A distributor we spoke with some time ago ran an FMCG territory outside Dhaka. He handled several well-known brands, had a team of six, a delivery van, and retail relationships built over eleven years.
Each cycle, he told us, the math works out on paper. The orders come in, the goods go out, the payments arrive. On paper, he is profitable. In reality, however, there are about ten days each month when he is simultaneously owed money by thirty retailers, owes money to two suppliers, and has almost nothing liquid.
He manages it by calling in favors, delaying one payment to cover another, running a kind of frantic, informal finance operation in his head. He doesn’t have any visible struggle, but a constant working capital gap. Which also means he just permanently operates below what he could do with adequate working capital.
In many ways, he doesn’t need a loan to fix this. A more appropriate solution for him would be a way to convert the money he is already owed, those thirty trade payables from thirty retailers, real obligations backed by goods already delivered, into cash today. He has the asset. He just can't access it.
This is the core idea behind receivable-based financing that several fintech upstarts are experimenting with in Dhaka. And we feel that it can be an effective answer to the growing SME working capital gap we have seen in years of covering this sector.
A trade receivable, the right to collect a specific payment from a specific buyer within a specific timeframe, backed by evidence of a real commercial transaction, is a real asset. It can be sold, discounted, or used as the basis for advancing capital.
When that happens at scale, the working capital that is perpetually frozen or locked/trapped in trade credit across millions of small business relationships becomes liquid and can help meaningfully address the SME financing gap. The economic consequence of that liquidity can be transformational for the SMEs and our economy.
The formal statistics on the SME financing gap in Bangladesh are striking. The IFC estimates from 2023 put the MSME financing gap at $2.8 billion. 39 percent of MSMEs are financially constrained, and around 85 percent lack sufficient working capital. Only 20 percent of total bank loans go to SMEs, and just 9 percent of total trade finance reaches them.
These numbers, however, don’t really explain the real problem. The businesses most severely affected, such as micro-enterprises, distributors, and informal traders, often don’t appear in formal surveys. The surveys usually measure the edges of the gap; the interior is harder to quantify.
The scale of the challenge becomes clearer when you put it in comparison. If Bangladesh’s GDP reaches $560 billion in 2025, an estimated 15–20% of business transactions will typically remain tied up in receivables at any given time. This implies that over $60–80 billion in working capital remains locked, creating severe liquidity pressure for small and medium-sized businesses.
Bangladesh has roughly 10 million small and medium enterprises, accounting for 90 percent of industrial units and 80 percent of industrial employment, contributing around 25 percent of GDP. In Indonesia, comparable enterprises contribute 59 percent of GDP; in Vietnam, 45 percent; in Sri Lanka, 52 percent.
Bangladesh's own SME Policy 2019 set a target of raising this contribution to 32 percent by 2024. The target was not met and predictably so. The financing gap is one of the main reasons.
The formal banking system has had decades of policy attention aimed at addressing the SME financing problem. But the gap persists. There is no lack of intent. We have seen various initiatives from private sector players over the years. The reason is structural.
Bangladesh's commercial banking system was built around collateral-based lending. The system works for clients it was designed to serve: large corporations, established importers, and land-owning entrepreneurs.
A small distributor's and supplier's productive capacity is concentrated not in hard assets but in supplier relationships, market knowledge, and its ability to move inventory quickly through an established route. A bank's collateral framework has no way to hold any of that.
Moreover, banks and formal financial institutions operate on a multi-layer decision-making structure that struggles to serve smaller players profitably. Their cost structure often doesn’t support working with SMEs and addressing problems like short-term working capital needs.
Debasish Chakraborty (read our interview with Debasish here), who was providing banking solutions to the unbanked population of Bangladesh before founding Chamak, saw this from the inside. "Banks have conditions for loans that can make it difficult for small players to access bank finance," he told us. "For instance, along with many other requirements and 25-30 types of paper documents, you will also need a guarantor who owns a house in Dhaka. Not even collateral, but a guarantor like that. I wouldn't even qualify as a guarantor myself based on their rules."
