Digital Financial Inclusion in Bangladesh:

Planning Better, Executing Faster,

Moving Together

Anir Chowdhury

Policy Advisor, Access to Information (a2i)

Prime Minister’s Office, Bangladesh

February 27, 2016

Digital Bangladesh Vision 2021

1. Strong middle-income economy

2. Inclusive development

3. Citizen-centric service transformation

4. Bottom-up execution

5. No digital divide

Digital Financial Inclusion: Components

Savings

Saving A/C, Transactions, Statement

Loans

House, Livestock, Business, Education

Insurance

Health, Life, Accident,

Crop, Livestock

Fund Transfer

P2P, P2G, B2P, P2B

G2P (Salaries, Pensions, Social

Payments)

Status

1. Access has increased

significantly

2. Usage is still low

3. 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 Banked

Salma36 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

Safeguard

against

shock

Store & Retrieve

Borrow & Repay

Pay & Receive

Expert’s Perspective Poors’ Perspective

Fin

anci

al M

aturi

ty

138 min

BDT 596

3 visits51min BDT 212

1 visit

Average time Avrage cost Average Visit

P2G: Fee Payment for

Electronic Land Records

63

%

75

%

75%

180 min

BDT 136

2 Visits40 min

BDT 65

1 Visit

Average TimeAverage Cost Average Visit

G2P: UP Salary Payment

78%

50

%

52

%

9

1

2

43

3.3

1.31

0.6 0.5

1

0

0.5

1

1.5

2

2.5

3

3.5

Average time

(day)

Average Cost

(USD)

Number of

Visit

Mobile Banking

Before

After

82%65%

0%

Digital Financial Products

Time, Cost, Visit (TCV) Reduction

4.31

0.921.2

0.34 0.22

1

0

1

2

3

4

5

Average time

(day)

Average Cost

(USD)

Number of

Visit

P2G: Electricity Bill

Payment

Before

After

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

0

20

40

60

80

100

Before After

Avg Time

0

10000

20000

30000

40000

50000

Before After

Avg Cost

0

5

10

15

20

25

Before After

Avg Visits72%

82%

77%

Dim

ensi

on 1

: Man

agem

ent

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

ensi

on 2

: Pay

ment

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

BTCA Toolkits: Gov, Biz, DP

Planning Payment Digitization

Better planning, faster execution,

moving together

Better Planning, Faster

Execution, Moving Together Taskforces

GoB Salaries, Pensions, MPOs – Finance Division

GoB Safety Nets – Cabinet Division

DP Safety Nets – Cabinet Division

Private Sector Salaries, Payments – a2i, PMO

Payments Architecture – a2i, PMO + BB

National Financial Inclusion Strategy – BFID

Monthly coordination meeting

Quarterly review meeting with Principal

Secretary’s inter-ministerial committee on DFI

Secretarial and Strategic Support – a2i, PMO

Payment

digitization

Demand mapping

(including demand

creation)

New product

experimentation

through Digital

Centres (LGIs,

POs, private

sector)

Strategy and

policy

development

Thanks