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Wednesday, October 4, 2023


Abdus Sattar, a sugarcane farmer of a remote village in Gaibandha—a sleepy northern district of Bangladesh—always get daunted by the spic and span ambience of a bank branch.

In places like Govindaganj, the nearest upazila from Sattar’s village that has branches of few of Bangladesh’s commercial banks, the buildings housing the branches are barely three-storied high.

Nonetheless, to Sattar—a farmer who doesn’t have a formal education—banks are alien places inhabited by people with ties and plastic smiles. He doesn’t feel comfortable there.

Now he needs not to be comfortable there. He in fact needs no bank services. He has bKash.

“I get payments for my sugarcane in my phone. I cash in and cash out with bKash agent in the haat (village market),” said Sattar.

bKash-Bangladesh’s largest mobile money transfer system has been able to bring people like Sattar under financial services who for long have considered clayed pot as bank and manual person-to-person cash transfer as the only way of moving money.

Concepts like savings, loans and insurances have little meaning to rural Bangladeshis like Sattar. Instead what matter to them are tools that safeguard their families from the economic and natural shocks through which they could ‘pay & receive,’ ‘borrow & repay,’ and ‘store & retrieve’ money.

Thus conventional concepts and products are needed to be broken down to their basic functions that convey what they truly mean — safeguarding/storing/growing their money (savings & insurance) and spending/borrowing/investing money (loans) and so on.

bKash and some other mobile financial services (MFS) are doing exactly what the doctors have ordered.

An inclusive financial service

These inclusive digital financial services like bKash have made Bangladesh a role model to the world in terms of creating financial activities at grass-roots level.

In the last few years, MFS have brought over five crore unbanked people under financial services.

The flow of money into the rural parts of Bangladesh, through MFS, has increased quite significantly in the last five years. On an average, transactions worth of Tk 1,038 crore is made through MFS accounts out of which about 60% were made in the rural areas, said the data of Bangladesh Bank (BB).

MFS enables consumers to obtain financial account information and conduct transactions with their financial institution using mobile banking services, and to make payments, transfer money, or pay for goods and services through mobile payments.

At present, 17 of the 19 banks granted permission to run MFS are providing services and of these, Brac Bank’s bKash and Dutch Bangla Bank’s Rocket topped the list. According to the central bank data, the number of registered mobile bank accounts stood at 5.69 crore by the end of September this year.

However, to curb illegal use of MFS, from February 1, 2017 the central bank brought down the daily ceiling of mobile cash-in to Tk 15,000 from Tk 25,000, while slashing the maximum cash-out limit to Tk10,000 from Tk 25,000.

The monthly maximum cash-in limit was slashed to Tk100,000 from Tk150,000 and the maximum monthly limit on cash-out was brought down to Tk50,000 from Tk150,000.

Industry insiders said the Bangladesh Bank move hardly had any negative impacts on the overall volume of MFS transactions as the users who previously used 10 SIMs for their transactions now have 15-20 SIMs.

Talking with Fintech, Mohammad Nurul Amin, a former President of Association of Bankers Bangladesh (ABB) said, it was not very long ago that Bangladesh was dubbed as an under-banked country.

Financial inclusion was a far cry at that time, he said adding that discussions were limited to the challenges, such as lack of knowledge and awareness in financial inclusion in Bangladesh.

The game started to change further in 2011 when BB issued MFS Guidelines defining a model where MFS must be bank-led, but partnerships with regulated micro-finance institutions were made to reach customers, he said.

Amin who was a former Managing Director of Meghna Bank said, his bank had introduced an advanced MFS service named Tap-n’-pay. “This is more modern and secured than other MFS services as we have introduced a chip based EVM card along with the mobile banking account.”

“I believe MFS is the best possible way for financial inclusion in the rural parts of Bangladesh. Because of MFS, the economic activities in the villages have increased by manifold.”

A changed mindset

Anir Chowdhury, Policy Advisor of the Access to Information (a2i) project of the Prime Minister’s Office (PMO) said it would have been difficult to imagine even a few years ago that an elderly widow living in a remote corner could be receiving money from her son living in Dubai sitting right at home or making petty payments through her mobile phone.

“Not any more, though,” he said, “Bangladesh reached the lower middle income country status in 2015, and has showcased the potential of combating rural poverty through inclusive digital financial services.”

This has proven to be an effective weapon to eliminate poverty and secure the sustainable development goals (SDGs) while the country advances towards Vision 2021 — lifting millions of Bangladeshis out of poverty, said Chowdhury.

He however said, access to the formal financial system remains a challenge for the rural poor in Bangladesh even though the central bank announced a plan for inclusive digital financial programmes back in 2015.

“Data from our ongoing rigorous survey in rural Bangladesh states that the prevailing topdown mind set, as far as the banking service is concerned, needs to be overhauled and transformed into a bottom-up approach that appreciates the perception of the poor and their needs of financial services.“

He said experts have to work towards a simple and affordable financial tool which acts as a cushion during times of urgent need. “This tool should keep the family from having to borrow heavily during crises. It should prevent their plunge into further debt and in the long run contribute towards lifting them out of poverty.”

Chowdhury said the branch-based banking system fails at inclusion since rural villagers deal mostly in cash. But the cost of these cash transactions will have to be passed on to the customers, meaning that they would end up having high service charges to cover the overhead of rural branches of banks. Difficult as it is, to bring the poor illiterate rural farmer into the fold of a formal financial system, a high service charge would make it next to impossible.

“Digital tools towards the same goals are accepted to be far more effective for the rural populace. Towards that end, electronic cash cards, agent banking, mobile phones and other digital means are opening up the possibility to connect rural households with reliable financial services and tools.”


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