Chamak has been working on a receivable-based financing model to address the gap and claims to have gained meaningful traction over the last several years. More on that in a moment.
Banks that provide services like factoring, the purchase of trade receivables, mostly work with established players, again leaving the smaller players, in a very limited scale. "Banks do factoring, but mostly for or with other commercial banks or large-scale multi-national corporations,” explains Debasish. Meaning banks only serve a small fraction of those receivables.
A closer look shows that the gap is not a capital scarcity problem alone. It is a problem of mismatch between the instruments the formal capital is prepared to hold and the assets small businesses can actually offer.
The history of this instrument is worth knowing because it helps explain why the mechanics are sound, and the instrument holds promise.
When we asked Debasish how he arrived at the receivable-based financing model, he didn't start with Bangladesh or with Chamak. He started in Mesopotamia.
Before 2000 BC, he explained, farmers who needed seeds and oxen to begin the planting season would borrow them from temples and priests. The obligation was recorded on clay tablets — you borrowed this, you will repay when the harvest comes in. The priests would then sell those tablets to wealthy merchants. Whoever held the tablet held the claim on the future payment.
The modern form took shape in Renaissance Florence. Italian merchants trading with American buyers faced the same problem: capital locked in a future transaction, unavailable for the next one. A shipment worth a thousand florins wouldn't generate payment until the ship arrived in America, months later. American merchants in Florence began buying these future payment rights at a discount, giving the thread merchant cash today and collecting the full amount on arrival.
These Americans were called "Factors," and the practice took its name from them.
But the historical details matter less than the mechanism. Here is why receivable-based financing specifically addresses what conventional credit struggles to address.
A trade receivable is a short-term obligation tied to a completed commercial transaction. Its value doesn't fluctuate the way property values fluctuate. It doesn't collapse in a recession the way real estate did in 2008 or the Great Depression. It is not an estimate of future worth. It is a specific, documented obligation from an identified counterparty, with a defined maturity date. The underlying question is straightforward: will the buyer pay? That binary is easier to underwrite than the open-ended question of what a piece of land will be worth in three years.
At a macro level, most trade receivables are ultimately settled; otherwise, large-scale commerce would not sustain itself. Defaults are a reality, but historically they are significantly lower among established businesses with proven transaction history and long-term market presence.
The short duration is also an important aspect. When a receivable matures in seven to thirty days, capital turns over twelve to fifty times a year. Each cycle creates a new opportunity to assess credit quality, build reserve funds, and identify problems before they compound.
A conventional loan held for twelve months has a longer feedback loop. A receivable portfolio with thirty-day maturities surfaces problems quickly and, in turn, provides opportunities to resolve them quickly. The risk model is different, short-term, and more transparent.
The other critical property is that receivables are self-liquidating. A land-backed loan requires a forced sale if the borrower defaults, a rather slow, costly, and uncertain process.
A receivable, compared to that, converts to cash on its own schedule, as the buyer simply pays. The collateral is its own exit mechanism.
This is one reason receivable financing remains resilient in economic downturns that destroy the value of conventional collateral.
Trade keeps happening even when asset prices fall, and the short-cycle obligations that trade generates retain their face value.
For the working capital problem specifically, the fit is worth mentioning. The FMCG distributor we described at the beginning faces a different kind of capital challenge. He is not able to convert existing, real, documented obligations—money he is genuinely owed—into cash he can use today. In a certain way, he has capital, but it is stuck in a short-term cycle.
Receivable financing gives him that cash on the basis of that documented obligation as an asset, without requiring him to own land, find a Dhaka-based guarantor, or prove his creditworthiness to a system designed to evaluate a different kind of borrower.
Every economy generates trade receivables, but Bangladesh's specific market reality makes it an unusually good fit for this instrument.
Bangladesh's FMCG market is around $4 billion and has been growing at roughly 10 percent annually for a decade. An estimated 97 percent of that distribution happens through the traditional trade of small shops, local distributors, and multi-layered intermediaries. There are roughly 1.2 million retail outlets across the country, and less than half are directly serviced by large manufacturers.
