Technology is helping the unbanked enter the formal economy

With a significant portion of Bangladesh’s population unbanked and having little or no access to financial services, financial technology can be the answer to incubating financial inclusion among micro-enterprises through access to finances. 

Leveraging fintech will also help reduce loan disbursement costs and eliminate other barriers existent among most micro and small entrepreneurs such as providing collateral against bank loans, maintaining financial accounts or transaction records, or undergoing a complex loan application process.

However, loan recovery costs might increase, according to experts.

They said this during a roundtable event organized by the Bangladesh Institute of Capital Market in Dhaka on Monday urging the disbursement of loans to micro-entrepreneurs through digital financial services such as bKash and Nagad.

"Fintech can build inclusion among the informal group of micro and small enterprises that are unbanked having little or no access to finance schemes," said Md Nazeem Hasan Satter, general manager of the SME Foundation.

A recent survey done by the Centre for Policy Dialogue (CPD) had also shown that medium-sized enterprises and urban area demographics could easily avail the government’s stimulus package to sustain the economic shock from the pandemic, in contrast to the large informal sector of micro-small enterprises and marginalized demographic such as women entrepreneurs. 

Experts also pointed out that the informal sector faces barriers in terms of accessing loans from banks due to the process being very complex as well as time-consuming for them, and having no collateral against traditional mortgage-based loans or even the skills of maintaining financial records, which can be eliminated if loans are disbursed using mobile financial service providers (MFS).

They also urged concerned authorities, policymakers, and stakeholders to promote the use of fintech.

In Bangladesh, the number of MFS users reached 10.81 crore, representing 59.62% of the country’s total mobile phone users. MFS transactions reached the second-highest at Tk67.5 thousand crore in October from Tk65.1 thousand crore in September. 

According to data from the central bank, the MFS transactions reached a record high of Tk71.3 thousand crore in May 2021.

Data shows, MFS such as Bkash, Nagad have already been playing a crucial role in financial inclusion, poverty alleviation, women empowerment, creating employment, business opportunities, reducing the impact of risks during times of uncertainty.

According to the study done by the Bangladesh Institute of Development Studies (BIDS), women's ownership of wealth increased by 14%, and participation in income-generating activities by 9% amongst bKash users, while domestic remittance to households using Bkash increased by 60% while per capita income went up by 28%.

Bkash which currently has 5.7 crore customers, and even launched micro-financial services with City Bank recently that provides Tk500-20,000 loans with a three-month repayment period, and going to the bank is not required at all.

According to data from Bkash, a total of 2,689 customers of the platform have received a total of Tk68.3 lakh as nano loans since the launch of the service on December 15.

On average, each of the customers received Tk2,539 as a nano loan from the City Bank.

However, for now, Bkash customers with e-KYC can only avail of the nano loan while the persons who became bKash clients on paper-based KYC are not entitled to the loan due to a regulatory embargo, according to the company’s statement.

Speaking to Dhaka Tribune, Syed Almas Kabir, president of Bangladesh Association of Software and Information Services (BASIS) pointed out that fintech can also automate the process of borrowing through automation while providing a sort of collateral for financial institutions through credit rating from transaction data recorded by MFS platforms while reducing disbursement costs.

“However, the cost of collecting the debt back might increase, despite reduced disbursing costs,” according to Md Shaminoor, the executive vice-president of Bank Asia.


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