Financial inclusion and the banking sector

Harun-ur-Rashid | Published: December 02, 2015 22:38:08 | Updated: October 23, 2017 04:34:23


For the last few years the banking sector is under tremendous pressure in creating opportunities for suitable lending in the wake of increasing competition. Competition is not just from within but from without too. The opportunity of borrowing foreign funds at comparatively lower rates by the large corporate groups is sometimes regarded as a potential challenge to the banking sector.
In the last few years, Bangladesh Bank (BB) and the government took several pragmatic initiatives for enabling the banking sector to remain sustainable. Besides, there are many initiatives to render the sector more pro-people. These among others include financial inclusion, empowerment of women, removal of inequality, mitigation of environmental degradation and minimising of interest rate at a competitive level of our surrounding countries.
Though the banking and financial sector has already become competitive, some new banks have entered in the economy in the last few years. Increased number of banks, however, is not a matter of surprise as there is still scope for making profit despite competition, and thus more competitors may enter in the economy till the situation reaches the saturation point. Success of the banking sector is in large part success of the entire economy. If this sector fails to attain its commitment, we shall fail as a nation as banks are the vital arteries of the economy.
Bangladesh Bank has already taken initiatives for an effective role to be played by the banking sector, while at the same time bringing competitiveness in the sector, such as providing incentives in diversified export oriented products, encouraging farmers' bank account, school banking, mobile banking, rural-urban quota fixing for opening new branches of private commercial banks, encouraging environment-friendly lending through re-financing schemes, SME financing, agriculture financing, encouraging agro-based industry to build up modern technology-based small and medium level efficient entrepreneur class.
The 7th Five Year plan (2016-2020) has given priority to curb inequality and emphasised on technical and vocational education. We have no way but to develop our manpower through enhancement of skills by adopting technical education so as to transform the huge population into assets through establishing small and medium diversified agro-based and export oriented industries.  Banking sector has a key role for execution and implementation of these policies and guidelines of the government.
At present, overhead expenditures of financial institutions have gone up significantly and it is on an increasing trend. To keep pace with such growing expenditures, bankers will have to seek ways and means. The bankers will have to engage in various other than financing activities through which financial inclusion of unbanked people can be achieved to a great extent.  It is here that innovative ideas can pave the way for enterprising bankers to strike a note of distinction in the financial sector.
It has been found that most NGOs engaged in micro credit charge high rate of interest. To facilitate the poor and the marginal income groups, banks may be engaged directly in micro-credit related activities through agent banking (adapting policies and taking approval from respective authoritives, if required). This will help them reduce overhead expenditures. Besides, new employment opportunities may be created.
For the attainment of Sustainable Development Goals (SDGs) and to derive demographic dividend through financial inclusion, it is important that the government creates the right platform to build technically and vocationally literate and skilled manpower. The banks will then find it more and more convenient to bring under their fold newer client groups with motivations and ideas.
The writer is a manager of Standard Bank Limited.

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