Participants take part in a roundtable on mobile financial services at The Daily Star Centre in Dhaka yesterday.

Bangladesh can use mobile financial services not only to accelerate financial inclusion, but also to bring more than 85 percent unbanked population to the mainstream at a cost effective manner.

Despite the enormous demand for mobile phone-based financial services, a large-scale adoption is yet not seen.

Analysts and policymakers made the observation at a roundtable co-organised by The Daily Star, BRAC Bank and bKash at The Daily Star Centre yesterday.

Former adviser to caretaker government Abdul Muyeed Chowdhury moderated the programme.

Some of the discussants proposed to form a body comprising the officials of the central bank, the telecom regulator, microfinance regulator and other stakeholders, to promote the services.

“A body can be formed to identify the problems and expand the services further,” said Khondkar Ibrahim Khaled, chairman of Bangladesh Krishi Bank and former deputy governor of Bangladesh Bank.

He said microfinance institutions can be the alternatives to the banks in expanding the mobile financial services across the country.

Muhammad Abdul Mazid, former chairman of the National Board of Revenue, also echoed the views of Ibrahim Khaled on the coordination issue.

“There is a necessity of coordination among the regulators to avoid any conflicting situation,” said Mazid who presented a paper on mobile financial services in Bangladesh.

The coordination issue came to the limelight as mobile financial services in Bangladesh are a bank-led model run by mobile phone companies, which are regulated by the Bangladesh Telecommunication Regulatory Commission (BTRC).

Often these two regulators come up with separate orders having no coordination between them.

Iqbal Quadir, a director of bKash and a teacher at the Massachusetts Institute of Technology in the US, also raised the conflicting issues between the banking regulator and the telecom regulator.

AB Mirza Azizul Islam, another former adviser to caretaker government, also stressed the need for coordination in the regulatory framework of the Bangladesh Bank and the BTRC.

Abdul Muyeed Chowdhury also endorsed the idea of forming a separate committee to promote the services.

Bangladesh, with a population of 150 million and a per capita income of around $800, has seen a steady economic growth over the past 15 years. Poverty rates have halved from 60 percent in early 1990s to 31 percent in 2010.

This development has also been reflected in the growth of the country's financial sector, supported by the recent transformation in banking technology.

Speakers said despite these significant improvements, access to basic financial services is still restricted to only 15 percent people.

They said, for the financially excluded people, opening and maintaining bank accounts can be costly, complex and time-consuming due to a lack of education and awareness.

The central bank has allowed 23 banks to operate mobile financial services. But only two banks -- BRAC and Dutch-Bangla -- have come up with the services and registered 20 lakh clients so far.

“Identity is a big problem,” said Nazrul Islam Khan, secretary to the ICT ministry, on the security concern in mobile banking services.

Khan said he is trying to convince the government to make an accurate database of the population, which can be used for mobile banking services.

Mahabub Hossain, executive director of BRAC, a non-government organisation, said mobile banking can benefit the poor who feel shy to go to a bank. But further investment is needed to reach out to the people, he added.

Khalid Shams, former chairman of Grameenphone, said there are some risks in the service, but Bangladesh should seize the opportunity.

Shams, a former bureaucrat, also asked the operators to come up with new products for the targeted people.

Abul Kashem Md Shirin, deputy managing director of Dutch-Bangla Bank, said cost is not a big issue in mobile banking as there will be no cost if there is no use. On security concern, he said it is like using credit/debit cards and there is nothing to be anxious.

Michael Kuehner, chief executive officer of mobile operator Robi, said costing and convenience of services are the two main components in mobile banking.

Hassan Zaman, chief economist of the central bank, said they have planned to launch a financial literacy campaign to make people aware. On why other banks are not coming with the mobile banking services, he said may be it is for the investment and profit margin issues.

Zaman also said the BB is trying to disburse money to the targeted people through mobile phones under different government programmes.

