Towards financial inclusion

On August 15, India's Independence Day, Prime Minister Narendra Modi announced a national mission of financial inclusion. Called the Prime Minister's People's Wealth Programme, it envisions bank accounts for all Indians. In its first phase, ending August 14, 2015, the target is 7.5 crore accounts. As Modi said, “There are millions of families who have mobile phones, but no bank accounts. We have to change this. The change will commence from this point.”
Bangladesh may not beat India on many economic and social indicators. But it can be asserted that Bangladesh has realised the importance of using mobile phones for banking for financial inclusion several years before India. There are 2.5 crore mobile bank account holders (almost one-sixth of the total population) and the number is increasing every day. On an average Tk 350 crore is being transacted every day through mobile banking. Another 1 crore Tk 10 farmers' accounts exist in state banks. Nearly 8 lakh students have bank accounts now. In addition, there are around 5.5 crore formal bank accounts in the country.
Altogether, the total number of bank accounts now stand at around 9 crore or over 56 percent of the total 16 crore population. If only the adult population is taken into account, nearly 90 percent people have bank accounts, which is a remarkable achievement for Bangladesh compared to the least developed and developing countries.
On the contrary, World Bank (2008) shows that in most developing countries, less than half the population has an account with a financial institution, and in many countries the number is less than one in five households.
“We are now the second biggest mobile banking country in the world after Kenya. We will become number one in a few months,” Dr Atiur Rahman, governor of Bangladesh Bank, told The Daily Star.
Rahman is believed to be the champion of the successful campaign for financial inclusion. He has motivated central and commercial bankers to bring the unbanked population into financial services. He made the mobile banking services 'well-regulated', both by the central bank and scheduled banks.
He dreams further towards sustainability. “Financial inclusion will lead us to financial sustainability. We have also launched green banking, keeping in mind the sustainability issue,” said the governor.
Financial inclusion and financial literacy have long been the words used by policymakers, bankers and researchers across the globe. There are many opinions about what financial inclusion means.
The G20 association of major world economic powers added its imprimatur to financial inclusion by recognising it as one of the four pillars in the financial sector reform structure of its Global Development Agenda and given it equal standing along with financial integrity, financial consumer protection, and financial stability. In doing so, the G20 defined financial inclusion as:
"...a state in which all working age adults have effective access to credit, savings, payments, and insurance from formal service providers..." The 'newly banked', as the beneficiaries of financial inclusion are often called, have not necessarily been deprived of all financial services. They may have significant and often negative experiences with informal moneylenders, unofficial exchange houses, and ancient transfer systems such as hundi and hawala.
It was not very long ago that Bangladesh was dubbed as an under-banked country. Financial inclusion was a far cry at that time. Discussions were limited to the challenges, such as lack of knowledge and awareness in financial inclusion in Bangladesh. A research conducted by the Bangladesh Institute of Bank Management shows that financial inclusion of the total population was 39.76 percent in 2004 which rose to 56.42 percent in 2010 due to the opening of 90 lakh Tk 10 farmers' accounts in state banks.
There are around 9,000 bank branches along with about 18,000 branches of NGO-MFIs, 1,200 thousands post offices and 183,000 co-operative outlets totalling about 2.1 lakh branches/outlets for the 56.6 million economically active population - generating at least one financial service point per 270 people.
The game started to change further in 2011 when Bangladesh Bank, the country's central bank, issued Mobile Financial Services (MFS) Guidelines defining a model where MFS must be bank-led, but partnerships with regulated micro-finance institutions were made to reach customers. 
Two MFS providers have emerged as early leaders: bKash of BRAC Bank and Dutch Bangla-Bank mobile banking. Launched in 2011, bKash, initially a joint venture of BRAC Bank and the US based company Money in Motion, has emerged as the market leader with more than 15 million customers. Following IFC's investment, Bill & Melinda Gates Foundation, one of the largest private foundations in the world, also made an equity investment in 2014. The service provider has around 105,000 agent points nationwide to facilitate cash-in and cash-out services at every corner of Bangladesh. Besides money transfer, a bKash account holder can also use his or her mobile wallet for availing other services such as mobile phone top up, salary disbursement and payment for shopping.
Bangladesh Bank has made a big effort in increasing availability of the highest quality banking services to the farmers. As per regulations, any farmer showing his/her National Identity Card/Birth Registration Certificate and Agriculture Inputs Assistance Card issued by the Agriculture Extension Department can open a bank account by keeping only 10 taka as initial deposit. The banks do not require the filling of the Know Your Customer (KYC) form for this purpose. No condition of maintaining a minimum balance will be applicable in this regard and these accounts will remain free of any additional charge or fees.
BB has also allocated a Tk 200 crore refinance scheme for these farmers so that these bank accounts will remain active. The marginal and landless farmers, small shop owners, hawkers and people affected by river erosion having the Tk 10 accounts will get loans under the refinance scheme with a 9.5 percent interest rate.
Dr Mustafa K Mujeri, director general of Bangladesh Institute of Development Studies (BIDS), hailed the country's progress in financial inclusion, saying, “We have progressed a lot in access to finance in the last several years. The number of bank branches (nearly 9000), accounts and products have increased significantly over the years.”
But he warns of being complacent with the growth in numbers only. He said people have multiple bank and microcredit accounts.
“10  crore accounts do not mean that 10 crore people have accounts,” said the top researcher of the state-sponsored BIDS. “Still, many people are ignored by the current financial system for being too poor.”
He also lauded the government and the BB for their efforts to distribute subsidies through bank accounts, otherwise the accounts (one crore Tk 10 farmers' accounts) will remain dormant. “Time has come for the BB to assess how far these accounts are being utilised,” said Mujeri.
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The writer is the chief business correspondent, 
The Daily Star. He can be reached at suja74@gmail.com