The International Finance Corporation is in for creating a secure digital banking structure and accelerating financial inclusion of all segments of Bangladesh's population under a deal signed Monday.
Officials said the IFC, World Bank's soft-lending window, signed a cooperation agreement with Bangladesh Financial Intelligence Unit (BFIU) for implementing and scaling up electronic Know Your Customer (eKYC) project.
"Under the agreement, IFC and BFIU will work together to develop and adapt eKYC infrastructure, which is a foundational regulatory arrangement for conducting customer due diligence during new client on boarding process for collecting and verifying customer data electronically," according to a statement on the deal and its objectives.
An efficient digital on-boarding infrastructure is billed one of the major building blocks for the fast-tracking of financial inclusion in Bangladesh.
Under the existing KYC protocol for opening new accounts, customers need to present their national identity (NID) cards in person and financial institutions (FI) must authenticate and keep a record manually photocopying and printing the NID.
"The process is time-consuming, costly, and inconvenient for both clients and FIs," the statement says about the merit of transition from the traditional to the oncoming high-tech banking and financial dealings that aims to involve all of unbanked people.
Moreover, in-person account opening has become more difficult amid the Covid- pandemic and the development of eKYC will help in social distancing while facilitating all-weather banking.
Once in place, the eKYC infrastructure will not only cut time and cost of client on boarding but also help reach more customers digitally, thus, reducing the number of unbanked people, particularly the underserved such as small business owners and women entrepreneurs.
The project will contribute to the financial-inclusion agenda of the government of Bangla-desh as well as IFC's target of including an additional 30 million unbanked adults in the country by 2030.
BFIU, an independent government agency charged with investigating suspicious transactions and money laundering, is also the central agency for ensuring KYC/eKYC compliance, meant for thwarting fraud and various pecuniary crimes.
Under the IFC cooperation deal, the BFIU is expected to issue a comprehensive eKYC regulatory guideline for the financial sector by December 2024.
Alongside establishing a regulatory infrastructure, the eKYC project will also deliver data analytics, case studies, knowledge creation and dissemination and awareness building on the financial market.
The IFC estimates that 500,000 people will be covered by the e-KYC system by end of the project-implementation period in 2025.
"Financial sector, especially financial institutions, is experiencing a drastic process of digitization. This digital transformation enables easy access of customer, even from the remote location, into the financial services," said Md. Masud Biswas, Executive Director and Deputy Head of BFIU.
He thinks this may pose some underlying risks of money laundering, terrorism financing and related criminal activities by abusing financial institutions and services.
"To minimise such risk of financial sector, e-KYC can be one of the most optimal solutions," he said on the occasion of agreement signing.
"Promoting financial inclusion is one of the priorities for IFC's work in Bangladesh," said Qamar Saleem, IFC's Regional Manager, Advisory Services, for Financial Institutions Group in Asia and the Pacific.
He hopes the implementation of eKYC infrastructure will offer seamless experience for end-users and support the financial sector to reach out to last-mile customers in Bangladesh, significantly increasing access to financial services.
The IFC helps advance financial inclusion through investments in the financial sector, advisory services to investment clients and other private-sector clients, and through advisory services to stakeholders in financial infrastructure.
Earlier, for conversion from manual KYC to digital eKYC, BFIU ran a small-scale testing by opening 1,500 accounts using eKYC technology, such as biometrics, and the results confirmed its effectiveness.