National Financial Inclusion Strategy for Bangladesh Summary of - - PowerPoint PPT Presentation

Roundtable on

Summary of emerging themes: Consultation kick-off meeting

National Financial Inclusion Strategy for Bangladesh

October 3, 2017 Hotel Pan Pacific Sonargaon, Dhaka Bangladesh

Welcome

Historical perspectives

1972 Bangladesh Bank established 1973 Bangladesh Krishi Bank 1982 License of Private Commercial banks 1983 Grameen Bank 1986 Rajshahi Krishi Unnayan Bank 1990 Palli Karma-Sahayak Foundation (PKSF) 1991 Bank Company Act (amendment 2013) 1993 Financial Institution Act 2002 Agricultural Credit Department 2007 SME Foundation 2010 Insurance Development and Regulatory Authority (IDRA) 2010 Establishment SME & Special Programmes department of Bangladesh Bank and SME Credit policies 2006 Microcredit Regulatory Authority Act 2011 Guidelines on Mobile Financial Service Regulation issued by Bangladesh Bank 2013 Guideline for Agent Banking for Banks 2015 Financial Inclusion Department 2015 Bangladesh Post Office electronic money transfer Service 2015 Bangladesh Electronic Fund Transfer Network (BEFTN) 2015 Real Time Gross Settlement (RTGS)

2017

• Nos. of bank

savings account: 65 million

• Nos. of registered MFS

clients: 54 million

• Nos. of MFI Clients :

35 million

Enabling economic environment

Rapid Urbanization Widespread access and use of technology Rapid Industrialization Opportunities to reap the demographic dividend. Poverty falling but vulnerability increasing

Why are we here?

Formal kick-off of the wide stakeholder consultation. Validation of:

• Diagnostic insights
• Strategic thrusts
• Coordination arrangements for

implementation

1 2

Structure of the evening

Mandate and progress of National Financial Inclusion Strategy

• Mr. Arijit Chowdhury, Additional Secretary, Financial Institutions Division, Ministry of Finance

Synthesis of key findings and implications for strategic priorities of National Financial Inclusion Strategy for Bangladesh

• Dr. Mustafa K. Mujeri, Team Leader for National Financial Inclusion Strategy Development.

1 2 3

Roundtable Discussion Moderator: Mr. Md. Eunusur Rahman, Senior Secretary, Financial Institutions Division, Ministry

• f Finance, Government of Bangladesh.

Way Forward

• Mr. S.K. Sur Chowdhury, Deputy Governor, Bangladesh Bank and BFP-B Project Leader .

Closing Strategic Guidance

• Mr. Fazle Kabir, Governor, Bangladesh Bank

4 5

Bangladesh Towards Financial Inclusion

Mandate of

National Financial Inclusion Strategy for Bangladesh

International Commitment National Commitment

National Social Security Strategy (NSSS) of Bangladesh

7th Five Year Plan SDGs Financing Strategy

The Maya Declaration

Commitments you can bank on

Status Of Financial Inclusion

Why Financial Inclusion?

Formal financial system helps people

Make day-to-day transactions Plan and pay for recurring expenses Safeguard savings Mitigate shocks Finance small businesses or micro- enterprises Drive economic growth

Financial inclusion is a state where every individual and enterprise have access to a wide range of financial products they value and are able to use through

• pen

transactional accounts, responsibly delivered by a diverse range of regulated providers that cooperate

• n

shared interoperable market infrastructure and compete on bringing value-to- customer.

10% 10% 30% 63% 21% 4% 2% 14% 2% 20% 67% 49% 43% 10% 14% 20% 39% 14% 24% 45%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Uganda Pakistan Kenya India Bangladesh

Banked Other formal Informal Exclluded

Bangladesh performs well in formal financial inclusion. Informality is commendably low but this has implications for access.