Brig Gen (retd) Shahedul Anam Khan, defence and strategic affairs editor of The Daily Star, delivered a welcome address, while Shah Husain Imam and Salehuddin Ahmed, associate editor and managing editor of the daily, and Syed Mahbubur Rahman, managing director of BRAC Bank, also spoke.

News: The Daily Star/Bangladesh/9th-Dec-12

"We must grow from being a 'knowledge'-bank to being a 'solution'-bank." This is the new agenda of the new World Bank president Jim Yong Kim. Dr Kim is a Japanese-speaking Korean. He moved from Korea to the United States of America at the age of five. Being an anthropologist and a social worker, now he is the president of the World Bank (WB). From an immigrant to a president of the World Bank, he is the first Asian American to be the head of this Washington-based multilateral capital donor. It is a long way for him.

Mr Kim has crossed that long way, his daily life having been full of struggle and experience. Through struggle, he has understood that the daily life of the human being is the best book of the world. That is why he has given the clarification on how his dream 'solution-bank' will work. He said, "..as a solution-bank, we will work with our partners, clients, and local communities to learn and promote a process of discovery. Through decades of development work I've learned that the best solutions to economic and social problems often lie with the individuals and communities coping with these challenges in their daily life. They have been my greatest teachers. We must listen to, and act on, their insights."

We know the history of the World Bank. It was founded 68 years before as a 'reconstruction bank' focused on rebuilding Europe after the Second World War. Robert McNamara, the radical chief of this global body, changed the character of the World Bank (WB). He is the first man who made the WB as an institution for the whole world. Mr McNamara transformed it from a reconstruction bank to a 'lending bank'. He extended funding for poverty reduction in the developing countries. It was then a great decision for the WB and for promotion of the developing countries' socio-economical and political interests. It was also a reflection of the European and American policy towards the developing countries at that stage. However, the WB got itself transformed into a knowledge-bank after the era of Mr McNamara.

Now its first Asian-American president wants to write a new chapter for the WB. About his new chapter, Kim has said, "I believe it is time for us to write the next chapter in our evolution: it is time for us to become a 'solution'-bank. We must listen, learn, and be partner with countries and beneficiaries to build bottom-up solutions. This is how we will increase our relevance and our value in today's and tomorrow's global economy."

In the present-day world, the developing countries are searching for new solutions to a different set of challenges; they aim at ensuring the participation of their poor people in the growth process. Such countries want to close their infrastructure and energy deficits. Besides that, they want second-generation policy reforms, embracing their roles as responsible and generous stakeholders in the global system. The low income countries are also searching for new solutions to help accelerate growth, boost competitiveness, and lift their citizens out of poverty. In addition to that, the fragile states, according to the WB, now want to overcome conflict and to ensure security, justice and jobs. Even then, in his address to the plenary session of the annual summit of the WB this year, the WB president gave two examples. One relates to the case of an old woman of Honduras and another is that of a mother in India. The old woman of Honduras said for their safety, they want more police but they need, above all, more jobs. The mother in India said they do not just want to escape poverty; they want to build and achieve all dimensions of prosperity such as good health, higher incomes, quality education and justice.

The demand and the situation as such are only new but also very different from any time of the past. And the demand of the society and the transition of the world economy are basically in favour of writing a new chapter. In this situation, the decision of Mr Jim Yong Kim is not only right but also the only way; there is no other alternative. The WB must have to write a new chapter and this chapter is obviously its transformation into a 'solution-bank'. But how they will write this chapter? In his address to the plenary session of the annual conference of the WB this year, Mr Kim said that the fuel of his life is a citation of Martin Luther King Jr. He, thus, quoted the latter, "the arc of the moral universe is long, but it bends towards justice." He further stated that he would like to carry it with himself to the WB Group. Is it possible for him to bend it towards justice? Mr Kim has said, it is a challenge to bend the arc and he has accepted that challenge. Why has he to bend the arc towards justice? About this, he said, "with over one billion people living in extreme poverty and 200 million unemployed, now it is not the time to go our own way or to focus only on our own narrow interests."

