School savings drop despite rise in student accounts
More students join, but inflation squeezes their savings
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The amount of money saved in school banking accounts has been dropping in recent months, according to the central bank, suggesting that the programme's growth may have stalled.
However, the number of students participating in school banking has actually increased over the months. In other words, more students opened accounts but they could not save much.
According to Bangladesh Bank data, Tk 21.79 billion was saved in school accounts in December 2023 compared to Tk 21.36 billion in January this year. This marks a decrease of nearly 2 per cent.
Looking further back, the data shows a similar plummeting trend. The amount saved in school accounts has been slowly going down since September 2023.
The central bank launched the school banking programme in 2010 to encourage financial literacy and inclusion among young people.
The programme allows students aged 11-17 to open special bank accounts with benefits like fee waivers, free Internet banking and lower minimum balance requirements to teach students how to save money and manage their finances effectively.
These accounts require only a small initial deposit of Tk 100 to activate.
Dr Mustafizur Rahman, a distinguished fellow at the local think tank Centre for Policy Dialogue (CPD), pointed the finger at a higher inflation rate for the recent slowdown in school banking growth.
"Lower and middle-income families are the ones who mainly maintain these accounts," said Dr Mustafizur Rahman. "Due to inflation, their purchasing power is eroded, meaning they have less money to save. This ultimately affects deposits in these accounts."
He added that once inflation is brought under control, school banking growth is likely to pick up again.
Dr Rahman also suggested continuous and more intensive nationwide campaigns by banks could help maintain consistent growth in the segment.
Syed Mahbubur Rahman, managing director and CEO of Mutual Trust Bank, said ongoing economic conditions are responsible for the slowdown in school banking growth.
"Despite these challenges," he said, "our bank and others continue nationwide efforts to actively engage school students in financial inclusion initiatives."
While admitting that growth in his own bank has stagnated despite campaigns, the CEO underlined the importance of such banking programmes and their long-term benefits in cultivating future customers.