Despite the pandemic, Bangladesh, till Sep 2020, has clocked a GDP growth rate of 5.2% (ADB, 2020) - one of the highest in Asia. Digital transactions are growing faster than ever. The first three quarters of 2020 saw a total od USD 65 billion+ digital transactions, where 72% of the transactions were dominated by MFS banking. With 96 million registered MFS users and USD 202 million daily MFS transactions, digital transactions can unlock new potentials of the digital commerce industry. The eCommerce market (including f-commerce) has grown at a steady pace to USD 2.1 billion in 2020. The market holds the potential to become USD 3 billion by 2023 and can create around five lakh jobs in digital commerce industry. Can the Digital Commerce Industry become a critical driving force of the future economy of Bangladesh? LightCastle Partners presents "Digital Commerce in Bangladesh: Policies & Possibilities"

1. DIGITAL COMMERCE
IN BANGLADESH
Policies & Possibilities

2. Bangladesh’s digital commerce industry is gaming forward on the back of the
following growth drivers:
Strong Economic Vitals for Tech Products and Services
Despite the pandemic, Bangladesh till Sep 2020 has clocked a GDP growth rate of 5.2% (ADB, 2020) - one
of the highest in Asia - much ahead of South Asia’s average growth rate of -6.8% or compared to India’s -
9% or Sri Lanka’s -5.5%. Majority of the population of Bangladesh are young and tech-adaptable, where
62%+ are under 35 years. The Middle class is growing at 10% per annum to reach 34 million by 2025.
Increasing adoption of digital services with 110Mn+ internet users (95% on mobile devices), 40Mn+ on
smartphones (BTRC & GSMA, 2020).
Growth in Digital Transaction Embracement
Digital services in the financial sector are slowly expanding. The Covid-19 pandemic has added momentum
to them. Private banks have scaled up their digital services during the pandemic. As part of digitization,
each bank has to launch e-KYC system by December 2020. The first three quarters of 2020 saw U$ 65 Bn+
transaction with 72% of the market dominated by mobile banking. With 96Mn Registered users and U$
202Mn daily MFS transactions, digital transactions will unlock the digital commerce industry's potentials.
E-Commerce Market Grows at a Steady Pace reaching USD 2.1 Bn
All online-based platforms that mainly retail everyday essentials have experienced remarkable business
growth during the pandemic, shooting the eCommerce market (including f-commerce) at a steady pace to
U$ 2.1Bn in 2020. The sector has connected 1,200 e-commerce companies, 60,000 SMEs (35,000
individuals; 25,000 enterprises), among which are 2,000 web-based and 50,000 active f-commerce
merchants. In the next five years, the country's e-commerce sector can create around five lakh jobs and
holds a potential to be a key driving force of the economy.
Pandemic propelling Digital Transformation in all sectors
The COVID-19 pandemic has undeniably altered consumer buying behavior, wherein traditional retailing
has taken a back seat. An exemplar shift towards a more digitized world is evident, with prompted changes
in spending habits are likely to have long-term ramifications. High priority sectors poised for growth and
digital transformation in the coming decade show early promises, including Pharmaceuticals, Agriculture,
ICT/ITES, Logistics, and Digital Financial Services.
Gateway to Digital Bangladesh:
Vision 2041
● Interoperable and connected health
management systems
● ‘Made in Bangladesh’ policy boost in ICT and
emerging Technologies
● Universal affordable access to digital literacy
● Universal coverage of digital financial
services
● Financial data interoperability to speed up
financial inclusion by 10X
● Alternative credit rating system for CMSMEs
and vulnerable citizens
● Digital commodity exchange for agriculture
produce connecting farmers at their
doorsteps
● Facilitating bottom-up e-commerce for
livelihood of local producers and artisans
● Transformation of education to 4IR adjusted
blended learning approach for all citizens
● Position on “Ease of Doing Business Index” at
50 by 2025
● Formulation of National Policy and Agenda
for Start-ups
Executive Summary
2

3. Table of Contents
3
Macroeconomic Overview
The Surging Bangladesh Economy
Sectoral Overview
The State of Digital Commerce in Play
COVID-19 Shockwave
Propelling Digital Adoption Across the Country
Key Drivers
Challenges and Opportunities
Recommendations
Gateway to Digital Bangladesh: Vision 2041
1
2
3
4
5

