The investment landscape in Bangladesh has traditionally been limited. You can keep your money in banks, which many people don’t find meaningful in a high inflationary market. The stock market remains underdeveloped. Mutual funds suffer from reputation challenges. Government-backed instruments like national savings certificates, and bonds are some of the options many people flock to. Overall, people complain that the available options for meaningful and safe investment are limited. The return on the many available investment options doesn’t make sense.
However, this scenario is changing as a small cohort of fintech startups are looking to change that. By leveraging technology and innovative business models, these companies are creating new investment opportunities and in the process, are shaping a new investment landscape in Bangladesh.
These companies are targeting underserved segments of the market and expanding the range of investment instruments beyond the conventional options to agriculture, real estate, SMEs, and more.
This is a fascinating development that comes with both huge opportunities and challenges and risks. We will get into that in a moment. First, let’s take a look at some of the notable players in this segment.
iFarmer
Founders: Fahad Ifaz, Jamil M Akbar
Founding year: 2018
iFarmer — a Dhaka-based agri-tech platform — connects farmers with capital, knowledge, inputs, and markets. Founded in 2018, the company started by addressing the challenge of access to capital, a common challenge smallholder farmers face in Bangladesh. iFarmer collects investments from retail and institutional investors, who are interested in investing in agriculture farms, which it then invests in farms using a portfolio approach to ensure expected return for investors. The company does not give direct cash to the farmers. Instead, it provides vouchers and other options to farmers to buy/access inputs and other farming-related support.
The company has also built a supply-chain business where it buys/collects agriculture products directly from farmers and supplies them to businesses and customers, helping bypass middlemen and thus earning a maximum profit on their products. The company has also been working on advisory and precision farming products. While started with finance and inputs, iFarmer has evolved into a full-stack agri-tech player in Bangladesh.
Biniyog
Founders: Shabab Shahriar Khan, Muhammad Saeedul Alam
Founding Year: 2021
Biniyog.io is a halal debt-based investment platform that connects regular people with profitable businesses for short-term financing. For the sake of understanding, you can call Biniyog a crowdfunding platform that allows individuals to invest in small and medium enterprises (SMEs) in Bangladesh. The platform screens and vets the SMEs, providing investors with access to a curated selection of investment opportunities. The company says it has an assessment and risk-grading mechanism that helps it to objectively evaluate and assess businesses. Investors’ safety and risk management are key priorities for the platform and is baked into its assessment process in multiple layers.
Biniyog is addressing a critical gap in the Bangladesh market by facilitating investments in SMEs. SMEs often struggle to access traditional financing, hindering their growth and development. Biniyog's model democratizes access to SME investments, empowering individuals to support the backbone of the Bangladesh economy.
Jomee Jomma
Founders: Alvi Sakib and Ayaz Hossain
Founded: 2023
Jomee Jomaa is a fractional land investment platform that democratizes real estate investing in Bangladesh. It aims to address the challenges that average citizens face when trying to invest in land, such as high capital requirements and complex property document verification processes. What Jomee Joma essentially does is securitizeation/tokenization of land, allowing regular people to benefit from investing in land.
Jomee Jomaa identifies promising land opportunities with high growth potential. These lands are then fractionally segmented, allowing members to invest in smaller units. Over 3-5 years, the land's value appreciates, providing investors with growth opportunities. The platform charges a fee upon the land's sale, deducted from the investor's profits.
While Bangladesh has a growing middle class with rising disposable income, the available investment instruments remain limited to bank saving schemes, bonds, and the capital market. All these options come with various limitations. To that end, Jomee Jomaa has an opportunity to provide a true alternative to people seeking meaningful investment opportunities.
WeGro
Founders: Md Mahmudur Rahman, Md. Alvi Rahman
Founding Year: 2021
WeGro is a Dhaka-based agri-tech startup that provides financing support to farmers by collecting funds from retail and institutional investors. The company says it usually purchases high-quality agricultural inputs with those funds and loans these inputs to the farmers and shares the eventual profit.
