Borrowing loans has now become super easy for about a third of the population in Bangladesh thanks to bKash and City Bank as they have joined hands to roll out digital loans that are spreading around the world.

Globally, digital loans have exploded in popularity after Ant Group, an affiliate of Alibaba that has stakes in bKash, introduced digital micro-lending half a decade ago.

BKash users can now apply for a loan ranging from Tk 500 to Tk 20,000 through its app, receive it instantly and repay in three equal monthly instalments. The interest rate will be 9 per cent per annum.

Zunaid Ahmed Palak, state minister for information and communication technology, inaugurated the Digital Nano Loan at a programme at a hotel in Dhaka yesterday.

Ant's Alipay app has functioned as a central tool for some 730 million monthly active users in China to obtain microloans and other services. It has virtual consumer credit card service, online cash loan service targeting individuals, and online credit service for small and medium-sized businesses.

For the innovation of City Bank's Digital Nano Loan product, the technology support of bKash's strategic partner Ant Group has played a vital role.

The launch follows a pilot project where the bank disbursed about 45,000 loans amounting to Tk 7 crore among bKash users.

"Only 3 per cent of the disbursed amount is non-performing, and borrowers are still paying," Mashrur Arefin, CEO of City Bank, told The Daily Star.

"Its market is having phenomenal growth in African nations such as Kenya, Tanzania and Nigeria, and the bad loans in these countries are very low in the segment as well."

"We are very hopeful about the new journey," he said.

However, unlike Alipay, the eligibility for the loans among bKash users would be determined by City Bank based on its credit risk management policy.

As a launch offer, City Bank will not charge borrowers any processing fee till further announcement. Customers will pay 0.5 per cent processing charge after the initial period.

The loan involves daily interest calculation and processing. A borrower can repay the loan earlier than the due date, and in such cases, the borrower will bear interest only for the days the loan was outstanding. There will be no early settlement fee.

Thanks to the agreement, City Bank, which has 22 lakh customers, will be able to provide service to a broader segment of people as bKash, the largest MFS provider in Bangladesh, has about 5.5 crore users.

Speaking at the programme, Kamal Quadir, CEO of bKash, said, "The integration between banks and MFS has opened up multitude of opportunities where banks can design more creative and inclusive services through a digital platform leveraging the large customer base of bKash."

"This initiative further validates the complementing arrangement that banks and bKash developed over the years through cooperation and confidence in each other. The Digital Nano Loan will broaden the scope of financial inclusion."