How do you deliver affordable and accessible financial services to the remotest communities? This was one of the topics discussed at a recent seminar held in Washington DC with panelists Martha Brantley at the Clinton Development Initiative, Leora Klapper at the World Bank, Stephen Kehoe at Visa, Cathleen Tobin at Women's World Banking, Camille Busette at CGap and Martin Holtmann at International Finance Corporation.
Digital payments were described as "truly revolutionary" for developing countries by Leora Klapper of the World Bank, but are not yet widespread - factory workers in Bangladesh are still taking three days to travel to pay their children's school fees. "Better connectivity and wider distribution of affordable broadband is needed to push these systems forward".
But the fact is different. A factory worker in Bangladesh now can send money to his family members living in a remote area within a few minutes thanks to mobile banking operations introduced by Bangladesh Bank. A digital revolution has made in Bangladesh under the present government led by Sheikh Hasina mostly driven by Dr. Atiur Rahman, Governor of Bangladesh Bank.
Dr Atiur Rahman, who is widely known as a visionary for financially inclusive society, was recently named the 'Central Banker of the Year 2015? in the Asia-Pacific region by The Banker, a prestigious publication of The Financial Times Group. The Banker put more focus on the issue of financial inclusion. He has taken the financial inclusion as a tool to fight against poverty, which is paying off well for Bangladesh economy over the last six years.
Meanwhile, financial inclusion of total population of Bangladesh increased significantly which was estimated to 56.42 per cent in 2010 from 39.76 per cent in 2004 driven by pragmatic measures taken by Dr. Rahman. In terms of adult population, it increased to 87.23 per cent from 65.33 per cent due to opening of a significant number of 10 taka account in the last two years.
Cautious, restrictive but growth supportive monetary and financial policies of Bangladesh Bank have helped achieve an annual average GDP growth rate of 6 per cent. Within a span of time, Dr. Rahman has introduced branchless banking, encouraged commercial banks to gain access to the USSD channels of Mobile Network Operators, thereby opening up a large and growing mobile subscriber base, that was never thought before.
Bangladesh is among very few countries where commercial banks have an explicit development objective with major focus on price stability and inclusive growth driven by impressive performances of bank CEOs- the solders of the battle.
All population segments of the society including farmers, small and women entrepreneurs are encouraged to undertake productive endeavors through broad based financial inclusion initiatives. Refinancing, modernization of the IT and payments system, environmental risk evaluation guidelines and other policy supports have been extended to facilitate inclusive and environment friendly financing.
Despite impressive progress in terms of number of bank accounts and higher volume of SME financing, some challenges, however, are still sparking gloomy signals to Dr. Rahman to win his battle. Many bank CEOs during this print media dialogue, have pointed some challenging issues of the financial inclusion.
It had been established that microenterprises are good for helping poor people cope/survive but not for producing economy-wide increases in productivity. In that case, are we evaluating microcredit against the wrong criteria?
When distribution channel is vulnerable, security concerns are at high level, the question has been raised how banks can use new models of Dr. Atiur Rahman to close the financial services gap specially when most banks are under pressure with soaring margin pressure? How can they survive amid mounting competition with MFIs and NGOs, when mobile operators are engaging in a power struggle over the unbanked?
How much access has actually been created through Bangladesh Bank policy packages when some banks facing struggle with high classified loans and the number of tiny bank accounts does put impressive effect financial inclusion?
Opposite team say the financial inclusion - means "formal" financial inclusion, which are often laden with fees, unfamiliar, or simply unsafe. In most cases, MFIs have focused too much on their own profitability and sustainability, charging very high rates of interest to the poor, and so are not very different from the moneylenders in the informal sector.
The question is: Does the use of informal financial services count when considering real financial inclusion?
Despite the widespread use of financial services in both the developed and developing world, many interpretations of financial inclusion are limited to services in the formal financial sector. Others disagree, and emphasize the importance of the informal sector in providing much needed financial services. As the struggle to manifest real financial inclusion continues, who will ultimately decide what constitutes a financial service or an inclusive system?
Financial inclusion is now a hot debate issue in global financial hubs. One question tweets on by many to take forward is "how will unbanked solutions factor in to the post-2015 agenda?"