As mobile banking and other technological innovations fuel the expansion of financial services in many developing countries, a new World Bank Group report urged the policy makers to focus on products that benefit the poor, women and other vulnerable groups the most.

No-frills savings and automatic payment accounts, for example, offer a safe place for people to store and transfer money and help them maintain a relatively stable living standard. Evidence, however, is mixed on microcredit and micro-insurance products.

“When well designed, efforts to foster financial inclusion can be an effective way to empower people,” said World Bank Group President Jim Yong Kim on the release of the report mid-night on Monday. “Whether you are a public sector financial regulator or a private sector bank, it is in your interest to get everyone access to financial services. This is good for the world and will help us end poverty.”

“The 2014 Global Financial Development Report: Financial Inclusion” is a comprehensive report yet on the topic. It comes as policy makers are pushing to reach the world’s unbanked – 2.5 billion people who make up about half of the world’s adult population.

More than 50 countries recently set targets to improve financial inclusion. Last month, Kim announced a new initiative to provide universal financial access to all working-age adults by 2020 – with the help of technological innovations such as e-money accounts and e-mobile wallets.

The report released at a time when mobile banking in Bangladesh was growing fast - the number of customers in the country exceeded five million, according to latest Bangladesh Bank figures.

Mobile financial services began in the country in 2010 to spread banking services among poor people, and to help villagers receive remittances from expatriate relatives securely and without trouble, Bangladesh Bank Governor Atiur Rahman said earlier, marking the milestone of 5m customers.

The number of clients reached 5.25m in April this year with a total transaction of Tk1.2bn daily through mobile banking. The total number of transactions by mobile banking was more than 15m in April, compared to about 14m in March. The total transaction value stood at Tk36.4bn in April, which was Tk33.3bn in March.

The central bank has so far approved 26 banks to provide mobile banking while 17 of them have already started the service.

Meanwhile, BB has plans to bring garment workers under the mobile banking system, and is discussing the issue with trade bodies like the BGMEA and BTMEA.

Progress in financial inclusion

According to the World Bank report, mobile banking has played a key role in expanding financial inclusion among low-income populations in countries such as Kenya, the Philippines and Tanzania. Brazil increased financial access to people living in remote areas by promoting technology-based “correspondent banking” – financial services provided on behalf of banks by retails stores, gas stations, and agents on motorcycles and boats on the Amazon River.

The poor benefit the most from technological innovations, which make financial services cheaper and easier to access, the report says. Low-income economies, especially those with remote, sparsely populated areas, have much to gain from allowing the provision of financial services outside of established bank branches.

Many countries have made progress in expanding account use among the poor, women, youth, and rural residents, even without tapping into advanced technology. Some policies have proven to be especially effective, such as requiring banks to offer low-fee accounts, waiving onerous documentation requirements and using electronic payments to deposit government assistance into bank accounts. South Africa, with a public-private framework, increased the number of bank accounts by six million in four years. Brazil’s regulatory reforms led to a dramatic expansion of places offering financial services – now in every municipality in the country.

Challenges in expanding financial inclusion

But challenges remain. While several countries have quickly rolled out basic bank accounts for the unbanked, in some cases, millions of those accounts have remained dormant. Even more troubling, without healthy competition and effective regulation, credit is often overextended to people not qualified to receive it.

And promoting credit without regard to cost actually exacerbates financial and economic instability, the report shows low-income countries face particularly daunting challenges. Thirty percent of the adults there saved in 2011, compared with 58% in high-income countries, according to analyses of the World Bank’s Global Findex database included in the report. And 11% of adults there saved using a bank account, compared with 45% in high-income countries.

In addition, about 9% of the adults worldwide originated a loan from a formal financial institution, but those in developing countries are three times more likely to borrow from family and friends than from banks.

“Financial services are out of many people’s reach because market and government failures pushed the costs of these services to prohibitively high levels,” said World Bank Director of Research Asli Demirguc-Kunt, who co-authored the report. “In many cases, the services are unavailable because of regulatory and legal hurdles.”

Addressing market and government failures

To promote financial inclusion responsibly, the report urges policy makers to improve the standards for information disclosure and support innovative, well-designed financial products that address market failures, meet consumer needs and overcome some behavioral hurdles. For example, commitment savings accounts, where access to cash is possible only after a period of time or after a goal has been reached, can promote savings.

And if well designed, index-based insurance, which links payouts to a well-defined index, such as the amount of rainfall or commodity prices, reduces moral-hazard problems, because payouts reflect a measurable index beyond the control of the policyholder.

Policy makers can also improve financial access by embracing new technologies, which not only include mobile banking, but other innovations such as borrower identification based on fingerprinting and iris scans, the report says.

They should, however, strike a balance between providing incentives for the development of new payment platforms and requiring them to be open to competition.

Responsible financial inclusion also requires consumers to better understand finance. The study finds that standard, classroom-based financial education aimed at the general population has little impact. But financial education can be effective during key moments of a person’s life, such as when starting a new job or when applying for a mortgage loan. People also learn better when financial messages are delivered though social networks and engaging channels, such as soap operas, according to evidence highlighted in the study.