In such a world, one cannot focus on one's narrow interest only. Organisations like the WB should have broader, long-term goals to serve. The WB is not only a bank but also the global development organisation. So when the world economy is changing, the demand of the people of world have also been changing. The WB must also change. Mr Kim wants this change. He said, "to be an effective solution-bank, we will need to seek answers beyond our walls". Besides that, Mr Kim said in an interview with a newspaper, "we are going to eliminate the bureaucracy." To eliminate bureaucracy, he will like to run the WB in a befitting way. "First we'll be establishing a clear and measurable bottom line…… second we're strengthening our implementation results …. third, we will rapidly improve our ability to provide our clients with integrated solutions for maximum impact…….fourth, we need to continue investing data and analytic tools, building on the success of the Open Data initiative."

So it is clear that Mr Kim has a detailed plan to bring about changes to the WB from a bureaucratic knowledge-bank to a solution-bank. It is a revolutionary programme. Mr McNamara also did a great deal of changes to the WB. It was also the demand of the then bi-polar world. Now, in this unipolar world, it is also the demand of the world to make a change to the WB in accordance with to-day's the socio-economical demand. Mr Kim is fully appreciative of this need. So he has accordingly drawn up the agenda for this.

Now the centre of the global economy is changing in a unipolar world. But identification of the centre of this economy involves an uncertain process. Many political transformations are changing the demand and the movement of the global economy at every moment. So, the present time is more indecisive and unpredictable in character than that of the bipolar world. That is why it will be relevant to see how Mr Kim will move forward to bring about appropriate changes to the WB to realise his dream about its becoming a solution-bank. He is a dreamer and an optimist.

News: The Daily Financial Express/Bangladesh/8th-Dec-12

Recently BRAC Bank has successfully introduced a new product - Krishak Card or a card designed especially for the farmers' use. This is nothing new to the people of Bangladesh. From time to time the banking sector has been coming up with different products for the lower income group of people. In particular, the Krishi Bank has been providing agriculture loans to the farmers for a long time.

But when it comes to card business, the Krishak Card has added a new dimension to it and it is much younger than other banking products in Bangladesh. Previously, banks used to design credit cards for high-profile businessmen, top executives of corporate bodies or professional bodies with high net worth. So there was a perception that credit card was only for the rich people or for the upper class people of the society.

Multinational banks first introduced credit card in Bangladesh. American Express, Grindlays Bank Plc and the then BCCI were the pioneers in introducing card business in Bangladesh. Of all the products then, holding an American Express card was deemed a symbol of status. Businesspeople used to show Express cards as a mark of high net worth of a business magnet. So these cards were only for the people in the upper class or upper middle class bracket. The card brands that dominated the market then were Visa Master card, American Express and Thomas Cook. Later on, private banks started offering cards to all sections of people, even to the newly-appointed junior executives of companies or small businessmen with stable incomes.

The main advantage of credit card is it allows a certain amount of credit facility without any security and if the credit amount availed is settled by the bill date, then no interest is required to be paid.

Gradually the card business is increasing in our country as in other developed countries. But still it is within the reach of only a section of urban people, not the mass people.

The recent initiative of BRAC Bank is praiseworthy in consideration of the things involved. First of all, they have chosen a segment that involves risks in terms of security of the credit and the income level needed for determining the credit worthiness of the farmers, whose income level fluctuates along with the uncertain production and market prices of their produce. Secondly, in business no one likes to become a pioneer in such a risky area with a new product. But BRAC Bank has come forward with a product that is designed for the farmers' use. The Krishak Card was first launched in Jhenidah in 2011 and this time they have issued 200 cards for the farmers of Dinajpur district which is known for rice cultivation. The farmers will use the cards to borrow funds and start repayment after selling their produce.

There are many aspects of such a dynamic product. One is banking products have become very limited. Competition in the banking arena has increased many times and is also increasing day by day with some new banks going to enter the existing market. Naturally, the competitive environment needs the existing banks to redesign their products and services and explore new areas of markets for their products, such as the new and comparatively unexplored market of rural banking.

