They also called for addressing risk management and security associated with the transaction, along with enacting proper policies to avoid corruption and irregularities in the process
The government could save millions of dollar if the handouts under the social safety net programs were given fully through Digital Financial Services (DFS) instead of traditional banking channel, experts said on Tuesday.
They also called for addressing risk management and security associated with the transaction, along with enacting proper policies to avoid corruption and irregularities in the process.
The experts underlined establishing a level playing field among the mobile service providers for a better service environment.
They came up with the recommendations while addressing a round-table discussion titled "Bangladesh Digital Financial Services" organized by the Policy Research Institute (PRI) in the capital.
PRI Chairman Dr Zaidi Sattar moderated the discussion.
“Millions of dollar can be saved, if the money doled out by the government under the safety net programme is provided through G2P (government to people) system,” PRI Research Director MA Razzaque said.
G2P is the method of making electronic transfers directly into the accounts of individuals.
As of now, this payment was largely made through bank accounts, which cost both the government and benefit recipients, added Razzaque.
“In the existing system, a recipient has to travel to banks and bear the extra cost of middleman,” he mentioned.
Citing an estimation of PRI, Razzaque in his keynote speech said: “If the government pays disability benefits through G2P, Bangladesh could save $23.15 million annually, which is 12.5% of annual allocation for disability benefits.”
On the other hand, another study by a2i and Pi in 2016 found that digitization of G2P payments, could save up to $15 million annually for the government, added the estimate.
It could also save up to 60.4 million visits, 91 million hours and $20 million for benefit recipients, it added.
According to finance ministry data, in the last fiscal year, the government transferred Tk932 crore under the social safety net schemes using the G2P.
“The digital financial services are running at a speed beyond our imagination. This speed is essential and we need it, and have to go with it. Without proper policy and regulatory framework, financial services would be disastrous for all sections including the government and benefit recipients,” said Zaidi Sattar.
As of September, there are about 74 million MFS accounts with an average monthly transaction of over $4.15 billion.
Meanwhile, average monthly G2P disbursement through MFS is approximately $17.2 million, which is 0.41% of all MFS transaction.
"We must address the looming challenges with proper risk management," said the economist.
“Good governance is a very critical issue as there remains scopes of corruption in case of digital system,” said Khondokar Shakhawat Ali, honorary fellow at Unnayan Shamannya.
The government must make clear the method it planned to apply in selecting a certain DFS for the digital payment, he added.
There was development in the DFS but the transaction was still largely limited to cash in, and cash out, although the country got to move towards the cashless transaction, participants said.
Still there was huge cash transaction in the payment system in a society the ultimate goal of which was to establish a cashless transaction regime, said Sattar.
To make it happen, the country must ensure transaction facilities everywhere, so that people did not have to bother to buy with cash despite having digital wallets, said the economist.
On top of that, DFS providers at the discussion called for level playing field and harmonized standards for all to ensure smoother services.
“Though the DFS providers are rendering the same services, there remain fundamental differences as far as setting the transaction limits (by varying companies). It is a barrier to comprehensive development of the sector,” said Quadir Kamal, chief executive officer of bKash.
If the regulations or the guideline were harmonized or rationalized, it would be better for the DFS to grow, added Kamal.
“In developed countries, businesses are run under the existing laws but here in Bangladesh, first a business starts and then law is formulated,” said Debdual Roy, executive director (programming) of Bangladesh Bank.
"If one cannot run the business or fail to sustain as per the laws, it will drop out of the business. We cannot give anybody opportunity of monopoly business; we will formulate the law for all," said Roy.