3 years ago

Expanding digital financial inclusion

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4G coverage in Bangladesh is still not very satisfactory. The top four operators cover 65-80 per cent area of Bangladesh. The video experience is less than 50 per cent , voice experience is less than 75 per cent, and download speed experience lies between 6.2-7.2 Mbps, latency experience lies between 56.6-66.7 ms. There were 66.44 million internet users (which stood at 41 per cent) in Bangladesh in January 2020. 76.6 per cent mobile users of Bangladesh is feature phone users.

 So smartphone penetration in Bangladesh is still very poor. Falling cost of smartphones and mobile data plan along with the 4G coverage can play a vital role in digital product innovation and as well as process innovation. In some cases the mobile operators are not willing to enhance their broadband coverage to remote areas due to low profitability.  This hinders the growth of financial inclusion. So there exists a viscous cycle. Low profitability does not attract the operators to enhance the broadband network and low accessibility to digital service (including financial product) keep the end users unwilling to own smartphone and/or enjoy digital service. 

Bangladesh has done tremendous job in product innovation and process innovation in recent days. But in model innovation category and information category, we are far behind the international standard. We are not that much focused in end-service level. Our financial sectors are more concerned about Core Banking System (CBS), mobile app development, alternative delivery channel, cards operation etc. But in most of the cases the products are not tailor-made. It is like a shop offering a few products and the end user has to choose his/her product from the shelf.

Bangladesh at present has around 600,000 credit card users. As of Q1 2018, total number of plastic cards in circulation was 13,023,769. Like American Express in USA, our banks/NBFI/MFS can promote prepaid account partnering with superstore retailer and/or other reputed retailers of different products/services/brands to offer differentiated products/services in a wider range for a single family providing different degrees of control (spending limit, alerts, product embargo, zone preference etc.). 

In recent days Bangladesh has remarkable achievement in payment systems and working capital loans for businesses that digitise transactions. Some of the mobile financial service providers allow fund transfer between banks and MFS. But it should offer more interoperability. Even the users should be allowed and facilitated to transfer his/her from one MFS to another that of. 

Inclusion of innovative product is a must in this era. It is high time to bring some blockchain product which will integrate the depositors, lenders, and merchants. In this connection the banks/NBFI can provide cloud-based ERP to its client merchants so that the borrowers can enjoy more flexibility in their recordkeeping. Another problem is that the dearth of technical and financial literacy of the merchants.  But it is evident that our countrymen are quick learner. Anytime anybody offers something new and innovative, a large portion of people embraces it. But the banks/NBFIs have to run extra mile in this regard.

P2P platform is getting popular all over the world. In Bangladesh sole p2p platform might not work. But a reliable platform based p2p can make disruption. Suppose a farmer needs capital in a rural area, but no financial institute is likely to offer him/her capital. So (s)he has to avail his/her capital from NGO at a very high rate of interest like 30-40 per cent. A job holder of metropolitan city can easily finance a rural farmer at a rate of 15-20 per cent. Both parties can be benefited from such deal. Even the SMEs might have access to its required capital in such model.

So far Bangladesh has made noteworthy achievement in online international remittance Services. Agent banking service and mobile financial services are getting popular day by day. In this connection the international remittance is coming exceptionally through banking channel rather than non-banking channel.

Product like instant online personal loan can provide more liquidity to the market. A merchant can fulfill his/her sudden capital need through availability and accessibility of instant online personal loan. But the lenders must have access to customer's transaction profile to approve such loan automatically. In Bangladesh the mobile operators offer emergency balance to its customer according to his/her historical usage. This might be an example of strategic way of thinking to design product like instant online personal loan. Recently a local bank partnering the largest MFS provider is offering such product on pilot basis. Super app like Sheba, Shohoz, Bkash can play a vital role in introducing online personal loan as they have access in voluminous merchants' transaction profile.

So many startups in Bangladesh are performing in price comparison sites (e.g. pickaboo, amartaka) and service aggregators (sheba, shohoz, handymama).  But the comparison is not found as apple to apple. Often this misleads  customers.

Delivery of financial information and education is not satisfactory at all. Often people indulge in schemes like Ponzi and lose their hard-earned money. A major portion of the retail investors of stock market possess speculative trading behaviour. So it is high time to take necessary steps in order to launch nationwide financial literacy programme.         

To achieve remarkable financial inclusion, broadband facility all over the country along innovation in financial service is a must.


Muhammad Oarisul Hasan Rifat, startup analyst.

[email protected]

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