In spite of the expansion in mobile network coverage, the full potential of digitalization remains untapped in South Asian countries, including Bangladesh. Of the many roadblocks, high cost of data usage charge and smartphone affordability are the most rudimentary ones.
A World Bank report released on Tuesday finds, for the bottom 40% of the population in Bangladesh, the cheapest 30-day data package (with at least 6 GB) costs about 5.6% of average monthly gross national income (GNI) per capita. And the price of smartphones poses yet another constraint to use, especially by the poor.
Device affordability is affected by taxes, customs duties, and constrained local manufacturing capacity relative to demand. These affordability challenges have significant consequences.
World Bank research suggests that individuals are 5% less likely to use mobile internet if the average mobile data cost is more than 2% of an individual’s monthly income and are 4% less likely to adopt mobile internet if the average cost of an internet-enabled phone is more than an individual’s monthly income.
Drawing from country assessments produced in 2021 for Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka, the World Bank on Tuesday published the report, South Asia’s Digital Opportunity: Accelerating Growth, Transforming Lives. It clearly demonstrates that despite having good mobile connectivity, there remains a huge usage gap in countries across the South Asian region. And the gap is one of the biggest in the case of Bangladesh.
Increase affordability of data and devices
The report suggests that South Asian countries should address the usage gap by putting in place innovative pricing models, lowering sector-specific costs, and engaging in partnerships for developing general-purpose digital skills. The review and reduction in sector-specific taxes can improve affordability and access, and stimulate demand. Targeting affordability measures for the poor may have the most impact and be sustainable in the long run. Device access for the poor through poverty alleviation programs in other regions suggests positive effects of device distribution, especially for women and female-headed households.
The World Bank notes that usage gaps stem not only from low purchasing power for devices and data, but also from the lack of digital skills and awareness. "Engaging in robust partnerships to bridge these gaps should thus be a policy priority," says the report.
Bangladesh situation
Bangladesh’s national ID system now covers 89% of adults but the system has not been as effective for service delivery and digital transactions as in India and Pakistan, most likely because of the narrow focus of the operating entity - the Election Commission. Identification systems that enable online transactions with the same levels of trust and security as face-to-face interactions can unlock enormous opportunities for service delivery in the public and private sectors, the World Bank notes.
The World Bank report finds that globally the financial inclusion gap is one of the widest in Bangladesh; adoption of digital financial instruments remains limited among women despite an increase in mobile phone ownership. In general, this situation is driven by various factors, including lower ID coverage and digital literacy, less confidence in using mobiles, limited knowledge of English, patriarchal household dynamics, and that nearly 99% of digital finance agents in Bangladesh are men. It however adds that Bangladesh is in the process of enacting a National Payment Systems Act to address some critical gaps.
The report notes that governments and regulators should proactively review legal and regulatory frameworks and address gaps and ambiguities that discourage market entry and the development of new business models. "Bangladesh, Bhutan, and Pakistan have recently launched initiatives in this direction that they should consider expanding."
Support policy reforms to facilitate cross-border payments
The World Bank report observes that integrated and interoperable payment systems offer considerable potential, beginning with cross-border partnerships and cooperative business arrangements among payment services providers.
"The State Bank of India’s operations in Bangladesh, for example, could facilitate acceptance of RuPay cards issued in India, under a partnership with State Bank of India. Sonali Bank (Bangladesh) operations in India and PayTM could accept Bangladeshi bKash in India under their respective acquiring licences in the country."
It says the countries need to simultaneously explore options and models to be considered for regional integration either by using existing infrastructure or by setting up a common new infrastructure for providing services to countries in the region.