Digital finance can ensure double-digit GDP growth
Bangladesh's economy can grow by double digits through the inclusion of unbanked people by way of digital financial services, said speakers at an event.
Only 34.4 percent of total private investment was financed by the formal financial system, while 61.4 percent came from non-formal channels such as own savings and informal borrowing, said Bazlul H Khondker, chairman of the South Asian Network on Economic Modelling (Sanem).
"So, there is a huge percentage of people out of the formal financial services," he said at a roundtable discussion on "Economic and social impact of digital financial inclusion," jointly organised by The Daily Star and the Policy Research Institute at The Daily Star Centre yesterday.
The average rate of interest on borrowing from informal sources is 40 percent, which is higher than banks, non-bank financial institutions, non-governmental organisations and microfinance institutions.
Borrowers can avail loans easily from informal sources, said Khondker, also a director of PRI.
The Bangladesh Bank increased funds for digital nano loans to Tk 500 crore from Tk 100 crore in 2023 to bring the unbanked people under the digital financial umbrella.
However, people are still unaware about the digital nano loan that is being disbursed by bkash in partnership with City Bank, Dhaka Bank and Bank Asia.
If digital financial inclusion is ensured, it would increase employment by 1.8 to 3.04 million and investment in rural areas by 15.8 percent, he said.
On the other hand, the poverty rate will come down to 15.8 percent from the existing 18.7 percent, Khondker added.
The DFS was a new horizon with a sophisticated model, said Mashiur Rahman, the economic affairs adviser of the Prime Minister.
"We are always keeping the informal sector out of the discussion. But the informal sector is most important in terms of GDP growth. If the relationship between the informal sector and the formal sector is 20 percent, that will be a huge jump in terms of GDP," he said.
Bangladesh has an important challenge for increasing financial inclusion, said Ahsan H Mansur, executive director of PRI.
"We are saying that our financial inclusion will increase. But what we are noticing is that it is happening from a micro angle. But when you look at the macro angle, we are seeing the financial deepening is reducing."
Financial inclusion from the macro angle is now 45 percent, down from 56 percent.
"So we have to think about why we are missing the macro part of it. That means, how the banking system, our regulators, our government work together to inject sufficient liquidity without creating inflationary pressure, without creating exchange rate pressures," he added.
It is unclear how much the digital banks will be effective in bringing in the unbanked people, said Lila Rashid, former executive director of BB.
The operational cost of a personal account with bkash is zero, said Moinuddin Mohammed Rahgir, chief financial officer of bkash.
"This discussion generated new ideas -- our job is to create ideas and disseminate them to the public," said Mahfuz Anam, editor and publisher of The Daily Star.
Of Nagad's 45 million active accounts, 53 percent are operated by women, said Muhammad Zahidul Islam, head of media at Nagad.
An account is considered active if there has been a transaction in the last 90 days.
Sayema Haque Bidisha, research director of Sanem; Khondokar Shakhawat Ali, visiting research fellow at BRAC Institute of Governance and Development; Ashikur Rahman, senior economist at PRI; Syed Yusuf Saadat, research fellow at the Centre for Policy Dialogue; Shariful Islam Chowdhury, project officer at the UN Capital Development Fund; Ananya Raihan, chief executive officer at iSocial; and Ayushi Misra, senior manager at MicroSave Global Consulting, also spoke.
Comments