The World Bank Group is committed to supporting countries in their efforts to bolster access to finance. It currently conducts financial inclusion projects with public and private partners in more than 70 countries. 

News:Dhaka Tribune/12-Nov-2013

The number of mobile banking subscribers has crossed the one-crore mark, thanks to a rapid expansion of the financial outlets of commercial banks.
The number of mobile banking accounts has nearly doubled to 1.24 crore in seven months from 50 lakh in April, according to Bangladesh Bank.
Mobile banking subscribers increased 11.79 percent to 99.8 lakh in October, rising from 89.3 lakh in September, BB data shows. Transactions through mobile banking stood at Tk 509 crore in October.
As part of the government’s financial inclusion programme, the central bank has allowed 27 banks to provide mobile-banking; to date, 19 have launched the service.
A lot of enthusiasm is centering around mobile banking as BB is promoting commercial banks to develop their mobile-based financial services, the central bank said in a statement.
Launched in 2011 by two private banks, mobile phone-based financial services have became popular in the country, it said.
Using a mobile phone and without making a visit to a bank branch, a customer can transfer money, receive salaries or pay bills from their accounts through mobile banking.
The central bank has allowed mobile banking systems to provide almost all services from disbursement of inward remittances to cash in and out, person to business payments, business to person payments, person to government payments, government to person payments and person to person payments.
Customers are also allowed to make some other payments such as microfinance, overdrawn facility, insurance premiums and deposit schemes.

News:The Daily Star/14-Nov-2013

Airtel Bangladesh Limited signed an agreement with The City Bank Limited in a bid to enrich the customer services at the corporate office of Airtel in Dhaka on Tuesday.

Rajnish Kaul, Chief Operating Officer, Airtel Bangladesh Limited and Mashrur Arefin, Deputy Managing Director, COO and CCO, The City Bank Limited signed the agreement on behalf of their respective organisations, said a press release.

Under the agreement, common customers of Airtel and City Bank will be able to enjoy exclusive promotional offers and City card members can activate auto debit service for their Airtel bills.

News:Daily Sun/14-Nov-2013

Trust Bank Securities Limited signed an agreement with Cygnus Innovation Limited on implementation of Stock Broker Back office software solution at the bank’s principal branch in Dhaka on Tuesday.

Abu Zafar Hedaytul Islam, Managing Director of Trust Bank Securities Ltd and CM Fazle Sami, Managing Director of Cygnus Innovation signed the agreement on behalf of their respective organisations, said a press release.

Ishtiaque Ahmed Chowdhury, Managing Director of Trust Bank and Director of TBSL, SM Akram Sayeed, Executive Vice President of TBL, CM Tufail Sami, Chairman of Cygnus Innovation Limited, CM Nabeel Sami, CEO of Cygnus Innovation and other senior officials from both the organisations were present.

News:Daily Sun/14-Nov-2013

Rajshahi Krishi Unnayan Bank (RAKUB) has disbursed around Tk3.44bn as loan to boost rural economy alongside employment generation in the country’s northwest region in the first four months of the current 2013-14 fiscal.

Of the disbursed loans, Tk1.36bn for crop production, Tk0.03bn for fisheries, Tk0.21bn for animal resources, Tk0.01bn for irrigation machineries, Tk0.065bn for agro-based industries, Tk0.19bn for SMEs, Tk0.98bn as cash credit, Tk0.215bn for poverty reduction and Tk0.38bn for different other need-based sectors.

Side by side with the disbursement, the bank has also recovered Tk4bn and mobilized deposit worth Tk22.89bn during the last four months.

RAKUB Managing Director, Mofazzal Hossain told the bank has set a target of disbursing Tk14.5bn as loan, recovery of Tk15bn including classified loan worth Tk6.5bn and deposit mobilization of Tk30bn in the current fiscal, reports BSS.

He said the present government had earmarked the huge money for RAKUB for disbursing as crop and rural uplift loan only in the northwest Bangladesh during the current fiscal.

To build a poverty-free Bangladesh, he said the bank had enhanced its lending activities in multipurpose potential fields for boosting agriculture production, intensifying food security and flourishing poultry and dairy sectors to reduce protein deficiency.

Production of pulse, oil-seed, maize and spice crops were brought under special credit programme at 4% interest rate to lessen the import pressure of the items.

Disadvantaged and underprivileged people in the region were brought under the financial inclusion programme.

“We have adopted special credit programme for encouraging the people for setting up solar power, biogas and waste management plant for generating eco-friendly and alternative power to face the power supply deficit,” he said.

He also mentioned that credit is being extended to the sector on a priority basis.

The bank has adopted multipurpose development programmes at the grassroots to make the credit programmes easier. Emphasis has been given on enhancing credit flow towards exploring the potential sectors of the region. Level best effort to ensure transparency and accountability in all the banking activities is continuing.

Apart from this, importance has been given to increasing relations between the bankers and the customers especially the rural farmers for boosting farm production, he added.

More than 120 branches have, so far, been brought under automation and all the 371 branches will be brought under the modern system by 2014 through which the bank will be able to provide various modern banking services online, by means of SMS and ATM booths. 

News:Dhaka Tribune/08-Nov-2013