Roundtable on National Financial Inclusion Strategy for Bangladesh Summary of emerging themes: Consultation kick-off meeting October 3, 2017 Hotel Pan Pacific Sonargaon, Dhaka Bangladesh
Welcome
2017 Historical perspectives Nos. of bank savings account: 65 million Nos. of registered MFS clients: 54 million Nos. of MFI Clients : 35 million 2015 1991 Bangladesh Electronic Fund Bank Company Act (amendment 2013) Transfer Network (BEFTN) 1990 2015 Palli Karma-Sahayak Foundation (PKSF) Bangladesh Post Office electronic money transfer Service 1986 2015 Rajshahi Krishi Unnayan Bank Financial Inclusion Department 1983 2007 2015 Grameen Bank SME Real Time Gross Settlement (RTGS) Foundation 1982 2013 License of Private Commercial banks Guideline for Agent Banking for Banks 2006 Microcredit 2011 Regulatory Guidelines on Mobile Financial Service Regulation issued by Bangladesh Bank 1973 Authority Act Bangladesh Krishi Bank 2010 2002 Establishment SME & Special Programmes department of Bangladesh Bank and SME Credit Agricultural policies 1972 Credit Bangladesh Bank Department established 2010 Insurance Development and Regulatory Authority (IDRA) 1993 Financial Institution Act
Enabling economic environment Poverty Rapid Rapid Widespread Opportunities to falling but Urbanization Industrialization access and use of reap the vulnerability technology demographic increasing dividend.
Formal kick-off of the wide 1 stakeholder consultation. Why are we here? 2 Validation of: • Diagnostic insights • Strategic thrusts • Coordination arrangements for implementation
Structure of the evening Mandate and progress of National Financial Inclusion Strategy 1 Mr. Arijit Chowdhury, Additional Secretary, Financial Institutions Division, Ministry of Finance Synthesis of key findings and implications for strategic priorities of National Financial Inclusion 2 Strategy for Bangladesh Dr. Mustafa K. Mujeri, Team Leader for National Financial Inclusion Strategy Development. Roundtable Discussion 3 Moderator: Mr. Md. Eunusur Rahman, Senior Secretary, Financial Institutions Division, Ministry of Finance, Government of Bangladesh. Way Forward 4 Mr. S.K. Sur Chowdhury, Deputy Governor, Bangladesh Bank and BFP-B Project Leader . Closing Strategic Guidance 5 Mr. Fazle Kabir , Governor, Bangladesh Bank
Bangladesh Towards Financial Inclusion
International Commitment Mandate of The Maya Declaration National Commitments you can bank on Financial Inclusion Strategy for National Commitment Bangladesh SDGs National Social Security Strategy 7 th Five Year Plan Financing (NSSS) of Strategy Bangladesh
Status Of Financial Inclusion
Why Financial Inclusion? F ormal financial system helps people Make Safeguard Plan and pay day-to-day savings for recurring transactions expenses Financial inclusion is a state where every individual and enterprise have access to a wide range of financial products they value and are able to use through open transactional accounts, responsibly delivered by a diverse range of regulated providers that cooperate on shared interoperable market infrastructure Finance small Mitigate Drive and compete on bringing value-to- businesses or shocks economic customer. micro- growth enterprises
Bangladesh performs well in formal financial inclusion. Informality is commendably low but this has implications for access. Bangladesh 21% 20% 14% 45% Banked India 63% 2% 10% 24% Other formal Kenya 30% 14% 43% 14% Informal Pakistan 10% 2% 49% 39% Exclluded Uganda 10% 4% 67% 20% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Access to formal financial services is high but customers are thinly served. Payment services make up a significant proportion of financial access. OTC’s role as a gateway to other services should not be underestimated. Access to Formal Financial Services in Bangladesh 1.6 Average number of services accessed 1.4 1.2 Whole Population (excluding 1.0 OTC) (excluding 0.8 payments) 0.6 Including OTC financial inclusion increases by 15% OTC = Over the Counter 0.4 mobile money transactions 20% 30 % 40% 50% 60% 70% 80% 90% Source: InterMedia (2016) Financial Inclusion Rate
Varying levels and depths of financial inclusion for different professions. Farmers and dependents have lowest levels of financial inclusion, despite targeted policies. As expected, professionals access the greatest range of products, but some remain fully excluded. Financial Inclusion Rate of different groups in Bangladesh (including OTC) 1.6 Average number of services accessed Professionals 1.4 1.2 SMEs Other Labourers Micro 1.0 Farmers entrepreneurs 0.8 Dependents 0.6 Size of each dot is proportional to the number of people in the group 0.4 20% 30 % 40% 50% 60% 70% 80% 90% Source: InterMedia (2016) Financial Inclusion Rate
