Digital Financial Inclusion in Bangladesh: A Citizen’s Perspective

Anir ChowdhuryPolicy Advisor, Access to Information (a2i)

Prime Minister’s Office, BangladeshFebruary 13, 2016

Digital Bangladesh Vision 2021

1. Strong middle-income economy2. Inclusive development3. Citizen-centric service

transformation4. Bottom-up execution5. No digital divide

Digital Financial Inclusion: Components

SavingsSaving A/C,

Transactions, Statement

LoansHouse,

Livestock, Business, Education

Insurance

Health, Life, Accident,

Crop, Livestock

Fund TransferP2P, P2G, B2P, P2B

G2P (Salaries, Pensions,

Social Payments)

Status1. Access has

increased significantly

2. Usage is still low3. Digitization for

mostly P2P fund transfer

4. Inadequate products

5. Financial literacy low

Where Are We? Tk 10 accounts

Reduced exclusion rapidly(15+ million accounts)

Mostly dormant Mobile money

30 million customers, $60+M transacted a day, 1 dominant player (85%)

80+% OTC limited usage of own wallets but huge P2P

1. Are we focusing on non-P2P digital payments?2. Individual wallets necessary for most non-P2P

payments

Payments & Remittances

P2P, P2G, B2P, P2B

G2P (Salaries, Pensions, Social

Payments)

SarbatiAbove 90 yearsWidow HH Monthly Income: Only allowances that she receives from Govt.

She needs to be accompanied by a member of the family to collect the allowance

She has to spent 120 taka conveyance fare to collect the allowance from bank.

She needs to wait for hours in queue often in harsh weather conditions

REALITY:

Persona 1: Unbanked Hard-Core Poor

1. Need to have G2P cashout points nearby

2. What other financial products will she need?

3. What does financial inclusion mean to her?

Persona 2: Partially BankedSalma36 years, mother of 3Housewife, husband sends remittance from MalaysiaHH Monthly Income: BDT 70,200

If she uses mobile money to receive remittances, she has to go 3 times a month because of daily limits.

So, she has to deposit into a DPS savings scheme in a traditional bank account 8km away.

REALITY:

1. Mobile money has reach but not necessary product variety

2. Need innovative financial products from MFS actors OR increase the reach of traditional banks

Persona 3: Visually Disabled, Accessibility issue

Vashkar36 years, Development worker, Innovator

- He is a 10 taka account holder but- Banks refuse to give him any electronic Card

based services due to his disabilitiesREALITY:

1. The needs and challenges of disabled and other vulnerable marginalized groups are not adequately addressed.

2. How do we enable meaningful financial inclusion for individuals like Vashkar?

Financial Inclusion through Whose Lens?

Savings

Loans

Insurance

Payments &

Remittances

Store & Retrieve

Borrow & Repay

Pay & Receive

Expert’s Perspective

Poors’ Perspective

Finan

cial

Mat

urity

Average time

Avrage cost Average Visit

138 min

BDT 596

3 visits51min BDT 2121 visit

P2G: Fee Payment for Electronic Land

Records

63 % 75 % 75 %

Average Time

Average Cost

Average Visit

180 min

BDT 136

2 Visits40 min

BDT 65

1 Visit

G2P: UP Salary Payment

78 % 50%52 %

9

12

43

Average time (day)

Average Cost (USD)

Number of Visit

0

1

2

33.3

1.3 10.6 0.5

1

Mobile Banking

BeforeAfter

82%65%

0%

Digital Financial ProductsTime, Cost, Visit (TCV) Reduction

Average time (day)

Average Cost (USD)

Number of Visit

012345 4.31

0.92 1.20.34 0.22

1

P2G: Electricity Bill Payment

BeforeAfter

92%76%

17%

Potential TCV Reduction in G2P through Digital Payments

14 major G2P

Digital Bhata (Allowance) Management Piloted by a2i Integrating 3 Ministries, 6 Allowances for 100k Beneficiaries

• Linked to NID• Directorate of Social Services in the

process of upscaling for 5.5M beneficiaries with technical support from a2i

Before After0

20406080

100

Avg Time

Before After0

1000020000300004000050000

Avg Cost

Before After05

10152025

Avg Visits72

%

82%

77%

Dim

ensio

n 1:

M

anag

emen

t

Digital Payment Pilot for Citizens: a2i, DSS and PO for 8K Old and Disabled Persons

• Finger vein biometric• Delivered to doorsteps by Post Office (ward

or home) – postal cash card• ‘Services coming to beneficiaries’ – huge

TCV reduction• Opportunity to link with other financial

products

Dim

ensio

n 2:

Pa

ymen

t

Bangladesh

Kenya

Distance to reach bank

1.4km 6.5km

Distance to reach agent

0.6km 1km

Access is Mostly Solved.Need to Focus on Usage

Driving usage needs appropriate products

No One Digital Payment Panacea for all Situations

Digital Payment Option

Full Service Banking

Store Funds Indefinitely

Access funds from mainstream financial infrastructure

Deposit additional funds

Access other financial products

Mobile Money

No No No Yes Limited

Agent Banking

Yes Yes Yes Yes Yes

Postal cash card

No No Yes Yes No

Prepaid card

No No Yes Yes No

The Poor May Need More Integrated Products than What We (Non-poor) are Used to

Tk. 500 safety net payment

Tk. 300 cashout

Tk. 100 forced savings

Tk. 100 insurance premium

Example of an Integrated Product Appropriate for the Poor: Ekti Bari Ekti Khamar

2.5 million poor households Matching grant to individual account:

$2.5/mon Matching grant to cooperative account:

$1,875/yr for 2 yrs Total savings: $91M (GoB) + $108M

(beneficiaries) Leverages agent banking

488 Upazila level agents 7,900 ‘physically mobile’ agents coordinating

in households Exploring agent banking in UDCs

Paradigm Shift Needed Shift in thinking

Need to direct focus away from mere extension of access towards fostering meaningful usage

Offering existing (pro-non-poor) products to the poor may not be meaningful Need to understand the BOP market for financial

products Chang the dialogue from concentrating on

regulation to a much more citizen-centric focus Shift in technology

Silo to integrated, interoperable platforms Strong standard-based biometric Integrated with NID/Civil Registry

Digital Financial Inclusion: Meeting Citizens Demands

Appropriate Products

Need demand mapping and experimentation

Transition cash to Digital

Payments

Gradual transition of cash to digital payments (G2P, large

private sector employers, merchant payments)

Access point

Need to develop a network among Digital Center, Post e-

Center and private sector access point

Financial Literacy

Digital Centers can provide financial literacy and create

awareness

Banks

MNOs

UDCs

PO

Private Agents

Ministries

Employers

MFIs

Digital Financial Inclusion: Policy ContextStrategy

Development

Steering committee co-chaired by Principal Secretary, PMO and

Governor

Interoperability

CGAP/Gates/Better Than Cash are supporting framework

development

Joint Investment

Banks, MNOs and MFIs need to invest jointly in appropriate

products-Inclusive Finance Lab for Innovation

Coordination

Taskforce under PMO (representatives from agencies,

public and private sector)

PMO

BB

BFID

FinDiv

MRA

Ins DevReg

Authority

BTRC

DPs

Thanks