Lack of awareness of value proposition among factories and demonstration cases also stood in the way of wage digitization in RMG factories
Non-availability of national ID of workers, lack of financial literacy and awareness about accounts, and difficulty in covering fixed costs incurred by MFS providers are among major constraints in wage digitization in readymade garment industry in Bangladesh.
This was revealed in a knowledge-sharing event on ‘Creating the business case of mobile financial services (MFS)-based wage digitization in the RMG sector’ organized by the International Finance Corporation (IFC) at a local hotel in Dhaka on Tuesday.
Lack of awareness of value proposition among factories and demonstration cases also stood in the way of wage digitization in RMG factories, it was said.
The event was organized to establish the business case for digital wage payments using mobile financial services in the readymade garment sector and launched a series of resources to enable garment factories to move from cash to mobile-based wage payments for their workers.
President of Bangladesh Garment Manufacturers and Exporters Association (BGMEA) Rubana Huq, senior financial sector specialist of IFC Ananya Wahid Kader, country manager of Bangladesh and Myanmar of Marks and Spencer Shwapna Bhowmick, director of Stylecraft Ltd Sharif Almas Rahman and chairman of ABA Group Mid Sajjadur Rahman Mridha took part in the panel discussion session.
Chief commercial officer of bKash Mizanur Rashid and consultant of IFC Takreem Riwan Siddiqui made separate keynote paper presentation.
Nuzhat Anwar, acting country manager of Bangladesh, Bhutan and Nepal of IFC, gave the opening remarks. Deputy general manager of Bangladesh Bank Masuma Sultana gave the closing remarks at the event.
The BGMEA president said: “Our main goal is to build a digital Bangladesh. So, we hope our goal will be implemented overcoming all bureaucratic complexities."
She also said that now their main challenge was to implement the wage digitization process at all the garment factories.
"We are going to sign a memorandum of understanding with the ICT Ministry on June 27 to introduce a mobile banking system for workers," she told the program.
Rubana also urged Bangladesh's mobile financial service providers like bKash to come forward to join the E-wallet for RMG workers platform.
She said the aim of digitizing the payment was in line with the government goal of a cashless Bangladesh.
‘We are working with alacrity and engaging with all the stakeholders in the industry to move forward on this agenda and advance the national interest," she said.
According to the IFC data, there is a stark gender gap in access to financial services in Bangladesh, where only 36% of women have a formal bank account, compared to 65 percent of men.
Given the economic significance of the readymade garment sector, which is dominated by female workers, digitizing wage payments through MFS can have a significant impact on women’s financial inclusion.
When garments workers open MFS accounts to receive their salaries, they can avail a broad range of financial services.
However, about 90% of factories pay their workers in cash, which is a missed opportunity for both the financial and RMG sectors.
Nuzhat Anwar said: “IFC is proud to engage with the private sector and leverage our international expertise in improving women’s access to financial services. This engagement demonstrates how our approach can benefit all stakeholders in the garment sector’s ecosystem."
Through IFC’s initiative, over 70,000 female workers benefitted from digital wage payments to their mobile financial services accounts between 2016 and 2018, and they can now use their accounts to send money, build savings and make payments securely.
Masuma Sultana said: “Bangladesh Bank has worked tirelessly to ensure that the financial sector expands inclusively to reach underserved segments, such as women. IFC has been a long-standing partner in supporting us to achieve this goal, and the efforts to financially empower female garment workers is commendable.”