Average number of services accessed

1.6 1.4 1.2 1.0 0.8 0.6 0.4

20% 30 % 40% 50% 60% 70% 80% 90% Financial Inclusion Rate

Source: InterMedia (2016)

Access to formal financial services is high but customers are thinly served. Payment services make up a significant proportion of financial access. OTC’s role as a gateway to other services should not be underestimated.

Access to Formal Financial Services in Bangladesh

OTC = Over the Counter mobile money transactions

(excluding payments) (excluding OTC) Whole Population

Including OTC financial inclusion increases by 15%

Average number of services accessed

1.6 1.4 1.2 1.0 0.8 0.6 0.4

20% 30 % 40% 50% 60% 70% 80% 90% Financial Inclusion Rate Financial Inclusion Rate of different groups in Bangladesh (including OTC)

Source: InterMedia (2016)

Varying levels and depths of financial inclusion for different professions. Farmers and dependents have lowest levels of financial inclusion, despite targeted policies. As expected, professionals access the greatest range of products, but some remain fully excluded.

Size of each dot is proportional to the number

• f people in the group

Dependents Farmers Labourers Micro entrepreneurs Other SMEs Professionals

Disparities

Regional Disparities Low

Divisions relatively clustered

10% difference between them but increases to 15% in absence of OTC

Gender disparities:

High Full service bank account: 7% women vs. 17% men. Access to MFS: 27% women vs. 52% men

Age disparities:

Moderate Potential digital exclusion mobile money: 43% among 25-35 year olds

• vs. 18% in 45+.

Gender continues to be one of the main disparities, despite targeted efforts to increase financial inclusion. Must be aware of potential digital exclusion across gender and age demographics. OTC plays a role in narrowing geographical disparities.

Sylhet Rangpur Rajshahi Dhaka Khulna Barisal Chittagong Average number of services accessed 1.6 1.4 1.2 1.0 0.8 0.6 0.4

20% 30 % 40% 50% 60% 70% 80% 90%

Financial Inclusion Rate

Source: InterMedia (2016)

Geographical disparities of Financial Inclusion (With OTC)

Regions relatively clustered in their access to financial services. OTC narrows geographical disparity.

Consumer Perspectives

• Why major demand-side

constraint: lack of perceived use case

• The supply side appears to

represent less of a barrier

Bank Account Profile

78% 16% 4% 1% 1%

Lack of use case: Dont need or sufficient money Lack of understanding Lack of ID or registration too complicated Banks costly or unreliable Accessibility issue

Source: InterMedia (2016)

79% unbanked 21% banked

79% don’t have a bank account, most of them don’t see the use case

Why don’t you have a bank account? Proportion of Bangladesh Don’t need/insufficient money

56% 15% 25% 4%

last 30 days 30-90 days 90+ Never

When was the last time you used your bank account?

• Access high but usage

moderate.

• Usage barriers

prevent deeper engagement with financial services.

Bank Account Profile

Source: InterMedia (2016)

79% unbanked 21% banked

Even those with bank accounts are not making full use out of them

Proportion of Bangladesh

Payments and savings are the main drivers of bank account sign-up

Source: InterMedia (2016)

38% 40% 47% 54% 57%

56% 48% 36% 39% 36% 2% 8% 1% 2% 3% 4% 4% 16% 5% 4% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Kenya Uganda India Pakistan Banglad esh

Payments Savings Credit Encouraged by organisation / company

Main reason given for getting a bank account 79% unbanked 21% banked Proportion of Bangladesh Bangladesh

Provider Perspectives

Diverse providers resolving problems of reaching last mile (MFS, Agent networks). But lack of synergy across providers constraints financial inclusion. Performance of MFIs

Access to credit is high by international standards Opportunities for growth may be declining.

Performance of Banks

21% banked Rate of growth is low High prospects for growth

Performance of MFS

Rapid growth but usage is constrained by regulation and lack of interoperability.

