As part of her visit to Bangladesh last week, Queen Maxima of the Netherlands drew attention to the rapid spread of digital financial services in the country, in her capacity as the UN Secretary-General’s special advocate for financial inclusion.
Bangladesh’s mobile money providers are making a huge difference to poorer citizens by expanding the reach of digital financial services. Only 15% of the population has access to formal banks, but mobile financial services are able to cheaply and efficiently ease the flow of money because they are not dependent on building uneconomic brick-and-mortar buildings in remote areas.
The advantages of digital technology are spreading across other areas. BRAC is soon to digitise repayments of its microfinance loans and hundreds of large employers in the garment sector are working to digitise wage payments.
As well as reducing transfer costs and opening up opportunities for more people to budget and invest for the future, mobile providers are a boon for the nation overall as they increase the volume of money flowing in the formal economy.
It is vital then that Bangladesh Bank rethinks its proposed new guidelines to limit MFS ownership stakes.
At present, there are 28 commercial banks with MFS licenses, but only three or four are effectively operating in the market, with bKash and DBBL currently succeeding in having around a 95% market share.
While it is desirable to see more competitors challenge for this market, analysts are agreed that the proposed guidelines, which would effectively lead to a forced divestment of BRAC Bank and Dutch Bangla Bank’s successful mobile money businesses, would end up reducing, not increasing competition.
Governments and regulators need to think very carefully before dictating changes to corporate ownership structures.
The phenomenal success of bKash is a great example of market-driven competition and innovation creating a public good by using technology to serve a need that would otherwise not have been provided.
As drafted, the new guidelines necessarily distort these principles and risk seriously undermining Bangladesh’s business and investment environment.
With the market growing fast and plenty of scope for new investment and technologies to allow new entrants to grow already, it is inappropriate to interfere with the market and undermine successful examples of entrepreneurship and innovation.