4. Macroeconomic Overview
The Surging Bangladesh
Economy

5. Bangladesh Economy Fights Pandemic like a Champion
With the Fastest GDP Growth Rate in South-Southeast Asia, 2020
5Source: ADB, Sep 2020
Bangladesh has been the best performing economy among 46 countries in the South-Southeast Asia,
including many economies that post negative growth. (Recorded till September 2020)
5.2%
2.4% 2.3%
1.0% 1.0% 1.0%
-0.4% -1.0%
-5.0% -5.5%
-8.0%
-9.0%
-20.5%
Bangladesh
Bhutan
Nepal
China
Vietnam
Myanmar
Pakistan
SouthKorea
Afghanistan
SriLanka
Thailand
India
Maldives
GDP Growth Rate in South-Southeast Asia, 2020

6. 0%
1%
2%
3%
4%
5%
6%
7%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
FDIas%ofGDP
Bangladesh India Indonesia Myanmar Pakistan Sri Lanka Vietnam
Foreign Direct Investment Requires Improvement
In Comparison with Regional Peers
6Source: UNCTAD World Investment Report, World Bank Data & LightCastle Analysis
Despite the excellent progress, the country’s Foreign Direct Investment (FDI) in CY 2019 stood at a mere
3% (U$ 2.87Bn) of the country’s total investment. With policymakers devising policies to attract FDIs,
investments are expected to increase in the new decade
0.5% 1.8% 2.2% 4.2% 0.8% 0.8% 6.2%(FDI as % of
GDP, 2019)
Comparison with Regional Peers: FDI as % of GDP

7. 50%
Population under
the age of 25
9th Largest
Mobile User Market
9.1Mn+
Daily MFS Transaction
(Sep 2020)
600+
Govt. E-Services
(2020)
USD 2.1 Bn+
Local E-Commerce
Market
(2020)
168Mn+
Mobile Subscribers
(Oct 2020)
USD 3.2Mn+
Avg. Daily Volume of
MFS Transaction
(Sep 2020)
2Mn+
Monthly Govt.
E-Service Users
(2020)
USD 800Mn+
ICT Exports
(2018-19)
111Mn+
Internet Users
(Oct 2020)
95Mn+
MFS Registered User
(Sep 2020)
100Mn+
Digital Cards Issued
(2020)
Bangladesh Leapfrogging in ICT & Digital Adoption
Indicating a Promising Future
7Source: World Bank Data, BTRC, Bangladesh Bank, a2i
Demography Mobile
Penetration
MFS
Penetration
Govt. E-Services
Penetration

8. Sectoral Overview
The State of Digital Commerce
in Bangladesh

9. E-Commerce, Marketplace and Financial Service Sectors
Lead the Digital Ecosystem of Bangladesh
E-Commerce
Classified Ads
F-Commerce
Branded
Mobility
Transport
Logistics
Food Delivery
Travel
Hotels
Flights
Tickets
Online Media
Advertising
Gaming
Video On Demand
Health-Tech
Screening & Diagnostics
Pharma Supply Chain
Virtual Care
EdTech
K12 Education
Career Development
LMS (Learning
Management System)
Market Place
Home Service
Business Solution
Jobs
Financial Services
Transfer
Payment
Lending
9Source: LightCastle Analysis

10. Ecommerce & Retail
Healthtech
Edtech
Digital Media & Content
Service
Traveltech
Logistics & Mobility
Bangladesh Startup Ecosystem
is diverse and operating in multiple Digital Commerce Sectors
10Source: LightCastle Analysis
*List is not exhaustive
Fintech

11. Digital Transaction came back strong in 2020 Q3.
Need to keep the momentum on & ensure stickiness
0.4
2.3
5.3
14.5
0.3
2.1
3.8
14.3
0.3 0.2
3.7
18.1
Credit Card Internet Banking Debit Card Mobile Banking
Q1 Q2 Q3
Mobile Banking Contributed 72% of U$ 65Bn+
Digital Transaction in 2020 (Q1-Q3)
9.3Mn+
Daily MFS Transaction (Oct 2020)
U$ 202Mn+
Avg. Daily Volume of MFS Transaction
(Oct 2020)
96Mn+
MFS Registered User (Oct 2020)
1Mn+
MFS Agents (Oct 2020)
15
Banks with MFS Service (Oct 2020)
Digital Transactions in 2020 Q1-Q3 (U$ Bn)
11Source: Bangladesh Bank
U$ 1.1Bn U$ 4.5Bn U$ 12.8Bn U$ 46.8BnTotal
Transaction
U$ 65.2Bn
(2%) (7%) (20%) (72%)

