bKash-Alipay strategic partnership -- an inspiration to start-up businesses

Media outlets which report on business and economic developments across the globe had their eyes on Bangladesh during the last week of April as bKash Limited, the leading mobile financial services (MFS) provider of the country, and Ant Financial Services Group, operator of China-based Alipay, announced a strategic partnership on April 26.

Alipay is the online payment platform of Alibaba Group. After overtaking PayPal as the world's largest mobile payment platform in 2013, Alipay had more than 54 per cent share of China's US $ 5.5 trillion mobile payment market by the fourth quarter of 2016.

Aimed at strengthening "financial inclusion of unbanked and underbanked communities in Bangladesh", the partnership between bKash and Alipay involves purchase of 20 per cent of bKash's stakes by the latter thus increasing bKash's financial and technological capabilities.

bKash is presently valued at $640 million. While the company's local entrepreneurs will retain 51 per cent share of bKash, Ant Financial, Alipay's parent company, will purchase from 49 per cent shares of bKash owned by Money in Motion LLC, International Finance Corporation, and Bill & Melinda Gates Foundation. The deal also entitles Ant Financial to subscribe to a further 10 per cent share of the company.

On April 27, local motorbike-taxi ridesharing entity Pathao announced that it raised a "pre-series B" investment, a round of capital venture financing, led by the $4.5 billion-valued Indonesian ridesharing start-up Go-Jek. The new investor is leading this deal along with participation from existing backers Openspace Ventures, Osiris Group and Battery Road Digital Holdings.

According to technological news journal TechCrunch, this investment may be more than US$ 10 million. Earlier, Go-Jek had invested $2.0 million in Pathao's "Series A" investment in 2017. Ant Financial and Go-Jek have studied the potential of the two Bangladeshi companies before taking the decision of investing in them.

Both bKash and Pathao have received foreign investments. It was fortunate for bKash that it started operations after initiating a joint venture with BRAC Bank. But, like most start-up companies in Bangladesh, Pathao could not attract local interest.

There are at least 150 start-up businesses in Bangladesh that are vying to receive investment required for expansion of business despite having formidable goods and services to offer.

Undoubtedly, the success stories of bKash and Pathao are acting as inspiration for them.

Founded in 2011, bKash paved the way for convenient MFS (mobile financial service) in Bangladesh. It made transferring money, paying bills and conducting other financial transactions easy for rural and urban users on mobile phones.

At the moment, the company is running a network of more than 180,000 agents across this country with over 30 million registered accounts. bKash's total transaction volume in June 2017 was US $ 7.5 million.

bKash has inspired numerous other mobile financial services in Bangladesh. Similarly Pathao is leading the way for other local app-based ride-hailing services in the country.

In less than three years since its inception, shares of bKash were bought by World Bank's financial concern IFC and American private organisation Bill & Melinda Gates Foundation in 2013 and 2014 respectively. bKash continued on its course to be named in the Fortune Change The World 2017 list, a recognition awarded to companies that have a positive social impact through their core business activities. There is no doubt that Ant Financial's partnership will strengthen the company further.

Pathao, on the other hand, initiated operations as a courier service provider in 2015. It eventually branched out to bike-taxis, then to car taxis in 2017 and recently food delivery service.

Today, Pathao provides services through 50,000 bikes and a team of 500 employees who cover three cities of the country. Each month, it handles a million rides and 100,000 deliveries.

Through the investment it has received from Go-Jek, Pathao wants to reach 25 towns and cities in Bangladesh and also eventually expand to the neighbouring countries.

Similar potential may be present in other start-up businesses in the country. It has been seen in the developed economies that start-up companies are dynamic in reacting to changes in the market and also at launching new services despite possessing smaller workforces, capital bases and other resources.

 Rather than rejecting any idea right off the bat, local investors can sit down with the founders of small enterprises and start-ups to understand their business strategy and long-term expansion prospects before taking the decision for investment.

The government can draft a regulatory framework which will also help these businesses.

Government steps towards helping start-ups in different ways can be complementary to the efforts of the Bangladesh Association of Software and Information Services (BASIS), SME Foundation and a2i.

These private and government programmes have their own competitions through which they find out promising ventures and award them in different ways. Also, founders of start-ups can receive training on different business aspects, information and other forms of support from these organisations.

Start-ups face a serious problem. It is nearly impossible for start-ups to obtain loans from the banks and financial institutions. Authorities in the banking sector can chalk out strategies and can possibly place start-ups in a category, making it easy for such ventures to apply for loans.

The recent developments involving bKash and Pathao should give confidence to local investors, government and financial institutions to encourage start-ups in the country, Time has come for us to change the traditional mindset towards small and start-up business ventures.

[email protected]