From writing letters to our fathers to send money for new books through money orders, to receiving Eid salami cheques via mobile money, we all grew up.
So grew Bangladesh. Over the last decade, the country has become more financially inclusive, with its citizens using mobile financial services (MFS) to send, receive, and save money. Presently, over half of the adult population in Bangladesh owns a bank or MFS account. From the convenience of transactions to security and ease of saving, MFS has generated many positive impacts in society. Women and those below the poverty line, who often remain excluded from formal financial services, have especially benefited. Individuals who are uncomfortable entering a bank outlet can avail day-to-day banking services from the next-door grocer who also happens to be an agent banker.
According to the Global Findex Database 2021, financial account ownership in Bangladesh – be it a digital wallet or a traditional bank account – has grown substantially over the past decade. Specifically, among Bangladeshi adults, it grew by 22 percentage points, from 31% to 53%, over the ten-year period of 2011 to 2021. However, this momentum is decelerating—account ownership rose by just three percentage points, from 50% to 53%, between 2017 and 2021.[1] This is problematic, as nearly half of the adult population remains outside the financial sector’s purview. These findings were presented at a seminar titled “The Future of Financial Inclusion: Presenting the Findex 2021 Bangladesh Findings” organized by the BRAC Institute of Governance and Development, BRAC University in collaboration with the World Bank.
Upon deeper investigation, the numbers reveal an intriguing story. While overall growth has slowed, a dramatic shift can be seen in account type. According to the Findex Data on Bangladesh, the number of mobile financial account holders has surged in recent years, by 26 percentage points since 2014[2], while the share of traditional account holders has fallen. The increase in mobile financial accounts can, at least in part, be attributed to the Covid-19 pandemic when countrywide financial support was distributed solely through mobile money. Moreover, many financial services are now delivered more conveniently via MFS than by the traditional providers. For example, users now make payments through their phones instead of standing in ATM queues. Thus, today mobile banking is often the preferred financial platform in Bangladesh.
Gender-based trends have also changed significantly over the last few years. The share of female account-holders has steadily grown since 2011. For example, between 2017 and 2021, the gap in the rate of account ownership between men and women decreased from 30 percentage points to 19 percentage points. The trend is promising for women’s financial inclusion, although there is more work to be done: only 43.5% of adult females hold financial accounts, and Bangladeshi men are 24 percentage points more likely to use MFS than women.[3] Various factors drive this gender gap in financial inclusion, including entrenched cultural norms. Patriarchal norms and gender stereotypes leave many women unbanked, as pointed out by Dr. Sayema Haque Bidisha in the seminar. In many cases, families prevent women from accessing financial services or owning accounts. Furthermore, women themselves are often conditioned to believe that financial matters are better dealt with by men. These cultural factors prevent many women from enjoying the benefits of financial inclusion, such as formal savings to advance long-term financial security.
The implications of financial exclusion can be especially severe for women. According to the Findex 2021 results, 50% of Bangladeshi males reported that they would be able to secure a reliable source of money in case of emergency while only 25% of women reported the same. Yet, Bangladeshi women are more vulnerable than men during emergencies. Research shows that women are more likely to self-sacrifice during a crisis, foregoing meals and healthcare to divert resources to the family.[4]
The gap in digital financial inclusion also persists along educational lines. The Findex 2021 findings illustrate a 10 percentage point gap in account ownership between individuals who have completed primary school or less and those who have completed secondary education or higher. Language and digital literacy are pervasive barriers for the lesser educated. The MFS user interface, which uses terminologies like ‘cash-in’and ‘cash-out’, is designed for English speakers. The experience of an informal sector worker stands out in this regard. Shefali Das works as a shoe shiner in Dhaka. She received a QR code for digital payment as part of the recent ‘Cashless Bangladesh’ initiative. Although she has been receiving payments digitally, she explained that she didn’t understand the technicalities of the system, nor the content of the confirmation messages.[5] These barriers are exclusionary to the lesser educated and can even render them more vulnerable to scams. World Bank Economist Saniya Ansar noted that 60% of the 60 million unbanked adults in Bangladesh need help to use accounts. Language and digital literacy barriers, coupled with valid concerns regarding safety, often render digital banking an unpleasant and even dangerous experience for ordinary citizens.
While changing cultural norms and improving educational attainment are long-term processes, prudent market initiatives may pose shorter term solutions. First, ensuring a competitive marketplace may engender services that better meet users’ needs. As Khondoker Shakhawat Ali, a social science researcher, noted during the seminar—“We see fast growth in the MFS sector, but we don’t see competition.” Presently, only a few banks offer services designed for female users. Greater competition in the MFS sector could spark demand-driven and women-centric financial services, while creating a women-friendly banking environment.
Greater competition may also prompt MFS providers to make their interfaces easier to understand. Although most MFS apps are available in both Bangla and English, Bangla is not available in the USSD platform[6]. This two-way method of communication through dialing short codes (e.g: *247# for Bkash) is the best available technology for low-income customers, who often lack access to smartphones to utilize MFS. As a result, users navigate their digital wallets through the clumsy USSD code instead of an intuitive digital app. Healthy competition in the MFS market is imperative to generate user-friendly services for the lesser educated.
Second, DFS providers can better reach the unbanked by collaborating with those who make payments to them. For example, of the 60 million unbanked adults in Bangladesh, 7 million receive a private sector wage payment. Introducing digital wage payments to these workers would generate 7 million new accounts. Similar opportunities exist in the public sector, as public social safety net programs frequently issue G2P payments. Moreover, specialized savings schemes for low and medium-wage earners would offer an additional incentive for these workers to turn to banks.
Channeling the currency sitting idle in tin cans or under mattresses into the formal financial system would certainly represent a boom to the economy. But perhaps more importantly, expanding financial inclusion to society’s most vulnerable can help to reduce poverty, promote social inclusion and empowerment, and drive sustainable economic growth for a better future for all. But financial inclusion for the currently unbanked populations, disproportionately represented by women and the poor, will require a new approach. Specifically, best case private sector practices, clever public-private partnerships, and effective regulation—with a continued focus on MFS—can help expedite financial inclusion in the short run.
References
[1] World Bank, Global Findex Database https://openknowledge.worldbank.org/bitstream/handle/10986/38148/IDU0bbc001f30973f04bf00a8db0909f3bff190a.pdf?sequence=5&isAllowed=y
[2] Ibid
[3] Ibid
[4]https://www.humanitarianresponse.info/sites/www.humanitarianresponse.info/files/documents/files/scbang1.pdf
[5] মতিঝিলে মুচির দোকানেও ‘ডিজিটাল’ লেনদেন সুবিধা, Daily Prothom Alo (January 19, 2023)
https://www.prothomalo.com/business/economics/qmu02a5dvb
[6] Unstructured Supplementary Service Data
Parthib Mahmud is a Program Associate at BRAC Institute of Governance and Development (BIGD)