12. 2,000 Website Based
Entrepreneurs 50,000Facebook-centric
Entrepreneurs
$2.1Bn Market Size in
2021 $3Bn Market Size in
2023
E-Commerce Market Grows at a Steady Pace reaching USD 2.1 Bn
While ~25% of the Transaction Occurs Digitally - an incentive is a must
12Source: ECAB, Statista & LightCastle Analysis
Digital Payment
Year Payment
(USD)
Growth
(Y-o-Y)
2016 20 Mn -
2017 152 Mn 660%
2018 185 Mn 22%
2019 233 Mn 26%
2020 471 Mn
(Projected)
102%
E-Commerce Market Size
Year Market Size
(USD)
Growth
(Y-o-Y)
2016 66 Mn -
2017 1.1 Bn 1567%
2018 1.2 Bn 9%
2019 1.6 Bn 33%
2020 2.1 Bn
(Projected)
31%
125K Employment in
the Sector
500K Job Prospect in
2021
~25% of the Transaction Occurs Digitally

13. Government Support for a Thriving Startup Ecosystem
Propelling Digital Consumption
Startup Ecosystem at
Inflection Point
Govt. Initiatives to Boost
Startup Activity
Local & Global Investors
Betting on the Startups
1,200+
Active Startups in
Bangladesh
28
Hi-Tech Parks Launched
USD 300Mn+
Foreign Investment
Raised
200+
New Startups born
every year
2,650+
Unions under Broadband
Connectivity
200+
Active Angels Boosting
Early Initiatives
Dhaka
Chattogram
Sylhet
Major Active Cities in the
Startup Ecosystem
USD 45 Mn+
Government Fund formed
Under ICT Ministry
1.5Mn+
Employment Created by
the Startup Ecosystem
13Source: Bangladesh Startup Consortium, LightCastle Startup Index & LightCastle Analysis

14. 600+ Govt E-Services
Serving 2 Million+ Rural and Per-Urban Populations Monthly
14Source: a2i

15. COVID-19 Shockwave
Propelling Digital Adoption
Across the Country

16. Digital Commerce Helped Maintain
Basic Needs During Lockdown
Source: LightCastle Analysis 16

17. While Lockdown Impacted the Most Business Verticals Badly,
Grocery, Logistics and Fintech Sectors saw Boom in Growth
Grocery, Logistics and Fintech Sectors
saw growth during lockdown
300%
E-Commerce Sector Growth in 2020
8%
Companies Introduced Retail Grocery
300
Companies started online services
100,000+
Daily Ecommerce Orders Reached Per Day
25%
Increase in avg. essential order’s basket size
Pre-Pandemic vs Post-Pandemic
Market Traction
17Source: ECAB, Bangladesh Startup Consortium & LightCastle Analysis

18. COVID-19 has Accelerated Some Sectors,
While Setting Others Back
18Source: LightCastle Analysis

19. Key Drivers
Challenges & Opportunities

20. Slow Online
Adoption in
Consumer
Lack of
Credibility
Predominant
COD
Transactions
Unstructured
Supply Chain
Underdeveloped
reverse logistics
Supply
Side
Inadequate
Infrastructure
Lack of
Integration
Demand
Side
City Center
Based
Bottlenecks from Demand Side and Supply Side
are limiting the growth of digital commerce in Bangladesh
Source: LightCastle Analysis 20