Disparities Gender continues to be one of the main disparities, despite targeted efforts to increase financial inclusion. Must be aware of potential digital exclusion across gender and age demographics. OTC plays a role in narrowing geographical disparities. Gender disparities: Age disparities: Regional Disparities High Moderate Low Full service bank account: Potential digital exclusion Divisions relatively clustered 7% women vs. 17% men. mobile money: 10% difference between them 43% among 25-35 year olds but increases to 15% in Access to MFS: vs. 18% in 45+. absence of OTC 27% women vs. 52% men
Regions relatively clustered in their access to financial services. OTC narrows geographical disparity. Geographical disparities of Financial Inclusion (With OTC) Average number of services accessed 1.6 1.4 1.2 Rajshahi Khulna 1.0 Rangpur Dhaka 0.8 Barisal Sylhet Chittagong 0.6 0.4 20% 30 % 40% 50% 60% 70% 80% 90% Financial Inclusion Rate Source: InterMedia (2016)
Consumer Perspectives
79% don ’ t have a bank account, most of them don ’ t see the use case Bank Account Proportion of 21% banked 79% unbanked Profile Bangladesh Don’t need/insufficient Lack of use case: Dont 1% money need or sufficient money 4% 1% Why major demand-side • Lack of understanding 16% constraint: lack of perceived use case Why don’t you Lack of ID or registration have a bank too complicated The supply side appears to • account? represent less of a barrier Banks costly or unreliable 78% Accessibility issue Source: InterMedia (2016)
Even those with bank accounts are not making full use out of them Bank Account Proportion of 21% banked 79% unbanked Bangladesh Profile 4% last 30 days 25% Access high but usage • 30-90 days When was the moderate. last time you Usage barriers • used your prevent deeper 90+ 56% bank account? engagement with financial services. 15% Never Source: InterMedia (2016)
Payments and savings are the main drivers of bank account sign-up Proportion of 21% banked 79% unbanked Bangladesh Banglad Bangladesh 57% 36% 3% 4% esh Pakistan 54% 39% 2% 5% India 47% 36% 1% 16% Uganda 40% 48% 8% 4% Kenya 38% 56% 2% 4% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Payments Savings Credit Encouraged by organisation / company Main reason given for getting a bank account Source: InterMedia (2016)
Provider Perspectives
Diverse providers resolving problems of reaching last mile (MFS, Agent networks). But lack of synergy across providers constraints financial inclusion. Performance of MFIs Performance of Cash is still King Performance of MFS Banks Access to credit is high Vibrant agent network Rapid growth but usage is by international constrained by regulation will be a critical driver 21% banked standards and lack of of financial inclusion interoperability. Rate of growth is low Opportunities for growth may be declining. High prospects for growth 1. Fostering Interoperability : Improve coherence and shift from silo approach. Untapped potential 2. Developing client centric business model: For better use case. 3. Embracing digitization of information: Narrow information asymmetries.
National Financial Inclusion Strategy (NFIS) for Bangladesh
A stand-alone and comprehensive strategy to: Assist the Government • Raise awareness • Build trust and collaboration amongst stakeholders • Adopt a coordinated approach across ministries, public • and private sectors Implement, coordinate and monitor actions • Timeline: 2017-2021 a rolling strategy Overview
NFIS Development Process Conduct diagnostic NFIS Components 1 of sub sector studies to Identify demand- supply and regulatory barriers Payment Banking Microfinance Insurance Mobile Digital Sector Sector Sector Financial Financial Systems Services Services Collect stakeholders’ 2 insights and build consensus Short Demand Side Study Identify time – bound 3 action plan, set targets and indicators Cross-cutting Issues 1. Gender, 2. Client Protection, 3. Climate, Finance, Set targets and 4 4. Agriculture & Value Chain, 5. Sustainable Development establish monitoring and implementation arrangement
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