Microcredit extended to the poor people has already gained worldwide appreciation. Still full-fledged banking services for the poor people are absent or in a very nascent stage. The BRAC Bank's launch of modern banking products like card service to farmers deserves appreciation. First of all, the system allows farmers' access to credit without security, as it is difficult for a farmer to get a loan by providing any collateral against it. The loan procedure is another hassle for the farmers as most of them are not aware about how to apply for a loan and get it and sometimes the lengthy loan procedure does not allow them to use the fund for the intended purpose. So they spend the loans for their personal purposes and later on become loan defaulters. But by using credit cards they can buy necessary materials such as seeds, fertilisers and other things as required instantly without any documentation or paper work. This will offer the farmers an easy access to instant fund and make farming more productive and easier for them.

Definitely the aspects discussed are the bright side of the said card, but as usual there are some problems with credit card for both sides - the company and the users. As we know, the interest rate of credit card on an unpaid amount is as high as 30 per cent. So, if it remains same in case of Krishak card, then surely it will be difficult for the farmers to borrow fund at such a high rate. Farmers are not habituated to use such loan facilities. So they cannot plan how to repay an instalment or a full amount.

Moreover, the agriculture sector is rife with uncertainties. Crop failure is a common phenomenon even in developed countries, because no one has got any control over the weather conditions. So, if anything goes wrong, how will they settle their dues? One option is a normal credit shield being applied to normal credit cards. But once again it is going to increase the repayment amount on the borrowed money and for marginal farmers it is difficult to repay.

News: The Daily Financial Express/Bangladesh/8th-Dec-12

Mohammad Abdul Mannan, Managing Director of Islami Bank Bangladesh Limited, said that “We need to change the financial system from greed-based to need-based,” He said “The current system has helped concentration of global wealth into the hands of a few while the vast majority of the people remained deprived.” Mohammad Abdul Mannan said this recently in an interview with Gulf News, the renowned newspaper of Middle-east published from Dubai.

The world economy is not showing signs of much improvement. Over the last two decades, the global economy has faced multiple shocks and crises. The recession comes in quick succession — much faster than anytime in history.

The global financial crisis of 2008 has exposed the flaws of the conventional banking system. In the US, more that 200 lenders collapsed during the first two years of the crisis.

That points to capitalism and the global financial system — and its flaws. What’s wrong with it? The system is greed based — that caused the biggest recession in human history, experts say.

During this same period, the Islamic banking industry grew at a higher rate. Why?
“We deal with real assets. When you invest in assets, you cannot go wrong. You cannot have a bubble built on assets,” Mannan points out.

However, the mother of all bubbles — the US subprime mortgage bubble was an asset bubble. “That was greed,” he argues. “Lenders were cashing in on consumers’ misery — from prime to subprime mortgage.”

As the conventional banking showed significant decline, Islamic banking — had begun to shine. Islamic banking assets will reach $1.1 trillion by the end of this year, a significant jump of 33 per cent from their 2010 level of $826 billion, according to a report by Ernst and Young.

Ashar Nazim, Mena Islamic Financial Services Leader, Ernst & Young, said: “The global Islamic finance industry continues its quest to boost international competitiveness and to build a sustainably profitable business model. Both the challenge and the opportunity currently facing leading industry players is how will Islamic banks succeed in making the historical growth curve sustainable.”

IBBL, whose deposits grew to Tk 392 billion (US$4.72 billion or Dh17.57 billion) in recent months, serves 6.5 million customers. The 29-year-old lender, the first Islamic bank to be established in South and Southeast Asia, is majority owned by GCC investors, such as Dubai Islamic Bank, Islamic Development Bank, Kuwait Finance House, among others. The bank’s investment has reached Tk 380 billion while its net profits last year reached Tk 11.5 billion.

The success of Islamic banking during the 2008-2012 downturn has inspired many in the conventional banking industry to shift towards Sharia-compliant lending activities. Islamic banking is expected to reach $2.7 trillion (Dh9.9 trillion) by 2015.