21. Investors will be increasingly selective going forward
What’s In?
• Sustainable Profits
• Robust Cash Flow Profile
• “Essential Services”
What’s Out?
• Vanity Metrics
• Negative Scaling
• “Non-essentials”
✓
X
Recalibrating
towards
sustainable and
profitable growth
▪ Adverse to “Blitzscaling” strategies that feature low take rate,
high burn rate and weak cash flows.
▪ Refocus on positive unit economics and path to profitability vs
growth only in GMV or active users
Essential vs non-
essential tech
▪ Focus on startups that drive improvements in efficiency and
access to services (ie. Logistics, access to healthcare)
▪ COVID-19 has made evident which startups continue to offer
essential services
Budding sectors
of growth
▪ Mature sectors such as e-Commerce, Transport & Food, Travel
and Media are largely consolidated and have seen multiple
rounds of late-stage funding over the past 3 years.
▪ Deal activity has instead picked up for nascent sectors, including
FinTech, HealthTech, EdTech, and among others, B2B SAAS
startups
21Source: LightCastle Analysis

22. Recommendations
Gateway to Vision 2041

23. Action Agenda Policy and Regulation
Interoperable and
connected health
management
systems
Investment in human capability and capacity, especially health care management
so that the health system is transformed from 'doctor-centric' to 'healthcare
management centric’
▪ Development of an accountability framework for both public and private
facilities
▪ Development and enforcement of a mandatory health data interoperability
protocol for connecting data system of all public and private health facilities
▪ Launching of universal health insurance system covering both public and
private
facilities
‘Made in
Bangladesh’ boost
in ICT and emerging
Technologies
Development and enactment of 'Made in Bangladesh' Policy for promoting local
manufacturing of digital devices for domestic and foreign market. The policy
needs to be foreign investment friendly and at the same time promote local
capacity Building
Universal affordable
access to digital
literacy
▪ Development of digital literacy curriculum guideline for each segment of
learners for development of course materials by public and private agencies
▪ Making curriculum and content for digital literacy open [creative commons
licensing]
Recommendations
Gateway to Digital Bangladesh: Vision 2041
23

24. Action Agenda Policy and Regulation
Universal coverage
of digital financial
services
▪ Digital Financial Inclusion Policy to incentivize digital financial transactions
across the population. BASIS has proposed 5% incentive for digital payments.
3% for users & 2% for merchants for accepting digital payments
Financial data
interoperability
speeding up
financial inclusion
by 10X
▪ Enactment of Data Interoperability Law
▪ Enactment of Data Protection and Privacy Law [e.g., GDPR]
▪ Revision of Digital Security Act, 2018 to connect with independent law on data
▪ protection and privacy
Alternative credit
rating system for
CMSMEs and
vulnerable citizens
▪ Enactment of a law for CMSME credit rating system with emphasis on credit 9
bureau database under Bangladesh Bank Order, 1972
Digital commodity
exchange for
agriculture produce
connecting farmers
at their doorsteps
▪ National policy for quality standards for different agro-commodities in
Bangladesh
▪ National Agro-Commodity Exchange Policy
Recommendations
Gateway to Digital Bangladesh: Vision 2041
24

25. Action Agenda Policy and Regulation
Facilitating bottom-
up e-commerce for
livelihood of local
producers and
artisans
▪ Upgrading National Broadband Policy, 2009 for revision of TAX, VAT, and
Surcharge to decrease Internet price
▪ Upgrading National Digital Commerce Policy, 2018 for exemption of taxes
imposed on digital commerce and advertising
Transformation of
education to 4IR
adjusted blended
learning approach
for all citizens
▪ Digital Education Policy [in alignment with 8th Five-Year Plan]
▪ Upgradation of Intellectual Property Rights [IPR] Policy to ensure appropriate
▪ encryption and to protect the providers of online education
Ease of Doing
Business Index, 50
by 2025
▪ Introduction of Ease of Doing Business Policy catering to each of the 18 sectors
identified
National Policy and
Agenda for Start-
ups
• Introduction of National Policy for Start-ups to promote growth of the
ecosystem, while also attracting foreign investment
25
Recommendations
Gateway to Digital Bangladesh: Vision 2041

26. LightCastlePartners
Level 5, House 10/12, Road 1, Block B, Niketan, Gulshan 1,
Dhaka - 1212, Bangladesh
Email:info@lightcastlebd.com
Mobile: +8801744 736621, +8801711 385988
Web:www.lightcastlebd.com
DataonDemandPlatform:www.databd.co
Mehad ul Haque
Project Manager &
Sr. Business Consultant,
LightCastle Partners
Bijon Islam
Chief Executive Officer,
LightCastle Partners
Authors
Silvia Rozario
Project Manager &
Sr. Business Consultant,
LightCastle Partners