Mobile money booms, empowers unbanked
Mobile financial services, seen as a means of poverty alleviation and financial inclusion, fared well in 2021 in Bangladesh thanks to adaptation of the people to digital transactions amid the coronavirus pandemic, the government's gradual switch to digital system to disburse social safety net funds and inflow of foreign investment.
Merchant payments, which include payments to retail shops and e-commerce by customers, surged to Tk 27,914 crore in the first 10 months of 2021, up by a massive 230 per cent compared to the same period a year ago.
It's a testament to the acceleration of digital transactions during the pandemic as mobile financial service (MFS) providers emerged as a saviours in the fight against the deadly contagious virus.
Overall transactions through MFS providers shot up to Tk 631,013 crore in the January to October period, up 40 per cent year-on-year, data from the Bangladesh Bank showed.
Cash-in rose 36 per cent and cash-out went up 21 per cent.
Last year saw the disbursement of the funds under the social safety net programmes through the major operators.
The government disbursed old-age allowance, widow allowance, student stipends, allowances for the people with special needs, the underprivileged, and the students with special needs, farmers' allowance and in other areas.
MFS providers distributed about Tk 14,000 crore in 2021 on behalf of the government, and a majority of which by Nagad, the MFS wing of the postal division.
Safety net disbursement through MFS providers was first initiated in May 2020 during the initial wave of the pandemic. Primarily, the government wanted to provide cash assistance to 50 lakh poor families hit by the pandemic.
But, only 36 lakh beneficiaries received the money after MFS operators pointed out duplication in the list of the beneficiaries, thus identifying leakage.
This encouraged the government to involve MFS operators widely in different types of disbursements as it witnessed better transparency.
Subsequently, the government increased the disbursement last year, and it will shoot up further in 2022.
"The government's allowance disbursements through MFS providers have several advantages such as transparency, elimination of intermediaries, and significant reduction in delivery time and cost," said Abul Kashem Md Shirin, CEO of Dutch-Bangla Bank, which owns Rocket that pioneered MFS in Bangladesh.
Rocket added 47 lakh customers last year, taking its tally to 2.66 crore, up from 2.19 crore in 2020.
Launched in the first quarter of 2011, its average daily transaction in 2020 was Tk 480 crore, up 45 per cent from the previous year.
The biggest beneficiary of the government's safety net fund disbursement among the MFS providers has been Nagad.
Armed with an easy account-opening process and the lowest cash-out charge, safety net disbursement helped it create 3.35 crore new customers in a year, an unprecedented achievement, lifting its customer base to 5.78 crore by the end of 2021.
On average, Tk 750 crore is channeled through Nagad every day.
In Bangladesh, the number of registered clients rose 12.13 per cent year-on-year to 10.81 crore in October, bringing the poor and the un-banked as well as under-banked into formal financial systems.
Nagad's data is not included in the central bank's calculation as it is running operation on the basis of an interim licence from the BB.
Some 2.01 crore people joined Nagad in 2021 by dialing *167# from a mobile phone, the easiest account-opening process in the world.
Last year, Nagad distributed government allowances and safety net funds 8 crore times among 3.5 crore beneficiaries.
Speaking about the achievement, Nagad Managing Director Tanvir A Mishuk said, "Nagad has brought about revolution to the mobile financial service in the country since its inception."
"Nagad has become the best mobile financial service for ensuring digital services for customers thanks to our customer-friendly, easy and affordable service," he said in a press release.
The biggest milestone in the sector is Softbank Vision Fund 2's investment in bKash, elevating it to the level of Arm Holdings, Sprint Corporation, Alibaba, Yahoo Japan, Ola Cabs, HYKE, Paytm, and WeWork, where it has investments.
The fund, which is the first investment from Japanese tech investor SoftBank in Bangladesh, will support bKash's existing robust and customer-friendly platform, increase digital adoption and help users experience the best technology available.
It will help promote financial inclusion through building a digital financial ecosystem in Bangladesh.
"The fact that Softbank decided to put money into bKash, it means company like Softbank recognised the overall running system by bKash," said Ito Naoki, Japanese ambassador to Bangladesh, a few weeks ago.
"I think it is a very important message to outside investors about Bangladesh. If bKash succeeds as a result of Softbank's investment, prospective investors will come to the e-commerce area in Bangladesh."
The operator has 3 lakh agents, 2.65 lakh merchants and 5.75 crore customers. It disbursed government allowances among 75 lakh beneficiaries.
Last year also saw the launch of a new MFS provider, Trust Axiata Pay (tap), a joint venture of Trust Bank, a private commercial lender in Bangladesh, and Axiata Digital Services of Malaysia.
Upay, the MFS brand of UCB Fintech Company Ltd, a subsidiary of United Commercial Bank, acquired 40 lakh customers and deployed 1 lakh agent points across the country since it launched on March 17, 2021.
In another major move, bKash joined hands with City Bank to roll out the country's first digital nano loan, highlighting what people could expect from the burgeoning MFS sector in the coming days.
The collateral-free and instant 'Digital Nano Loan' helped Bangladesh enter into a new era of digital lending.
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