However, most Islamic banks are just replicating the traditional banking activities — ignoring their social responsibilities, critics say.

“Although Islamic principles focus more on social and human development and lending philosophy in Islam is guided towards the overall social development of people, most Islamic banks are operating on just a profit-loss mechanism while replicating the all other norms of traditional banking practices,” Mannan says.

Corporate social responsibility (CSR) is very strong in Islamic beliefs and practices — which is largely ignored by the Islamic banks, generally, he adds.

“Banks should focus on maximisation of welfare instead of maximisation of profits. Famines are not caused due to lack of wealth, but disproportionate distribution of wealth,” Mannan says. “In fact, Islamic banks should invest their resources in areas that contribute to socio-economic development as well as help human development in a society. In a way, Islamic banking itself is a CSR practice — if it runs with the true spirit of Islam,” he says.

As an example, he says, his bank started micro-finance in the 1990s to help the poor and unbanked population under the banking system. Today, IBBL has brought 600,000 poor families in 14,500 villages under the bank’s Islamic microfinance scheme, known as Rural Development Scheme (RDS).

“About 85 per cent of our customers are women. We have allocated 20 per cent of our resources in the RDS which is about 2.5 per cent of our portfolio,” Mannan says. “Today, it represents about 50 per cent of the world’s Islamic micro-finance.”

However, most Islamic banks are yet to embrace micro-finance.
“Unlike conventional banks, Islamic banks’ objectives should include social dimensions. Given this social role, Islamic banks can complement the efforts of Islamic microfinance institutions in providing the much-needed funds to the poor to facilitate their economic upliftment,” Habib Ahmad, an economist with Islamic Development Bank wrote in a research paper.

For Islamic banking, there is another issue — the lack of proper Sharia-compliant money market. Although the UAE is home to the world’s first Islamic bank — Dubai Islamic Bank — it is yet to develop one.

“We are operating in the same money market — the inter-bank borrowing market — where conventional banks also operate and which runs on the conventional banking principles,” Shaikh Abdul Karim, Head of operations at Sharjah Islamic Bank, says.

“We need a separate Islamic money market where we could create our own benchmark profit rates for borrowing that will not fluctuate due to external reasons, speculations and credit default swaps. Since Islamic banks deals in assets and run on profit-loss principles, this money market would offer a better and stronger alternative and contribute more to the economy.”

An Islamic inter-bank lending market will help the cash-rich Islamic banks to place the surplus cash for overnight investment that, in turn will help the Islamic banking industry to grow, Karim says.

The Bangladesh government has recently created an Islamic money market, although it is yet to formalise an Islamic banking act.

“Islamic banking is a work in progress. We have to walk a long way to get there,” Mannan says.
It is estimated that as much as half of the savings of the world’s 1.5 billion Muslims will be in Islamic financial institutions by 2015. The Indian government is contemplating introducing Islamic banking in the country where Muslims are by far a minority.

Gordon Bennie of Ernst and Young, says, “Reduced profits and valuations are amongst the biggest business risks facing Islamic banks, which can partially be tackled by introducing a service driven culture and investing in customer centric activities. Sharpening of their Sharia differentiation by acquiring and building specialist product skills and ensuring better integration with the real economy will help CEOs to take their banks to the next phase of growth.”

News: The Daily Independent/Bangladesh/8th-Dec-12

Mercantile Bank Limited opened its 83rd branch at Anowara Super Market, Bishaw Road at Gobindogonj in Gaibandha recently.

Md. Abdul Jalil, MP, Chairman of Mercantile Bank Limited inaugurated the branch as chief guest, said a press release Friday.

Md. Monowar Hossain Chowdhury, MP was present as special guest.

Md. Abdul Jalil Chowdhury, Managing Director and CEO of the bank and senior executive of the bank and other invited guests were also present.

News: The Daily Sun/Bangladesh/8th-Dec-12