Lately, financial inclusion (FI) has been dominating discussions among development practitioners. For a proper assessment, this important issue needs to be framed under two dimensions-financial literacy and consumer protection.
While talking about FI, the immediate past president of the World Bank Jim Yong Kim said, "Financial inclusion allows people to save for family needs, borrow to support a business, or build a cushion against an emergency." Kim went on to stress that access to financial services contributes toward reduction in both poverty and inequality.
If seen under this context, it is sad millions of people worldwide are not getting banking services. Payment and trade-related services and lending are available only to the privileged. According to the Global Findex Database (2017) published by the World Bank, nearly half of the unbanked are located in the seven most populous countries of the world including Bangladesh. The poor, uneducated, women, and minorities are especially hit hard by the issue. People living in remote areas are also left out. This exclusion can be blamed on urban bias. Despite recent gains, women in Bangladesh, Pakistan and Turkey trail men by 30 per cent, as far as financial exclusion is concerned.
This is unfortunate. When savings and investment grow side-by-side, financial markets tend to mature and participants grow more sophisticated. Market equilibrium is achieved between the expectations of savers and the return offered by investors/risk-takers. As consumers step into the formal sector, they are included in the tax net and official statistics.
By some estimates around 1.70 billion adults are unbanked in the world. Looked from another perspective, around 69 per cent of adults have a financial services account either in a bank or a mobile money provider. Globally about 20 per cent of mobile accountholders have not made or received any payments. It is true that the coverage in banking services is increasing. This is more pronounced in the case of mobile banking, especially in emerging economies like Bangladesh, aided by a rapid expansion in internet and mobile network coverage.
Some of us wrongly assume that people who lack bank accounts are not financially savvy. On the contrary, large sections of them use the informal sector for financial services. These informal modes include money-lenders, pawn brokers and hundi-wallahs. Because incomes and expenses among the poor are closely aligned, they are acutely aware of the costs and benefits involved in the services of the shadow economy.
So much paperwork is involved in opening a bank account in Bangladesh that the common man is often intimidated by the sheer number of processes. One way of going around this is to ease various restrictions, related to account operation, and excessive documentation. Jan-Dhan Yojana, a scheme by the Indian Prime Minister Narendra Modi for mass banking, is worthy of mention, here.
Under this ambitious plan, the Adhar (biometric ID) card is sufficient as documentation to open a no-frills savings account with zero balance. Apart from being eligible for interest on deposits and overdraft facility after six months (subject to conditions), pension payments and other government transfer payments may be channelled through this account.
Bangladesh should study this bold initiative. The Association of Bankers Bangladesh (ABB) and the Bankers Association of Bankers (BAB) can take the opportunity to reach out to non-elites in this pretext.
Additionally, the time for financial education is ripe. As a practical skill, financial literacy is vital for one's financial well-being throughout one's life cycle. Courses may be designed and imparted on a staggered basis, that is to say levels of difficulty, up to the Higher Secondary level.
Money matters are learnt best by individuals if these are taught to them when they are young. Templates are available in the form of day-long courses throughout the country offered by the Bangladesh Securities & Exchange Commission (BSEC) and diploma courses offered by the Bangladesh Institute of Capital Market (BICM). A little tweaking may be necessary.
Consumer rights often do not get the importance it deserves. While highly-regulated banks and non-banking financial institutions are less likely to go astray, the non-performing loan situation in Bangladesh is unacceptably alarming. A raft of suggestions may be considered to make executives and directors more accountable under pain of punishment. In Canada for example, each bank has an ombudsman. Banks may also be forced to have one or more customers in their boards. Bangladesh Bank can call independent directors to hear from them confidentially. The Consumers Association of Bangladesh (CAB) can also send representatives to banks' AGMs.
Raihan Amin is an educator & trainer
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