Digitizing payments in a cash economy

How can we use investment tools to quickly bring impactful new technologies to low income people?
Digitizing payments


In Bangladesh, three-quarters of adults live on less than $2.50 a day and most poor households operate almost entirely within the cash economy. In 2013, only 20% of adults had a formal financial services account. This means these families must save in physical assets, such as livestock or jewelry. Cash gets spent, animals die, and jewelry can be lost or stolen. What’s more, these forms of savings earn no interest and often lose value over time. To send money to family, those without a bank account must rely on couriers or friends who carry cash by bus, which is expensive, insecure, and slow. To borrow money in an emergency, they turn to moneylenders who charge notoriously high interest rates.


Following the initial success of M-Pesa in Kenya, our Financial Services for the Poor colleagues identified mobile payments as a key strategy to broaden the reach of low-cost digital financial services for the poor. In Bangladesh, 63% of adults owned a SIM card, a key to accessing mobile money – three times the percentage that had a formal financial services account. In partnership with BRAC Bank and local serial entrepreneurs Kamal and Iqbal Quadir, the foundation provided grant funding to help establish bKash in 2010.

The Strategic Investment Fund entered the picture in 2014. Early that year, we provided bKash with scaling capital to help it broaden its distribution into rural and low-income areas and help grow the business to sustainable cash flow. The foundation’s support included an $11 million Series A Preferred Equity investment and a $4 million grant focused on developing new products and services specifically for low income people. The foundation also took an active role to support strong governance for the Company.


bKash’s accelerated entry into less profitable and harder to serve geographies and customer segments resulted in significantly more low-income people using mobile money services. Between 2013 and 2017, the percentage of adults in Bangladesh with access to mobile money accounts has increased from 23% to 45%. During this time, the number of low income people using a digital financial services account within the past 90 days has roughly doubled for both low-income women (from 4 million to 8 million) and low-income men (from 7 million to 13 million) largely through the growth in mobile payments and bKash.

Lessons Learned

Growth equity can rapidly scale an impactful product or service that has achieved product-market-fit and accelerate its adoption by low-income people. Long-term investment instruments like equity also work well with companies that will be critical partners for many years, particularly when partnered with active board support either directly or through jointly-recruited independent directors.