School banking: Ensuring financial inclusion since childhood

The principle functions of banks are broadly divided into two segments-- collection of deposits from surplus and supplying the collected fund to the deficit units through disbursement of loans. Usually, banks collect deposits from the account holders, irrespective of their age, class, social position, religion etc.

School banking is a wonderful concept that can help financial inclusion. Under this, school-going students can save money in their bank accounts. This is helpful for instilling a habit of saving from an early age among children.

Bangladesh bank, the central bank of Bangladesh, directed all the scheduled banks to start a financial inclusion policy for school-going students under the name of School Banking through BRPD (Banking Regulation and Policy Department) circular number 12 on November 2, 2010. Slowly but steadily, many banks have initiated the service for students. Though the concept is comparatively new for many school children, their parents, teachers and others, the programme is already gaining popularity. School banking accounts can be opened for students aged between 11 to 18 years.

Policy guidelines for school banking were circulated by the Bangladesh Bank on October 28, 2013 through GBCSRD (Green banking and CSR Department) circular No 7. In its guidelines on school banking, Bangladesh Bank had suggested that participating banks could provide educational insurance facility to account holders. If a student faces financial crisis to continue his/her education due to family emergency or other reasons, financial help can be provided under the insurance coverage.

School banking systems began in the USA around the late 1870s. J.H. Thiry is credited with pioneering the concept through his book 'School Savings Banks in the United States'. After 1885, school savings proliferated to public schools throughout the USA. School Savings Banking was systematically promoted by the Savings Bank Division of the American Bankers Association (ABA) from 1913. The ABA approved a curriculum for use in public schools which was promoted as the standard system of School Savings Banks.

School banking is not new in Bangladesh. Some banks, including Muslim Bank, had introduced a school banking programme in the 1960s. But that did not last long. Later on, AB Bank (formerly Arab Bangladesh Bank) launched the service at Sunshine Grammar School in Chottogram in 2003. But that programme did not become popular. These initiatives were informal and beyond the instruction of the central bank.

Formal school banking accounts were opened by the commercial banks following the instructions of Bangladesh bank in 2010. Bangladesh Bank has appointed a lead bank in every district to monitor the school banking initiative. Their responsibility is to encourage other banks to open student banking accounts, arrange an annual conference on school banking and report on how many accounts have been opened. The lead bank also gives individual targets to the banks to foster account-opening initiatives.

As per the central bank's latest quarterly report on financial inclusion, deposits to school banking accounts increased to around Tk 15.46 billion around the end of March 2019. This also showed that the total amount was deposited through 1,954,231 school banking accounts at 55 scheduled banks, as of March this year. According to the report, school banking service seemed to be more popular in the cities than in the rural areas as 1,237,458 school banking accounts were opened in the cities against 7,16,773 accounts in the rural areas.

The report also pointed out that banking is more popular among the male students than the females as 1,144,775 accounts were opened by male students whereas 809,456 accounts are opened by female students. Dutch Bangla Bank, Islami Bank, Eastern Bank, United Commercial Bank and Dhaka Bank are the five banks that pulled most of the deposits from the students. According to the report, Islami bank opened 370,991 accounts, which is 18.98 per cent of the total number of accounts. The highest deposit of Tk 4.55 billion was collected by Dutch Bangla Bank, as mentioned in the quarterly report.

There are some rules that students and parents have to follow in order to open and maintain a school banking account. For example, students cannot withdraw cash unsupervised. They need to have their guardians' or parents' with them while withdrawing money from accounts. Also, account-holders need to be Bangladeshi citizens. A student can withdraw a maximum of Tk 2,000 through ATM booths or points of sale on any given month. However, withdrawal amount can increase to Tk 5,000, if guardians request for it.

The school banking accounts will eventually be converted into general savings accounts when the student account holders become adults. Of course, this is possible only with confirmation from the account holders. School banking accounts are free of any charges.

A wide variety of facilities are being provided to account holders and their parents through school banking services. Transactions through school banking accounts are more secure. School banking accounts also make it easy for parents or guardians to pay school fees through the accounts.

School banking is teaching the children how to manage their money and funds effectively. This programme was introduced to familiarise school students with banking services and advanced banking technologies with a view to ensuring their financial inclusion. The central bank should closely monitor the school banking account activities of commercial banks and ensure that every school student gets the chance to open a school banking account.

Mir Mahmudul Haque Chowdhury is a banker.

[email protected]