Cash is still King

Vibrant agent network will be a critical driver

• f financial inclusion

1. Fostering Interoperability : Improve coherence and shift from silo approach. 2. Developing client centric business model: For better use case. 3. Embracing digitization of information: Narrow information asymmetries. Untapped potential

National Financial Inclusion Strategy (NFIS) for Bangladesh

Timeline:

2017-2021

a rolling strategy

A stand-alone and comprehensive strategy to:

• Assist the Government
• Raise awareness
• Build trust and collaboration amongst stakeholders
• Adopt a coordinated approach across ministries, public

and private sectors

• Implement, coordinate and monitor actions

Overview

Banking Sector Microfinance Sector Insurance Sector Mobile Financial Services Digital Financial Services Payment Systems

NFIS Components

Short Demand Side Study Cross-cutting Issues 1. Gender, 2. Client Protection, 3. Climate, Finance,

• 4. Agriculture & Value Chain, 5. Sustainable Development

NFIS Development Process

Identify time –bound action plan, set targets and indicators Collect stakeholders’ insights and build consensus Set targets and establish monitoring and implementation arrangement Conduct diagnostic

• f sub sector studies

to Identify demand- supply and regulatory barriers

1 3 4 2

Vision

An integrated financial system that:

1 2 3

Responds to the needs of the country's population and enterprises. Provides access to financial products to smooth consumption, invest in

• pportunities and mitigate shocks.

Supports rapid and inclusive development

• f the country’s real sector.

Strategic Thrusts 1

Strengthen capacity: data-driven policy analysis. Mandate for consumer protection. Regulatory sandbox to support innovation. Establish interoperability. Revise guidelines for MFS and e-KYC.

Policy and regulatory framework

Offer time-bound subsidies to incentivize innovation. Promote competition. Enabling regulatory environment. Forge institutional partnerships. Expand agent banking networks. Capacity building to assess key target groups’ needs. Innovative financial products and delivery channels for excluded groups.

Strategic Thrusts 2

Appropriate, relevant and efficient financial products and delivery channels

Digital innovations. Develop digital ecosystem. USSD pricing policy. Promote use of digital smartcards/NIDs. Digital inclusion for women. Increase number of MFS female agents. Develop tailored products. Open- Application Programming Interfaces (APIs). Use technology :increase efficiency & reduce transaction cost.

Strategic Thrusts 3

Digital Financial Services

Adopt a financial literacy and education programme. Improve customers’ decision-making.

Strategic Thrusts 4

Financial literacy and education

Coordinate and create partnerships across: ministries, regulators, govt. agencies and private sector. Clarify roles and responsibilities.

Strategic Thrusts 5

Financial Advocacy

Financial inclusion for women

Establish quantitative, gender-related targets and gender-focused research for financial literacy and policy design. Regulatory reforms to increase access to basic financial services for women.

Strategic Thrusts 6

Challenges

• Coordination across government agencies.
• Assessing risks associated with emerging

technologies.

• Communicating to private sector roles and

responsibilities.

• Tackling group-specific barriers to financial

inclusion.

Coordination structure

• Ensure timely undertaking of responsibilities.
• Suggest areas for collaboration between public & private sectors.
• Prepare action plan and implementation budget.
• Provide technical, administrative & research support to NNC & NSC.
• Monitor and Evaluate NFIS progress and share progress reports.
• Form technical committees as per need.
• Periodically review financial inclusion strategy.
• Approve time-bound action plan.
• Provide guidance for policy, institutional and legal reforms.

NFIS-B National Secretariat NFIS-B Steering Committee NFIS-B National Council

1 2 3

Roundtable Discussion on National Financial Inclusion Strategy

Moderated by

• Mr. Md. Eunusur Rahman, Senior Secretary, Financial Institutions Division,

Ministry of Finance, Government of Bangladesh.

Way Forward

By Mr. S.K. Sur Chowdhury, Deputy Governor, Bangladesh Bank and BFP-B Project Leader.

Closing Strategic Guidance

By Mr. Fazle Kabir, Governor, Bangladesh Bank .

Thank You

Roundtable on National Financial Inclusion Strategy