Call for banks, non-banks to change business model
Banks and non-bank financial institutions should change their business model and take their services to millions of people still left out, said an economist yesterday.
"The banks should not try to replicate their urban business model in rural areas. They need to go to village customers," said Toufic A Chowdhury, general secretary of Bangladesh Economic Association.
Speaking at the seminar on 'inclusive financing' at Bangabandhu International Conference Centre in the city, Chowdhury said banks should also rearrange their business hours to catch up with the rural customers, as most of them remain out during the traditional banking hours.
Palli Karma Sahayak Foundation (PKSF), the state-run lender, organised the seminar on the sidelines of its four-day event -- 20 years of PKSF and Development Fair 2010 -- which ended yesterday.
Atiur Rahman, governor of Bangladesh Bank, presided over the programme, while Md Shafiqur Rahman Patwary, secretary of Bank and Financial Division of the finance ministry, spoke as the chief guest.
Chowdhury, the keynote speaker, said a well-functioning financial system can economically and socially empower individuals, allowing them to better integrate into the economy, actively contribute to the development and protect themselves against economic shocks.
Bangladesh ranked 43rd among 55 countries in an index of financial inclusion adjudged as per three dimensions, banking penetration, availability of services and usage of services, said Chowdhury, quoting a 2008 study.
Around 25.5 percent of the country's 16 crore people have bank accounts, according to a United Nations estimate of 2006.
In 2008, there was a bank branch for every 20,566 people and the number of bank deposits stood at Tk 3.76 crore, according to Bangladesh Bank.
To improve the scenario, the central bank increased the availability of quality banking services to the farmers, allowed the banks to open SME service centres to provide a whole range of services and invested at least 50 percent of deposits of these centres in SME or agriculture sector.
Among other initiatives, Bangladesh Bank also introduced a three-year term revolving crop credit limit system to ensure smooth flow of agricultural credit.
The state-run commercial and specialised banks have so far opened nine lakh accounts for the farmers at
Tk 10 each, which is expected to help the country to shift from paper-based payments from state benefits to direct payment into accounts.
Chowdhury said the policies and measures on inclusive banking undertaken in the country are of course essential and in the right direction and they already started creating positive impacts.
However, he said the measures are still wholly regulation-driven and are not really spontaneous initiatives on the part of the banks and financial institutions. "Without their spontaneous participation, the sustainability of inclusive banking cannot be established and achieved."
The economist said the measures so far taken are still not fully able to address the demand side problems of the financially excluded section, and the issue is not only a supply-side problem.
Chowdhury, also the director general of Bangladesh Institute of Bank Management, said banking approaches to the financially excluded people are to be changed. Women focus of the inclusive banking measures also must be maintained.
He urged the central bank to provide a detailed guideline of inclusive banking, instead of piecemeal directives, to all financial institutions.
The central bank chief said the country cannot afford to forget those people -- farmers, small and rural entrepreneurs and micro-financiers -- who have helped Bangladesh tremendously to achieve 6 percent economic growth in the turbulent times.
"We have to think about them, as Bangladesh is growing gradually -- thanks to their contribution," he said. "The country's success stories are actually the success stories of its people."
“The banks and financial institutions have to reach them," said the central bank governor.
Rahman said the central bank has awarded licences to eight banks to carry out mobile banking, which he said will help the country's target of bringing all people under the banking services.