Simply put, WeGro connects individual and institutional investors with farmers and their agricultural projects. The company says it simplifies investing in agriculture. WeGro has a mobile app-based platform that enables users to choose a firm/project and invest in it. The company promises 18-22% returns on investment while guaranteeing principal protection. Investors also have the option to insure their investment against any calamities. The financing gap in the agriculture sector in Bangladesh is staggering. Several companies are working in the space to address the challenge.
As we mentioned earlier, the emergence of these fintech startups is a fascinating development. These companies are democratizing access to a wide range of investment opportunities and can potentially transform the investment landscape in Bangladesh.
Historically, Bangladeshi investors have relied on bank deposits and government-backed instruments, which often fail to keep pace with inflation.
The new investment options offered by these fintech companies—ranging from agriculture and real estate to SMEs—allow investors to diversify their portfolios and potentially achieve higher returns. More importantly, it indicates an important shift in Bangladesh's investment landscape. By introducing new investment instruments, these companies are addressing the limitations of traditional investment options.
These startups also make it easier to invest in various sectors for average citizens. This democratization is crucial in a country where financial inclusion remains challenging, with a significant portion of the population still unbanked.
Moreover, these fintech startups are targeting underserved market segments, such as small-holder farmers and SMEs. Entities in these segments often struggle to access traditional financing which limits their growth. If these fintech startups can address the finance gap for these groups, it can unlock new growth potential previously constrained by limited access to capital.
While the emergence of these fintech startups is a positive development on many counts, it also raises important regulatory questions.
The current regulatory framework is ill-equipped to deal with and does not have a well-defined set of rules and regulations governing these types of financial companies.
Bangladesh Bank has initiated efforts to create a conducive environment for fintech. Still, the lack of comprehensive regulations can create uncertainty for both the fintech startups and the investors, potentially challenging the growth and adoption of these new investment options.
It can also create important consumer protection challenges dealing serious blows to the fledgling sector in the case of fraud and failure to provide investor safety.
To that end, policymakers and regulators in Bangladesh have a complex task: developing a comprehensive regulatory framework that addresses these concerns while making sure that early regulation doesn’t stifle the innovation and growth of the sector.
New investment instruments are not a new phenomenon or unique to Bangladesh. In markets like the US, we see regular evolution of new markets and investment instruments.
Making Markets of Colossus is one of our favorite podcasts at Future Startup. The podcast features how new markets emerge across verticals outside of mainstream domains. From agriculture to art to vineyards to marijuana to crypto, the world is a big place.
However, one critical requirement for these developments to work is a robust regulatory framework that can ensure protection for both investors and various stakeholders involved without stifling innovation.
This new crop of fintech startups will undoubtedly transform the investment landscape in Bangladesh in the coming years and the development will have important implications.
Expanding investment options beyond traditional instruments will likely attract a new generation of investors, particularly younger and tech-savvy individuals who are open to new ideas and appreciate more diverse and accessible investment opportunities.
Similarly, this development indicates that although finance remains a highly regulated industry, you can still push the boundary without going outside of legal bounds.
For regulators, it tells that allowing experiments and innovations can add tremendous value to all involved - an important policy-making lesson that we don’t often see in practice in markets like Bangladesh.
However, the long-term success of these fintech startups will depend on their ability to navigate the regulatory landscape and address the concerns of both investors and policymakers. To that end, as these fintech platforms gain traction, it will be useful for them to focus on financial education and investor awareness to drive understanding and adoption of these new instruments.
In conclusion, while regulatory uncertainty remains, the potential for these fintech companies to transform the investment landscape and drive financial inclusion in Bangladesh is significant.
As the sector continues to evolve, policymakers, regulators, and industry players should come together to ensure a balanced and supportive development of the ecosystem that enables innovation and protects the interests of investors.
