Research estimates the presence of over 300,000 merchant pages and 28 million Facebook users in Bangladesh today. Large companies are increasing their promotional focus in the platform, to target the right clients and benefit from the large customer base. The most promising factor, however, are not the big players, but the multitude of small businesses and entrepreneurs joining the biggest virtual mall available to us today. While many of these do have physical stores, over 30% of local business are absolutely Facebook-based, operating on the convenience of just an online page.
In 2016, Kazi Sayba started a Facebook page called ‘Desired Velvet’, selling clothes to her friends and family. She soon began receiving orders from other clients as her online boutique grew more popular. “I prefer the comfort of working from home and not having to interact with customers in-person” says Sayba. “My business is small, and it gives me the spare time to study and do other activities while also enabling me with a decent income”.
Unlike Sayba, many entrepreneurs come to the platform with the intent to acquire more customers and expand. But not all f-businesses* can sustain. Many lose traction over time and fade into obscurity.
Sustaining an online business depends on many factors – business strategy, supply chain management, and targeted marketing, and like any other business, it requires access to finance to expand.
The platform ShopUp emerged in 2015 in Bangladesh with the aim to provide technical and business support to help small business owners build their brands on Facebook. Nevertheless, they found that the growth of most of these businesses are hindered by entrepreneurs’ inability to access credit in a timely manner.
Loans are not that easy to obtain for online businesses in Bangladesh. Mainstream banks require collateral and exhaustive paperwork, whereas informal lenders charge exorbitant interest rates, neither offering a promising scenario for these virtual entrepreneurs.
Traditionally, microfinance institutions (MFIs) are known to design products and services to meet the needs of people at the bottom of the pyramid. But could these MFIs also serve a totally different demographic who, in comparison, are unique in terms of investment needs, location and market interaction?
BRAC’s microfinance programme in Bangladesh has made a significant breakthrough in the country to incorporate, test and scale technology in its operations. It is the only microfinance institution in Bangladesh to completely digitise instalment collection process and promote digital financial services throughout the country.
For ShopUp, partnering with BRAC to disburse loans to its f-entrepreneurs* was a logical choice, and for BRAC it was an opportunity to explore a completely new avenue.
After a few months of development and testing, BRAC microfinance launched a pilot project in March 2018, and disbursed the first batch of loans to a cohort of ShopUp’s “supersellers”. It follows a simple three-step operational process:
Step 1: Clients’ loan requests are analysed through ShopUp’s self-learning appraisal algorithm that tests their working capital requirement, repayment capacity and other variables. After the appraised amount and loan duration is determined, the selected clients are informed and it is updated on a dashboard that notifies BRAC’s microfinance programme.
Step 2: Approved loans are forwarded to the designated local BRAC branch offices and the client profile is registered in the system. The loan is disbursed into the client’s preferred bank or bKash account, BRAC banks mobile money subsidiary.
Step 3: ShopUp automatically deducts the instalment amount from the client’s account – from their monthly sales revenue – and sends it to BRAC.
As of January 2019, the pilot project has served 380 clients (240 male and 140 female), and disbursed over BDT 3.1 million. The entrepreneurs were pleased to take loans from a trustworthy source, for a time-period they were comfortable with, and also track their payments. Many who finished their first were interested for a second loan, and usually for a larger volume.
The shift from entrepreneurs struggling to maintain Facebook pages online to being able to avail brand management support and flexible loans for business growth bodes well for the overall e- and f- entrepreneurship prospects of Bangladesh. Although, it is still in the early days to comment on the future of the product, but the project has opened new possibilities for BRAC to financially empower another underserved group. Partnerships like this are a promising prospect of merging technology and customising financial services to lower operational costs and serve more and varied customers.
F- entrepreneurs are e-commerce entrepreneurs who use Facebook, the social media site, as the primary platform for their businesses”.
“F-business or F-commerce refers to e-commerce that is facilitated by the Facebook social media platform”