According to a 2018 report by IDLC Finance Ltd, online sales account for less than 1% of Bangladesh’s retail sales, compared with 5%-6% for India. Meanwhile on the seller side, less than 30% of Bangladesh’s workforce is female according to the International Labour Organization which represents a tremendous untapped market of potential social commerce entrepreneurs for ShopUp.

However, the more exciting part of ShopUp’s growth story is not in Bangladesh’s social commerce landscape but in the country’s nascent fintech sector, which has tremendous potential to grow thanks to a huge unbanked population (estimated at 70% of the total population), increasing smartphone penetration and a relatively undeveloped financial system. Having started out by providing solutions for the automation of business operation processes such inventory control and order management, over the past few years ShopUp has successfully transformed its product offering to include automation services in the areas of credit assessment for small business owners who are generally left out of the formal credit system. Using algorithms and big data, ShopUp’s automated credit appraisal platform aims to solve this challenge for the majority of Bangladesh’s 10 million Micro, Small and Medium Enterprises (MSME) who lack access to much needed working capital.

REPTO Education Center

The global educational technology market is on an upswing (Frost & Sullivan foresees the global education technology market growing from US$ 17.7 billion in 2017 to US$ 40.9 billion by 2022, representing a CAGR of 18.3%) and in Bangladesh which suffers from low educational attainment, edtech could well be a key solution to address the country’s imminent skills shortage as the country transforms into middle-income country.

Bangladesh’s own homegrown online education platform REPTO Education Center, which is a graduate of Bangladeshi startup accelerator GP Accelerator, offers online courses, classes and training, focused on tertiary level students, and working adults, somewhat similar to Udemy and the startup appears well placed to capitalize on what promises to be a potentially substantial opportunity.

In Bangladesh, education demand is on the rise and there is a greater need for education opportunities, particularly higher education and skills-based education. According to education sector market intelligence company ICEF Monitor, tertiary enrollment in Bangladesh tripled between 2000 and 2012 and surpassed two million students in 2012. Yet, as of 2012, just 13.39% of Bangladesh’s college-age students were enrolled in tertiary education, compared with 27.18% in China, 24.37% in India, 30.66% in Indonesia, 37.21% in Malaysia and 61.46% in Japan the same year according to data from the World Bank indicating ample potential for increase in the years ahead as Bangladesh’s education system matures along with a growing economy.

Bar chart showing gross enrollment ratio in tertiary education (% of college-age population) in selected Asian countries, in year 2000 and 2012. The percentage of college-age students enrolled in tertiary education increased from 48.74% in 2000 to 61.46% in 2012 in Japan, from 25.74% in 2000 to 37.21% in 2012 in Malaysia, from 14.88% in 2000 to 30.66% in 2012 in Indonesia, from 9.55% in 2000 to 24.37% in 2012 in India, from 7.72% in 2000 to 27.18% in 2012 in China, and from 5.45% in 2000 to 13.39% in 2012 in Bangladesh. Data from the World Bank.

Of Bangladesh’s 160 million plus people, 46% are aged 24 years and younger according to data from the CIA and they are becoming increasingly digital. For most of these young adults, skills development institutes are out of reach, either due to cost constraints (most of the courses are unaffordable for the majority of working adults in Bangladesh which ranked 176th in the world out of 228 countries in 2017 in terms of per capita income according to data from the CIA), or geographical constraints (most of these institutes are located in Bangladesh’s capital city Dhaka), or language constraints (foreign courses offered by online education platforms such as Coursera or Udemy are primarily conducted in English, a language most Bangladeshi’s are not proficient at; Bangladesh ranks 63rd out of 88 countries in education company EF Education First’s English Proficiency Index).

REPTO Education addresses all these problems for Bangladesh’s burgeoning workforce; the online courses can be accessed online anywhere, are generally more affordable than courses offered by traditional brick-and-mortar educational institutions, and most of the platform’s courses are offered in Bangladesh’s official language, Bengali.