Md. Perwez Anzam MoonirJoint Director

Bangladesh Bank(The Central Bank of Bangladesh)Email: perwez.moonir@bb.org.bd

Financial Inclusion: General Overview, Central Banks’ Role and De-Risking Practices

May 10, 2017 1

08 May 2017Intercontinental Cairo Semiramis Hotel, Egypt

Points to be discussed

• General Overview

• Bangladesh Bank’s Key Initiatives

• De-Risking Practices

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Financial Inclusion

[General Overview]

Financial Inclusion

[General Overview]

• Financial inclusion or inclusive financing is the delivery offinancial services at affordable costs to sections of disadvantagedand low-income segments of society, in contrast to financialexclusion where those services are not available or affordable.

Reality of the present World up to the date

• 2 billion adults don’t have a basic account.

• 59% of adults cannot afford financial services.

• More than 200 million MSME lack of adequate financing.

• Women, rural poor and remote people are more financially excluded.

• 80% of adults in fragile conflict-affected states are outside the financial system.

Financial Inclusion

[General Overview]

Source: Financial Inclusion Overview, The World Bank, 5th April 2017

Financial Inclusion

[Bangladesh Bank’s Key Initiatives]

Financial Inclusion – Big Picture

Financial Inclusion Initiatives by

Bangladesh Bank

Inclusive Development Goal of

Government of Bangladesh

Sustainable Development Goals of

United Nations

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Why Bangladesh Bank promote financial inclusion?

Poverty Reduction

Reduce Inequality

Women Empowerment

Financial Stability

Inclusive Growth

Combat with Informal Banking

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Key Financial Inclusion Initiatives

• Agricultural Credit

• SME

• Mobile Financing Service

• No Frill Account

• Agent Banking

• School Banking

• Financial Literacy Program

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Bangladesh Bank’s Key Initiatives

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Agricultural Credit Program

• A special collateral free low cost agriculture-loan scheme for thelandless, marginal and unbanked deprived sharecroppers which is beingdisbursed using NGO linkages.

• A concessional rate of 4% Credit facilities for cultivation of pulse , oilseeds, spices and maize to increase the production and reduce thedependency on import.

• To ensure timely and hassle-free disbursement of agricultural Credit toreal farmers BB has set up three-tier monitoring system. Such as:

• Monitoring at disbursing bank level

• Monitoring by Branch offices of BB

• Monitoring by Head Office of BB

• The performance in the Agricultural and rural credit policy and programwill also be reflected in the “M” portion of the CAMELS rating done byBB.

0%

20%

40%

60%

80%

100%

120%

140%

160%

02000400060008000

100001200014000160001800020000

2010 2011 2012 2013 2014 2015 2016

Target Disbursement Target Achievement

Target and Disbursement of Agricultural Credit: FY 2010-2016

(USD in million)

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Data Source: Bangladesh Bank

Bangladesh Bank’s Key Initiatives [cont.]

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SME Sector Developments

• Institutional Building-Creation of new dedicated departments

• Regulatory Improvements and Policy Interventions

• Launching of SME Credit Policies and Program in 2010

• Target Based Lending

• SME Cluster Development

• Broadening Financial Inclusion through SME financing led policies

• Women Entrepreneurship Development Polices that engenderfinancial Inclusion

• Women Entrepreneurs’ Financing

• Refinancing support from own and development agencies fund toprovide low cost funding to CMSMEs

• Demand side Interventions-Providing trainings and other infrastructuralfacilities.

Target and Achievement in CMSME Lending: 2010-2016

Data Source: Bangladesh Bank

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0

100000

200000

300000

400000

500000

600000

700000

800000

0

200

400

600

800

1000

1200

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1600

2010 2011 2012 2013 2014 2015 2016

BD

T in

Bill

ion

TargetAchievementNo.of Beneficiaries

Bangladesh Bank’s Key Initiatives [cont.]

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Mobile Financial Service (MFS)

• Bangladesh Bank has introduced bank-led mobile banking throughmobile phone operators to extend financial services to this largeportion of underserved population.

• The rapid growth of mobile phone users and countrywide coverage ofmobile operator's network have made the delivery channel animportant tool.

• Under this system anyone can open a mobile banking account throughspecified agent if he or she has a mobile phone.

• The introduction of MFS has made the transfer of money a matter ofseconds.

• The main beneficiaries are poor/lower income group people/masspeople .

• Currently 17 Banks are providing the services and the no. of activeaccounts is 2.39 crore.

