27 January 2010
The Governor of Bangladesh Bank, Dr Atiur Rahman spelled out his views on financial services for the future at an event today organised by the UK’s Department for International Development (DFID) and CGAP (Consultative Group to Assist the Poor), an independent microfinance centre housed at the World Bank.
The conference “Expanding Financial Services With New Technology: A Vision for 2020” considered how Bangladesh can harness new technology to expand formal financial services such as loans, savings, payments and remittances across the population. Strengthening financial services through new technologies will extend financial access to the millions of Bangladeshis without bank accounts, and thereby help build a stronger and more inclusive national economy. This will support the Government’s vision for Bangladesh to become a Middle Income Country by 2021, with poverty halved from 40% to 20%.
More than 2 billion people in developing countries have no access to financial services. This excludes them from economic life, and makes it much harder for them to cope with unforeseen events such as severe weather or illness in the family. It also means it is harder for them to improve their incomes, build assets, pay for healthcare and education and to link into the wider economy as full citizens. Lack of access to financial services for individuals can act as a significant constraint on a country’s economic growth.
Financial inclusion is growing in most countries. This is partly due to the expansion of conventional banking channels, such as branches and automated teller machines (ATMs). However a recent DFID/CGAP publication on ‘Scenarios for Branchless Banking in 2020’ notes how bricks-and-mortar growth is inherently limited by its cost. Branchless banking - be it expansion of existing bank networks using branchless options (bank-led) or through others such as telecom companies (non bank led) presents a cheaper option and a greater opportunity to reach the masses. New technology based financial services, such as mobile phone banking or the use of smartcards, have the potential to transform people’s access to finance.
CGAP and GSMA researchers found that the number of people across Africa, Latin America and Asia with a mobile phone, but no bank account, is set to grow from 1 billion today to 1.7 billion by 2012. These ‘unbanked mobiled’ individuals represent a compelling market opportunity for service providers who might provide an alternative way to spend, save and invest through the mobile network, as well as improve the security and transparency of payments.
Despite the growth of such alternative models, so far the “branchless banking” approach has only had modest though growing reach to date in most countries. Mr David Porteous, Director of Bankable Frontier Associates in USA engaged the audience to weigh factors that might influence where technology and branchless banking can evolve in Bangladesh. A wide range of Bangladeshi bankers, telecom companies and technology groups contributed to the dialogue. Speakers from banks and telecommunications companies in the South Asia region (India, Pakistan and Sri Lanka) also shared their recent experiences with these new technologies.
Chris Austin, UK/DFID Country Representative, noted that “financial exclusion is as much of a ball and chain on the poorest as lack of education. Without the means to save money, to invest, to deal with the proverbial “rainy day”, the poor are consigned to remain in misery. In Bangladesh the majority of people do not have bank accounts. But we can reach large numbers of people through the use of innovative technology. Bangladesh is in a unique position to combine development with business for a win-win solution for the millions of poor in this country. This conference will help make this happen."
The ‘Scenarios for Branchless banking in 2020 document can be found at:
http://www.cgap.org/technology
GSMA is the Global System for Mobile Communications Association
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