National Financial Inclusion Strategy: Strategic ConsiderationsStrategy: Strategic Considerations

Outline• Why a national financial inclusion strategy?

• Where we want to go – targets

• Where we are now – context

• Key thrusts

• Exploring synergies: The “first and

• Fostering a virtuous inclusion cycle: Innovation, demand, and trust

strategy? Why digital?

last mile” of financial inclusion

Fostering a virtuous inclusion cycle: Innovation, demand, and trust

Why a financial inclusion strategy? Why digital?• Financial inclusion is for social cohesion and empowerment.

• A national financial inclusion strategy:• provides a comprehensive framework with all stakeholders’ consultation.

• facilitates prioritization and coordination,

• Digitization:• democratizes and enhances both efficiency

• expands inclusion from financial to social services.

Why a financial inclusion strategy? Why digital?Financial inclusion is for social cohesion and empowerment.

A national financial inclusion strategy:provides a comprehensive framework with all stakeholders’ consultation.

coordination, leveraging synergies.

efficiency and inclusion.

expands inclusion from financial to social services.

Where we want to go – Targets• The government has embraced sustainable growth agenda, aided by the

central bank’s financial inclusion initiatives.

• SDGs: Expand access to banking, insurance and financial

• 7th 5-Year Plan (2016-’20):

• Financial inclusion: “No one left behind”

• Digitization: For better governance, transparency, and service delivery

TargetsThe government has embraced sustainable growth agenda, aided by the central bank’s financial inclusion initiatives.

Expand access to banking, insurance and financial services for all

Financial inclusion: “No one left behind”

Digitization: For better governance, transparency, and service delivery

Where we are now – Context

Urbanization

30%

Demographics

50%

< 2

5 yr

• From a low-income agrarian society at its birth in 1971, Bangladesh is now a lower middleincome country of 160 million people in the midst of critical transitions.

Context

Industrialization

28%

GD

P12

5 m

M

obile

Technology

income agrarian society at its birth in 1971, Bangladesh is now a lower middle-income country of 160 million people in the midst of critical transitions.

Where we are now – Poverty Reduction• Growth from labor-intensive manufacturing , agriculture, and remittance

has been inclusive, supporting poverty reduction and gains in HDIs.

0%

25%

50%

75%

100%

1970 1975 1980 1985 1990

Poverty Rate

73

Poverty Reductionintensive manufacturing , agriculture, and remittance

has been inclusive, supporting poverty reduction and gains in HDIs.

1995 2000 2005 2010 2015

Poverty Rate

25

Life expectancy 40s => 70+ years

Where we are now – Inequality• Inclusion minimized inequality: lower than the start and lowest among the peers.

0

10

20

30

40

50

0

10

20

30

40

1973 1992 2010

Gini Coefficient : Bangladesh

InequalityInclusion minimized inequality: lower than the start and lowest among the peers.

Cross-Country Gini Coefficients

Where we are now – Financial Depth• Bangladesh ranks well in terms of its financial depth.

0

20

40

60

Tanzania Kenya Mexico Indonesia Sri Lanka

Domestic Credit(In percent of GDP)

Median Emerging Market Depth

Financial DepthBangladesh ranks well in terms of its financial depth.

Sri Lanka Nigeria Phillippines Bangladesh India

Domestic Credit(In percent of GDP)

Where we are now – Agriculture Credit• Size of agriculture sector credit also ranks well, with high impact on output.

0

4

8

Agriculture Credit(In percent of total credit)

Agriculture CreditSize of agriculture sector credit also ranks well, with high impact on output.

0

2

4

6

Productivity: Agriculture Credit(Value added per unit of credit)

Where we are now – MFIs• MFIs are playing an effective role in financial inclusion

0

5

10

15

Tanzania Nigeria Sri Lanka India Kenya Phillippines Bangladesh

Borrowers (In percent of population)

MFIsMFIs are playing an effective role in financial inclusion.

240

5

10

15

India Tanzania Nigeria Sri Lanka Phillippines Bangladesh Kenya

Depositors(In percent of population)

Where we are now – MFS• Digital inclusion through MFS represents a paradigm shift.

030

10

20

30

40

Dec '11 Dec '12

Clients (In millions)Clients (In percent of adult population)

MFSDigital inclusion through MFS represents a paradigm shift.

12

22

30

Dec '13 Dec '14 Dec '15

Clients (In percent of adult population) 32 million

Where we are now – Summary• Bangladesh has made impressive strides in financial inclusion.

41

25

Banks and MFIs

Accounts (In percent of adult population)

SummaryBangladesh has made impressive strides in financial inclusion.