The other more than 600,000 operate through distributors who carry inventory on their own capital and manage payment timing across their entire customer base.
Every delivery a distributor makes on credit terms creates a trade receivable. The volume of these transactions, running across hundreds of thousands of businesses, is meaningfully large. A very negligible portion of it is currently being financed through formal instruments.
Over the years, Bangladesh's digital payments infrastructure has also matured enough to make the logistics of receivable financing feasible.
The core operational challenge in this instrument is verification, proving that a specific trade transaction happened, that the goods were delivered, and that the payment obligation is real. When that evidence exists digitally in purchase orders, delivery confirmations, and payment histories, the entire process of settling a receivable can move through software in minutes.
It speeds up the entire process and makes small-value, high-frequency receivable financing economically viable at the transaction sizes relevant to SME working capital.
The most detailed operating case for receivable-based financing in Bangladesh is Chamak, founded by Debasish. Understanding how it works can give a sense of both the potential and how such an operation works in practice.
Rather than lending money to a small business to purchase inventory, Chamak buys the inventory itself and sells it to the business on credit. When Chamak buys goods from a brand and delivers them to a distributor on a seven-day payment term, the distributor's obligation is a trade payable. Chamak's claim, the right to collect that payment, is a trade receivable.
Chamak targets, for now, FMCG distributors and retailers with at least three years of operating history. Established brands have already vetted and chosen these businesses as their distribution partners. It means these businesses have a track record and can be considered reliable. This pre-selection does substantial credit work before Chamak is involved.
Personal and business guarantees are taken from every buyer, with the right to recover unsold goods if the buyer cannot sell them.
A default reserve is built from every transaction's margin, and Chamak guarantees the return of investor principal in the event of non-payment.
Across approximately seventy to seventy-five crore taka in facilitated transactions, Chamak says, total actual defaults have run to around thirty thousand taka.
That number reflects the combined effect of careful borrower selection, personal guarantees that shape repayment behavior, and the short transaction duration that allows for seeing the problems and addressing them quickly.
Chamak says it is building a technology-enabled infrastructure layer that transforms receivables into digital assets. Once the ecosystem is fully developed, it will help businesses access faster liquidity, enable investors, both locally and globally, to invest in a new asset class, and support governments and economies by improving cash flow across SMEs.
Increased liquidity within SMEs can ultimately lead to higher productivity and stronger economic growth for the country.
The businesses on the wrong side of the SME financing gap are not, for the most part, failing businesses. They are productive, operationally capable enterprises running below their potential because the formal financial system finds working with them incompatible.
The distributor we described at the beginning is profitable and experienced. He is also permanently cash-constrained, which limits how much inventory he can carry, how quickly he can respond to a promotional opportunity, and how many new retail relationships he can take on.
When you multiply that constraint across hundreds of thousands of similar businesses, the aggregate productivity loss is large. In fact, it is larger than the $2.8 billion gap figure captures, because the figure measures the financing shortfall, not the output that would have been created without it.
Receivable-based financing makes visible what the banking system currently treats as invisible.
A seven-day trade payable from a distributor — backed by a delivery record, a purchase order, and a personal guarantee — is a real asset. It has been a real asset since Mesopotamian farmers pressed their obligations into clay.
The reason it hasn't been treated as a fundable asset at scale is not that it isn't valuable. It is that no one has built the infrastructure — the platform, the legal framework, the investor base — to originate, verify, and trade it efficiently.
Building that infrastructure requires retail investors who understand what they are buying, institutional capital willing to participate in a new asset class, and regulators willing to provide the formal framework that transforms a grey-area practice into a legitimate market.
Each of those is a reasonable ask. None of them requires inventing something that doesn't already exist. The instrument is five thousand years old. The question is only whether Bangladesh builds the conditions to use it. Debasish and his team at Chamak believe the time for the instrument has come.
This article draws on a conversation with Debasish Chakraborty, founder of Chamak. Future Startup covers Bangladesh's business economy with the depth it deserves.
