10 barriers to financial inclusion in Bangladesh identified

FE Report

The central bank has identified ten barriers including poor banking infrastructure, particularly in
rural areas, now stand in the way of financial inclusion in Bangladesh.

"Keeping in view the number of financially excluded people in Bangladesh, about half of the
adult population is un-banked (48.49 percent) in terms of deposit accounts in the banks,"
Bangladesh Bank (BB) said in a working paper styled 'Financial Inclusion: The Role of
Bangladesh Bank,' released recently.

The major barrier is geographical or physical access measuring the average distance from
household to bank branch; however, the branches per 1,000 square kilometres could be used as
crude indicator for providing an initial idea to the barriers of inclusion, the paper added.

Citing an example, the paper said Spain has 96 branches per 100,000 people and 790 branches
per 1,000 square kilometres, while Bangladesh has less than seven branches (or ATM) per
100,000 population and about 67 branches (or ATM) per 1,000 square kilometres.

A large section of the population who do not have any physical access to the banking services are
in rural and remote areas in the country, according to the paper.

"As a competitive and cost effective strategy, major banks focus on large scale of loans instead of
providing services for small size of loan; as a result, rational business decisions prevent a major
portion of people from accessing loan services including small and medium enterprises (SME)
and agriculture loan," it said quoting poor level of technological infrastructure.

Promoting technological and institutional innovations as a means could expand the financial
system access and usage; however, less than four people per 1,000 population in the country are
using credit cards identifying the technological and infrastructural weaknesses, according to the
paper.

Other barriers include lack of proper documentation, inadequate financial literacy or education,
high requirement of minimum balance, low income, lack of suitable product structure of banks
and micro-financial institutions (MFIs), high cost of product and absence of credit bureau and
insurance of MFI borrowers.

Recent trend in mobile banking indicates that financial inclusion is scaling up in Bangladesh
especially in rural areas where no bank branch is available.

"Recent data show that number of mobile phone subscribers and tele-density have been
increasing substantially over time creating an opportunity for banks and MFIs to use the mobile
technology in the financial services and serve un-banked people with lower costs specially in the
rural areas," the paper said, adding that rate of overall financial inclusion is increasing in modest
pace.

It is observed that financial inclusion of total population increased from 39.76 per cent in 2004 to
56.42 per cent in 2010, the paper noted.

In terms of adult population, it increased from 65.33 per cent in 2004 to 87.23 per cent in 2010
due to opening of a significant number of 10 taka account in the last two years, according to the
paper.

The BB has recommended that the central banks of the SAARC region can initiate policies
targeting low income populations by introducing agriculture and rural programmes under a
comprehensive monitoring strategy.

In this connection, loans to sharecroppers and small enterprises introduced by the BB has been
contributing not only to achieving wider coverage of financial inclusion in Bangladesh but also
to reducing the high dependence of small and marginal farmers on non-institutional sources, it
added.

BD placed 19th in global financial inclusion

progress

Published at 12:51 AM August 15, 2016

Bangladesh has been ranked 19th, scoring 66% in financial

inclusion progress among many countries in the world while
Kenya topped the list with 84% score, according to a global
study report
The 2016 Brookings Financial and Digital Inclusion Project (FDIP) report revealed recently
evaluates access to and usage of affordable financial services by underprivileged people across
26 geographically, politically and economically diverse countries.

The report also mentioned the largest cyber heist that took away $81 million from Bangladesh
Banks reserve account, causing major institutional shifts in Bangladesh.
A major institutional shift in Bangladesh since the publication of 2015 FDIP report was the
resignation of then governor of Bangladesh Bank, Atiur Rahman, in March 2016, after hackers
allegedly stole more than $81 million from Bangladesh Bank by providing transfer orders to the
U.S. Federal Reserve Bank in New York.

Fazle Kabir was appointed as the new governor of Bangladesh Bank in the same month. Thus
far, financial inclusion initiatives in Bangladesh do not appear to have been significantly
disrupted by these events.

For example, as of spring 2016, the drafting of a national financial inclusion strategy under a
committee chaired by the governor of Bangladesh Bank was underway, the report observed.

The neighbouring country, India, was ranked 12th, scoring 71% in the development of financial
inclusion.

Pakistan scored 69% and was placed 14th among the countries under Financial and Digital
Inclusion Project (FDIP) in the study.

The other top-scoring countries include Colombia, earning 79%, and Kenya, South Africa, Brazil
and Uganda, each scoring 78%.

They held the top five positions among countries between 2015 and 2016.

The 2016 report assesses these countries financial inclusion ecosystems based on four
dimensions of financial inclusion country commitment, mobile capacity, regulatory
environment and adoption of selected traditional and digital financial services.

Bangladesh scored 89% on the country commitment, 83% on mobile capacity, 78% on
regulatory environment and 39% on adoption while India scored 100%, 72%, 94% and 44%
respectively.

The study report said Bangladeshs robust mobile capacity levels have contributed to the
increasing take-up of Mobile Financial Services (MFS) in the country, which as of 2014, boasted
among the FDIP countries in Asia.

In fact, Bangladesh is one of the fastest growing mobile money markets in the world when
measured by the total number of accounts.

There were about 131 million mobile phone subscribers of the total about 160 million population
as of March 2016.

xpanding Women's Financial Inclusion in Bangladesh

Feb 21, 2017
The participation of women in business is increasingly being recognized as fundamental to
economic growth. With women representing half the labor force aged 1549 in Bangladesh,
accelerating entrepreneurship and access to finance will be pivotal to socio-economic
development in the country. According to the Bangladesh Labor Force Survey of 2013, the
participation rate of females (32.9%) is substantially lower than their male (81.7%) counterparts.

Of the 7.8 million businesses in Bangladesh, 99.93% are cottage, micro, and small and medium
enterprises (CMSMEs).1 However, the percentage that are women-owned (7.21%) is
insignificant compared to those owned by men, and women account for only 17% of individuals
are employed by CMSMEs.2 This low participation rate is the result of several economic and
cultural barriers, but the greatest challenge facing women entrepreneurs in Bangladesh is access
to finance (Jahed, Kulsum & Akhter, 2011).

In recognition of the importance of womens participation in business for economic

development, and in keeping with a constitutional commitment to economic opportunity and
inclusion, the Government of Bangladesh has crafted national policies aimed at improving
financial inclusion for women.