30

MFS

Accounts (In percent of adult population)

66

How to move towards How to move towards universal access?

Objectives

• Include the excluded or vulnerable groups and sectors, often exposed to income, wealth, and climate change shocks.

• Minimize marginalization and vulnerabilities amid Bangladesh’s transitions.

• Leveraging technology for the reach and sustainability of inclusion initiatives.

Include the excluded or vulnerable groups and sectors, often exposed to income, wealth, and climate change shocks.

Minimize marginalization and vulnerabilities amid Bangladesh’s transitions.

Leveraging technology for the reach and sustainability of inclusion initiatives.

Key Thrusts

• Sector (Agriculture)

• MSME (Refinancing)

• Gender Priority

• Rural Access (Promoting rural branches)

• Marginalized and excluded (Landless; No Frill Accounts)

• Green Financing

• Life-cycle approach toward inclusion (school banking, pension)

• Insurance (crop, livestock, fishery)

• Digital inclusion initiatives

Rural Access (Promoting rural branches)

Marginalized and excluded (Landless; No Frill Accounts)

cycle approach toward inclusion (school banking, pension)

Laying the Foundation for a Digital Ecosystem• The government and BB have built technology infrastructure

the “first and last mile” financial inclusion with various

• Online credit information and supervisory reporting

• Payment systems (RTGS)

• Bangladesh Automated Clearing House (BACH)

• National Payment Switch (Interoperability)

• Electronic fund transfer (EFT)

Laying the Foundation for a Digital EcosystemThe government and BB have built technology infrastructure connectingthe “first and last mile” financial inclusion with various enablements:

Online credit information and supervisory reporting

Bangladesh Automated Clearing House (BACH)

National Payment Switch (Interoperability)

Laying the Foundation for a Digital Ecosystem• The government and BB is working

• NID-linked G2P Payments, a catalytic initiative for the digital ecosystem

• Union Digital Centres (4500+ Union

• Agent Banking; Point of Sale (POS); Rural branches; Rural Savings Banks (One House One Farm)

• Ongoing initiatives: Joyeeta (women’s economic empowerment)

• NID-linked inclusion initiatives for efficiency, transparency, and governance

Laying the Foundation for a Digital EcosystemThe government and BB is working on the “first and last mile” inclusion:

linked G2P Payments, a catalytic initiative for the digital ecosystem

Union Digital Centres (4500+ Union Parishads, lowest tier of local government)

Agent Banking; Point of Sale (POS); Rural branches; Rural Savings Banks (One

(women’s economic empowerment)

linked inclusion initiatives for efficiency, transparency, and governance

The FIRST and LAST MILES of Inclusion• The public sector plays a catalytic role in the first mile access and the

private sector in the last mile innovation.

Easing the FIRST MILE

• MFS

• Agent Banking

• Rural Branches, Savings Bank

• Post Offices

• Union Digital Centres

The FIRST and LAST MILES of InclusionThe public sector plays a catalytic role in the first mile access and the private sector in the last mile innovation.

Bridging the LAST MILE

• MFS

• Agent Banking

• Post Office

• NID-linked e-KYC

• Union Digital Centres

• Delivery of social safety nets

A Virtuous Cycle: Innovation, Demand, and Trust• Sustainable inclusion requires innovation that can create and respond to

the bottom-up demand.

• Trust and risk management are essential for scaling up any initiative.

• Ingredients: • Fostering innovation (Challenge Fund Initiative)

• Financial literacy

• Consumer protection (Customer Interests Protection Centre)

• Coordination among regulatory agencies

• Demand and impact assessment

A Virtuous Cycle: Innovation, Demand, and TrustSustainable inclusion requires innovation that can create and respond to

Trust and risk management are essential for scaling up any initiative.

Fostering innovation (Challenge Fund Initiative)

Consumer protection (Customer Interests Protection Centre)

Coordination among regulatory agencies

Guiding Principles

StrategyFormulation with national support and led by a

Consultation With and among public and private stakeholders

Coordination across agencies and between the public and private sectors (FIs, MFS, tech solution providers)

Synergies among products and providers (e.g., insurance can unlock credit, payment ease deepens deposit and credits)

Innovation followed by regulation (learning by doing, experimentation)

with national support and led by a s high level steering committee

With and among public and private stakeholders

across agencies and between the public and private sectors (FIs, MFS, tech

among products and providers (e.g., insurance can unlock credit, payment ease deepens deposit and credits)

followed by regulation (learning by doing, experimentation)

National Financial Inclusion StrategyFinancial Inclusion Strategy