Millennials change e-commerce in Bangladesh

Bangladesh has witnessed a boost in its e-commerce with startups that are changing the credit assessment industry for small business owners, reports CNBC.

Start-ups like ShopUp, created by three young people, have crafted a niche in the credit assessment industry by helping small entrepreneurs in getting loans.   

Small local merchants choose Facebook or other online platforms for their low start-up costs and established user base to reach wider and international consumers beyond the traditional market.

At present, more than 8,000 online retailers sell different products—clothing to cosmetics—through Facebook, according to the e-Commerce Association of Bangladesh.

However, the small entrepreneurs confront difficulty in gaining loan to build up stock and serve their new, enlarged audience, as despite having an established microloan system in Bangladesh, the cumbersome assessment processes and high interest rates make it hard for them.

ShopUp, a platform created by Afeef Zaman, Siffat Sarwar and Ataur Chowdhury to automate the credit assessment process for small business owners, cutting wait times by weeks and reducing interest rates from 18-20 percent to 3-5 percent, CNBC says in its report.

That also means slashing minimum loans from $2,500 to $300 and tie-in periods from one year to three months — a major win for fledgling entrepreneurs with less money to commit.

"The problem was not with default rates," 26-year-old Zaman told CNBC Make It.

"It's that the existing methods for assessing microloans are too lengthy and costly, meaning many businesses struggle to get up and running" he said.

While ShopUp doesn't provide the loans itself, its algorithms mean that more microlenders can assess more loans more quickly.

In addition to helping with financing, ShopUp provides technical and business support to help small business owners get up and running on Facebook and other social platforms. It also works with DHL to automate the delivery process for domestic and international sales.

That means more people will be able to build online businesses, which is vital for a country in which more than 55 percent of people are self-employed, according to data aggregator IndexMundi.

“For a lot of people, entrepreneurship is a dream. For people in Bangladesh, it’s a reality," said Zaman, who noted that the country lacks the levels of multinational employers enjoyed by many other economies.

ShopUp believes their platform will be especially game-changing for Bangladeshi women. Currently, less than 30 percent of Bangladesh’s workforce is female, according to the International Labour Organisation, and fewer still are business owners.

“Millions of women in Bangladesh are unable to earn for themselves because of social and family issues. If you start a business on Facebook, you can earn lakhs of taka while changing your child’s diaper! All you need is determination,” Sarwar, ShopUp’s chief operations officer, told a newspaper in Dhaka in May.

Launched in 2016, ShopUp plans to help finance 2,000 entrepreneurs this year, before expanding to 10,000 per quarter from next year with priority given to women entrepreneurs, which could help fast-track wider economic development across Bangladesh and beyond, according to Zaman.

ShopUp is one of a number of tech companies hoping to catch a slice of growing entrepreneurship by offering financing.  Amazon announced in June that it has lent more than $ 1 billion to small businesses in the past year, while Singapore-based ride-hailing platform Grab began offering micro-loans to business owners in March.

Zaman isn’t afraid of the competition though.

“The problem is so enormous we need many people, many micro-financers,” he said.