In an era driven by technological advancements, cashless payments have emerged as a crucial tool to foster economic growth across the globe. It is very commendable that Bangladesh is fast moving towards a cashless society with the use of digital payment systems such as mobile money, digital wallets, and point-of-sale terminals.
To give this transformation a further push, the government has come up with quite a few time-befitting measures to encourage the use of digital payments, thus gradually phasing out cash-based transactions in the economy. The Bangladesh Bank has already launched an interoperable Bangla QR Code with a view to popularizing digital payments.
Recognizing the immense potential of digital transactions, the central bank has set a target to make 75% of transactions through digital technologies by 2027 -- a move that will greatly help us shift to a cashless economy.
To achieve this goal of significantly reducing dependence on cash, there is a need for a comprehensive approach, with clear directives in the annual budget, which will foster an environment conducive to cashless payments.
We need to design a proper plan to accommodate the needs of cash-dependent individuals. Firstly, we have to make them understand that going cashless has a number of benefits, including convenient transactions, reduced financial crimes and corruption, cost savings, and a significant reduction in the carbon footprint.
When it comes to bringing comfort to people's lives in the form of digital transactions, the present government led by Prime Minister Sheikh Hasina is going in the right direction and doing what it necessitates. For example, the government has digitized disbursements of many social safety net allowances by handing over the responsibility to Nagad, a leading mobile money service in Bangladesh.
Earlier, allegations ran rife that many real beneficiaries of social safety net allowances had missed out because of massive anomalies. After taking on the responsibility, Nagad ensured transparency in the entire disbursement procedure, thus plugging the non-poor's inclusion into the list of beneficiaries. Similarly, we also revolutionized education stipend payments.
Now, allowances and stipends are directly sent to mobile wallets of beneficiaries, which reduces the government's disbursement costs as well as speeding up money flow.
But, still, only one-tenths of government disbursements have come under mobile money channels. If mobile money carriers are also chosen in paying out pension and freedom fighters' allowances, there will be more convenience for beneficiaries in receiving the money, alongside giving an impetus to non-cash transactions. In many cases, they do not have to withdraw cash either as they will have digital means available at their fingertips, be it for money transfer or for any kinds of payments.
The introduction of a digital toll collection system for vehicles crossing the Mayor Mohammad Hanif Flyover is another welcome move by the government to encourage people to adopt cashless transactions, bringing an end to typical hassles while paying tolls. Citizens also want to see the same move for other bridges such as Padma, Bangabandhu Jamuna bridge, Meghna-Gomoti bridge and so on.
It is indeed the rise of mobile money that is helping drive the adoption of digital payments in Bangladesh. Smart transactions will lead to less uses of cash in the economy. According to a Bangladesh Bank study, the country needs about Tk9,000 crore to manage cash. I think the government can save money if we popularize digital transactions. We have set a target to become a “Smart Bangladesh” by 2041, so, our main job is to make transactions smarter.
A rise in mobile base transactions can also boost the government's revenue income. A portion of every transaction made using mobile money channels goes to the government's coffers -- there is 12% AIT of the carriers revenue and 15% VAT on customers service charge level -- are levied on the amount we charge against the services we offer. This is why Nagad has come out as a top VAT-payer in only three years of its journey.
I believe the vision of a cashless Bangladesh is ambitious but an achievable goal nonetheless, we simply need to develop an ecosystem for that. To pave the way for a digital economy, the annual budget must include clear directives and provisions that prioritize infrastructure development, financial inclusion, digital security, merchant incentives, and collaborative partnerships.
By doing so, Bangladesh will not only propel itself into the age of non-cash transactions but also unlock tremendous socio-economic benefits, including increased transparency, efficiency, and financial inclusion. With the right budgetary framework, our government can lay a strong foundation for a cashless future, empowering our country's citizens and driving economic growth in the process.
Tanvir A Mishuk is founder and Managing Director of Nagad Limited.
