Cottage, Micro, Small & Medium Enterprises (CMSMEs), although being key contributors to Bangladesh’s national GDP growth, remain stifled by limited access to finance, markets, and digital tools. They operate in a landscape riddled with obstacles, including burdensome paperwork, high collateral requirements, and limited financial literacy. In such a context, embedded finance—a seamless integration of payments, lending, insurance, savings, and investment into non-financial platforms—could be a game-changer.
Imagine a small clothing vendor doing business through e-commerce sites like Daraz or Pikaboo. Instead of visiting financial institutions, they could apply for a nano loan, insure their products, get logistical support to ship the product, or accept payment digitally—all from the same app where they conduct business operations. Embedded finance brings financial services to where businesses already are, rather than forcing entrepreneurs to navigate separate, unfamiliar systems.
For all latest news, follow The Daily Star’s Google News channel. This reduces friction, shortens the journey to financial inclusion, and empowers entrepreneurs to focus on growth rather than red tape. According to GlobeNewswire, the global embedded finance industry is projected to grow from $817 million in 2024 to $25.8 billion by 2029, at an annual rate of 48 percent. If Bangladesh can align with this global wave, CMSMEs here could be standing on the edge of a financial revolution.
The key factor for Bangladesh to make embedded finance feasible is to fill the gaps where entrepreneurship loses grip. Access to credit remains the most pressing hurdle. Traditional banks, wary of lending to small, informal operators, demand high collateral. Embedded lending bypasses this by using customer behaviour and transaction data to assess creditworthiness. In some countries, platforms are also offering a “Buy Now, Pay Later” option, which has become widely popular with both buyers and sellers.
Although insurance penetration in Bangladesh is low, embedded insurance can change this by offering coverage while purchasing goods or services. For instance, logistics firms can offer automatic delivery insurance for CMSMEs. In countries like China, platforms often bundle insurance with product shipments, increasing confidence on both ends of the transaction.
Payment solutions are already gaining traction. With rising smartphone use and internet access, embedded payment solutions like QR code transactions, mobile wallets, and direct transfers are within reach for many. Bangladesh’s National Payment Switch and Bangladesh Bank’s Fintech Sandbox have laid the groundwork for wider adoption.
Embedded platforms can also help CMSMEs invest small amounts or set aside savings automatically from daily earnings. This model is seen in Kenya, where mobile money platform M-Pesa launched savings and loan products through M-Shwari, targeting micro-entrepreneurs.
For embedded finance to take root, both short-term and long-term strategies are needed. Pilot projects must be launched to test models and gather data. Fintech firms must collaborate, and digital literacy campaigns and merchant training should be prioritised. Simplified e-KYC (Know Your Customer) protocols will be vital.
In the longer run, Bangladesh must establish a user-friendly regulatory framework, ensure customer protection, and build robust open banking infrastructure. Digital identity systems and credit scoring models must mature. Policies should also consider mandating embedded insurance for key sectors such as agriculture, logistics, and food delivery for MSMEs.
Embedded finance holds the potential not only to democratise access to financial tools, but also to narrow the urban-rural divide and accelerate the growth of CMSMEs through proper inclusion. With the right alignment of policy, technology, and entrepreneurial will, it can power Bangladesh’s ambition to become a developed nation by 2041.
The opportunity is not only financial—it’s transformational. Now is the time to unlock it.
The writer is a senior banker
