Monday | 7 October 2024 | Reg No- 06
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Monday | 7 October 2024 | Epaper

Achieving 100 per cent financial inclusion

Published : Tuesday, 29 June, 2021 at 12:00 AM  Count : 1156
Rajib Chakraborty
Financial inclusion aims at drawing the "unbanked" population into the formal financial system so that people can get chances to make access to financial services like savings, payments, remittance, insurance, etc. Financial inclusion is a key element of social inclusion. Again, for the sustainable economic development of a country, the inclusiveness of the financial system is a prerequisite. People from the different segments of the society should have access to financial institutions and knowledge to avail the various economic benefits given by the government of the country.

Such inclusive growth can boost up the local economic conditions that make better the national economy of a country. Though the government of Bangladesh and its private players has been instrumental to make the general mass financially literate to include them in the financial system, the following barriers and policy implications are addressed to overcome hurdles to fulfil the government's agenda of ensuring 100 percent financial inclusions.

According to The Little Data Book on Financial Inclusion 2018, only 41% of the adults Bangladeshi (15+) have financial institution account against 68 % of south Asian data and 56 % of all lower-middle-income countries (LMIC). Adults belonging to the poorest 40% also, the percentage (40 percent) is lower than that of (65 percent) south Asian data.

But surprisingly, in the case of mobile banking, compared to 4% and 5% of south Asian and LMIC data respectively, the highest 21% of Bangladeshi people have mobile banking account. On the other hand, the number of bank branches or even ATM services is less that keeps the majority of the people especially those who live in the rural areas out of the financial system. Therefore, the government can add another semi-formal FI with public sector banks along with opening new branches to reach people of remote areas.

The transaction cost of borrowing now becomes a most considerable factor in the case of the inclusion of mass people in the banking arena. Excessive paper works, time, and formalities for sanctioning low-interest cost of loan sometimes demotivate the borrowers, whereas the wide presence of semi-formal institutions in the extremely remote areas throughout Bangladesh made disbursement of loan on a reasonable time. So, the government can entertain more non-banking financial companies and other NGOs, co-operatives to come forward with their different need-based products and services.

Financial literacy is also a matter to the people who even do not know about opening an account as it needs necessary ID, proof of domicile, reference letter, etc. Low awareness level also creates an obstacle to operate or make transactions while depositing and transferring money from one account to another account. Government has to lunch various awareness-raising programs through local administrations in rural schools, colleges so that the children of the farmers, fishermen, daily labourers, can learn about operating an account and teach their earning members in the family.

As part of the government initiatives to promote digital services in all aspects especially in the education, health sector, financial sector, the government can direct all service providers to use digital forms in the case of making various payments like electricity bill, insurance, gas bill, salary, health insurance, pension, old age fund, etc. For that, a machine-readable smart card containing 12-digit unique numbers can be issued against of voter card to make all kinds of financial transactions including distribution of public welfare schemes services.

A large number of people in Bangladesh are still unbanked, un-served, or under-served due to the absence of either reliable financial institutions or a lack of sufficient financial literacy. More than that there is no unique product and services that can be easily affordable, reachable, reliable, easily transferable and can offer both credit and savings facilities to cover the unbanked people to fulfil the government's agenda of ensuring 100 percent financial inclusions.

Most of the financial institutions concentrate on large-scale loans, neglecting to fulfil the demand of the middle-income people for their small-scale loans and agriculture loans as priority sectors as per government policy for their upliftment. To augment the growth of priority sector lending, the government can direct all the nationwide MFIs and local NGOs to provide short-term loans as per the requirements of the local people with flexible rules that will ensure access for the poor household to financial institutions.

Though Bangladesh Bank has already taken a lot of initiatives for enhancing the approach of inclusive banking with the help of state-owned commercial banks and development banks by opening 10 taka accounts for the farmers, stimulating the SME financing to encourage the small entrepreneurs, there is a lot to improve the facilities of green banking, mobile banking, online banking, etc to include the unbanked people especially the rural people of Bangladesh.

The microfinance movement in Bangladesh has become a successful model and established a reliable vehicle from providing small-scale loans to other non-financial services and now considered a trustworthy vehicle for eradicating poverty. MFIs and other NGOs are instrumental in delivering different tailor-made small loans and other credit and deposit facilities to the unbaked people residing in a remote part. Government can make an integrated plan to add these semi-formal institutions with mainstream banking institutions so that microfinance beneficiaries can avail all services and government subsidies through their accounts.

For creating a competitive financial system, the central bank of a particular country has a significant role to make a level playing field for all types of financial institutions either state-owned, or semi-govt, NGO, etc. A general perception is that the traditional kind of product and services of government institutions and their delivery style should be revised. In contrast, the performances of other private players are far better than that of government concerns. It pollutes the overall competitive environment of a financial system. Thus, the government should formulate policies to make a level playing field for all types of FI to ensure services at affordable cost.

But the reality is that, capturing and bringing those financially excluded people for inclusion in the financial system is not only a difficult task but also time-consuming. In order to attaining the goal a master plan, devised by the government, is required by including all financial players.
Dr Rajib Chakraborty is a
researcher and columnist




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