MFS growth in terms of Number of MFS registered clients

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6624

1318016710

2518628646

3184536204

41078

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

Jun'13 Dec'13 Jun'14 Dec'14 Jun'15 Dec'15 Jun'16 Dec'16

No. of registered clients in '000

Data Source: Bangladesh Bank

Bangladesh Bank’s Key Initiatives [cont.]

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No Frill Account (NFA)

• BB instructed to open NFAs for farmers in January 2010 and gradually issuedpolicy guidelines for all scheduled banks comprising flexible conditions toopen account of-

• Farmers,

• poor segments of population having earning capacity,

• vulnerable part of population covered under social safety networkprograms,

• City corporation workers

• Garments workers

• Leather sector workers and so on.

• These people can open account by depositing only Tk. 10 (less than 1 USD).

• No charges will be applicable to these accounts.

• Till today, Around 1.67 crore accounts have been opened under theseprograms.

Growth of No-frill A/Cs

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14,96115,317

15,93916,138

16,755

14000

14500

15000

15500

16000

16500

17000

Dec'14 Jun'15 Dec'15 Jun'16 Dec'16

No. of Accounts in '000

Data Source: Bangladesh Bank

Bangladesh Bank’s Key Initiatives [cont.]

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Agent Banking

• Agent banking services was introduced in 2013 to providedigitized services to poor/lower income grouppeople/mass people with a new and innovative approach.

• It has opened doorway to provide banking servicesthrough an outlet by banks where branch establishment isextremely difficult or not feasible.

• Agent banking aims at serving the underserved populationthrough engaging agents under valid agency agreements inlimited scale banking and financial services.

• At present 10 banks are operating agent banking through2601 outlets.

Agent Banking (up to Dec 2016)

Accounts 544,536

Outlets 2,601

Agents 1,646

10 Banks Operating

13 Licensed

BanksData Source: Bangladesh Bank

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Bangladesh Bank’s Key Initiatives [cont.]

May 10, 2017 20

School Banking

• To make the youngsters financially literate and build the habit ofsavings by these youngsters to enhance deposit mobilization andproductivity, School Banking has been introduced in November2010.

• A guideline has been issued in 2013 to provide students withnecessary banking services by ensuring more transparent,encouraging and dynamic institutional financial supports to themunder the school banking program.

• Accumulation of these small deposits is a stabilizing factor for thefinancial system.

• This financial net covers students up to age of 18 years with aninitial deposit of BDT 100 (around only 1 USD).

• Upto December 2016, the number of School Banking accounts is12,57,370 and the total balance is USD 127.60 million.

Growth of School Banking Account and Amount of Deposit

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295.8

850.31034.95

1257.3738.22

89.69

105.52127.60

0

20

40

60

80

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120

140

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200

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600

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1400

2013 2014 2015 2016

Mill

ion

USD

Nu

mb

er

in ‘

00

0

No. of Accounts

Balance

Data Source: Bangladesh Bank

Bangladesh Bank’s Key Initiatives [cont.]

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Financial Literacy Program

• Awareness conferences for SME entrepreneursspecially for women entrepreneurs.

• Regional level workshops with banks and otherstakeholders.

• Banking fair and exhibition of banking services andproducts.

• School Banking conferences are being arranged indifferent districts through lead-bank system toincrease awareness and financial literacy.

• Media and web based awareness program.

Financial Inclusion

[De-risking Practices]

Drawbacks of De-risking Practices

• All the driving factors regarding de-risking practices areassociated with high cost which will eventually reduceincome/profitability in individual customer, Banks, Central Bankand Government level.

Financial Inclusion – Digitization

GoB (eNID) BB (eKYC) CB (Implement)

Cost : Profitability

Digitization (e.g. e-KYC, e-NID, Biometric)

Identification of Fraudulent Activities

Country Experience

Probable Scenario

Driving Factors for De-Risking

Elements of Risk

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Financial Inclusion – AML/CFT

GoB (AML/CFT Act) BB (Policy Guidelines)

CB (CAMLCO/BAMLCO Implement)

Cost : Profitability

AML/CFT Policies

Money Laundering

Country Experience

Probable Scenario

Driving Factors for De-Risking

Elements of Risk

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• Agriculture• SME• Mobile Financing

Services• Agent Banking• School Banking• No-Frill Account

• Digitization• High tech / Biometric

• High Monitoring•Customer protection• AML/CFT•Financial literacy

• High cost• Less

profitability• Long period

of time

• Generally it will hamper the growth of Financial Inclusion

• GoB• BB• Com Bank• Donor

Agencies

Financial InclusionDe-risking

Financial Inclusion, De-risking and its Impact

BD experience

Thank

YOU

May 10, 2017 28