10 Barriers to Financial Inclusion in Bangladesh Identified
Posted by Unknown in Agriculture and Farming, Asia, Bangladesh on Monday 28 January 2013
The
central bank has identified ten barriers including poor banking
infrastructure, particularly in rural areas, now stand in the way of
financial inclusion in Bangladesh.
"Keeping
in view the number of financially excluded people in Bangladesh, about
half of the adult population is un-banked (48.49 percent) in terms of
deposit accounts in the banks," Bangladesh Bank (BB) said in a working
paper styled 'Financial Inclusion: The Role of Bangladesh Bank,'
released recently.
The
major barrier is geographical or physical access measuring the average
distance from household to bank branch; however, the branches per 1,000
square kilometres could be used as crude indicator for providing an
initial idea to the barriers of inclusion, the paper added.
Citing
an example, the paper said Spain has 96 branches per 100,000 people and
790 branches per 1,000 square kilometres, while Bangladesh has less
than seven branches (or ATM) per 100,000 population and about 67
branches (or ATM) per 1,000 square kilometres.
A
large section of the population who do not have any physical access to
the banking services are in rural and remote areas in the country,
according to the paper.
"As
a competitive and cost effective strategy, major banks focus on large
scale of loans instead of providing services for small size of loan; as a
result, rational business decisions prevent a major portion of people
from accessing loan services including small and medium enterprises
(SME) and agriculture loan," it said quoting poor level of technological
infrastructure.
Promoting
technological and institutional innovations as a means could expand the
financial system access and usage; however, less than four people per
1,000 population in the country are using credit cards identifying the
technological and infrastructural weaknesses, according to the paper.
Other
barriers include lack of proper documentation, inadequate financial
literacy or education, high requirement of minimum balance, low income,
lack of suitable product structure of banks and micro-financial
institutions (MFIs), high cost of product and absence of credit bureau
and insurance of MFI borrowers.
Recent
trend in mobile banking indicates that financial inclusion is scaling
up in Bangladesh especially in rural areas where no bank branch is
available.
"Recent
data show that number of mobile phone subscribers and tele-density have
been increasing substantially over time creating an opportunity for
banks and MFIs to use the mobile technology in the financial services
and serve un-banked people with lower costs specially in the rural
areas," the paper said, adding that rate of overall financial inclusion
is increasing in modest pace.
It
is observed that financial inclusion of total population increased from
39.76 per cent in 2004 to 56.42 per cent in 2010, the paper noted.
In
terms of adult population, it increased from 65.33 per cent in 2004 to
87.23 per cent in 2010 due to opening of a significant number of 10 taka
account in the last two years, according to the paper.
The
BB has recommended that the central banks of the SAARC region can
initiate policies targeting low income populations by introducing
agriculture and rural programmes under a comprehensive monitoring
strategy.
In
this connection, loans to sharecroppers and small enterprises
introduced by the BB has been contributing not only to achieving wider
coverage of financial inclusion in Bangladesh but also to reducing the
high dependence of small and marginal farmers on non-institutional
sources, it added.
