As Bangladesh emerges as a dynamic player in South Asia, its journey toward economic resilience and digital transformation stands out. Once among the poorest countries globally, Bangladesh now showcases a rapidly developing economy that is embracing digitalisation to expand financial access and foster inclusion.
Home to over 174 million people, Bangladesh has made significant strides in economic development. Since its independence in 1971, the country has transitioned from one of the world’s poorest to a lower-middle-income nation by 2015, a transformation marked by steady economic growth and strategic initiatives.
Today, Bangladesh’s gross domestic product (GDP) per capita stands at over $2,600. The country has also achieved considerable poverty reduction, with moderate poverty levels dropping from nearly half of the population in 2010 to around 30 per cent by 2022, according to the World Bank. Earlier this year, projections indicated that Bangladesh could advance to a middle-income economy by 2026 and potentially reach upper-middle-income status by 2031 if its growth momentum continues.
The Bangladeshi government’s ‘Vision 2021’ economic development strategy laid the foundation for a digitally connected and technologically advanced nation, promoting the goals of ‘Digital Bangladesh’ and, more recently, ‘Smart Bangladesh’.
One of the most notable impacts of this digital shift has been the surge in mobile internet penetration. While only a fifth of the population had mobile internet access in 2017, by 2021 that number had skyrocketed to nearly universal coverage. Bangladesh’s young population – over 60 per cent of whom are under 35 – has been a driving force behind this digital transformation.
Financial inclusion
Building on this momentum, Bangladesh launched its first National Financial Inclusion Strategy 2021-2026. Financial inclusion has since grown significantly, with at least half of the population now participating in the formal financial system, a leap from just 30 per cent previously.
Despite this progress, only 38 per cent of the population currently holds a traditional bank account, leaving the majority without access to banking services. Debit card usage remains below one-third, with even lower figures for correspondent banking (seven per cent), internet banking (six per cent), prepaid cards (three per cent), and credit cards (two per cent).
Growth of fintech led by mobile money
The expansion of mobile financial services (MFS) has been a driving force in Bangladesh’s fintech development, showcasing how financial technology can foster inclusion. Primarily led by banks and supported by the Bangladesh Bank (the country’s central bank), MFS growth is part of a broader effort to promote digital finance and innovation. Among the central bank’s key initiatives was the establishment of the Regulatory Fintech Facilitation Office (RFFO) in 2019, designed to attract financial sector innovators and enhance public access to financial services.
Mobile money has become one of Bangladesh’s most visible fintech advancements, significantly boosting financial inclusion. According to the Global System for Mobile Communications Association (GSMA), Bangladesh leads Asia in mobile money account ownership, with around 13 MFS providers. These providers include prominent players such as bKash, Rocket, MYCash, Islami Bank mCash, Trust Axiata Pay (tap) and Nagad. Together, these providers account for over 100 million MFS accounts, giving Bangladesh a near 12 per cent share of the global mobile money market.
One standout MFS provider is bKash, which serves an estimated 60 million users. Offering a wide array of mobile money services – from money transfers and remittances to utility payments and bank loan applications – bKash has become a trusted financial service provider. This platform is part of Bangladesh’s thriving fintech sector, with at least 200 active fintechs, and estimates suggesting as many as 500 startups.
Just in general, fintech has made wider inroads in the country. For instance, transactions using mobile devices has grown, doubling to over $50billion in 2019 from just three years prior.
The impact of fintech in Bangladesh has been substantial. Transactions via mobile devices more than doubled to exceed $50billion by 2019. In 2020, over one million digital bank accounts were opened to enable government-to-person payments for vulnerable groups. During the pandemic, the Bangladeshi government delivered cash support to five million affected families through MFS operators. Notably, 2020 saw a dramatic increase in MFS accounts opened by women – nearly 70 per cent, up from just 36 per cent in 2017.
Venture capital interest in Bangladesh’s fintech sector has been on the rise, with investments exceeding $429million in both 2021 and 2022. Major players like Softbank, Sequoia, Valar Ventures and Startup Bangladesh Ltd (a government-sponsored ICT venture capital fund) are among the notable investors supporting this fintech boom.
Challenges remain
While Bangladesh’s progress in fintech and economic development is impressive, substantial challenges remain. Recent political upheavals, including protests that led to the resignation and departure of Prime Minister Sheikh Hasina, have made the nation’s political volatility clear.
Additionally, Bangladesh’s geographical vulnerability to flooding, compounded by its high population density- the country is roughly the size of Illinois yet home to over 174 million people – creates further economic strain. Dhaka, the nation’s capital and one of the world’s most densely populated cities, is particularly affected by these environmental pressures. Heavy reliance on imported energy has also made Bangladesh susceptible to global market shifts, impacting inflation and overall economic stability.
Despite these obstacles, Bangladesh’s potential for growth remains strong. Tremendous progress has been made, yet millions of Bangladeshis still lack access to formal financial services. For fintech to thrive further, several key areas require attention, including regulatory frameworks, data protection measures, financial literacy and enhanced support for entrepreneurship and early-stage startups. Addressing these gaps will be critical for Bangladesh to leverage fintech in driving economic growth.
Looking ahead, the outlook for Bangladesh is positive. The country’s recent strides indicate a promising future as it continues to establish itself not only as a South Asian economic force but as a growing influence in Asia and the global arena.