, Governor,,

Dr.AtiurRahman,
BangladeshBank

1
 FinancialInclusion
Fi i lI l i O
Overview,definitionandmeasurementissues
i d fi i i d i

Approachesinwideningfinancialinclusion progressthusfar

StatusofFinancialInclusioninBangladesh

RemedialMeasuresbytheGovernmentofBangladesh(GoB)andthe
( )
BangladeshBank(BB)

Thewayforward

Concludingremarks.
C l di k

2
 FinancialInclusion AnOverview
Basicfinancialservicesincludingdeposit,paymentsand
creditservicesarerecognizedasentitlementsofallcitizens.
creditservicesarerecognizedasentitlementsofallcitizens

UShasafederallawprohibitingdiscriminationbybanks
UShasafederalla prohibitingdiscriminationb banks
againstlowerincomeneighborhoods.

SomestatelawsintheUSmandatorilyrequirebankstooffer
b i
basicaccountsforlowcostbankingservices
f l b ki i .

UKhavegovernmentprogramspromotingfinancial
inclusion.

3
 FinancialInclusion AnOverview(Contd)
Financialinclusionofthepoorest,particularlytheiraccessto
smallsizedcreditisamajortoolinBangladeshforcombating
j g g
poverty.

Despitesubstantialbankbranchexpansionandemergenceof
microfinanceinstitutions(MFIs),scantaccesstobasicfinancial
servicesstillremainsasasourceofdeprivation.

Accesstosmallsizedcreditforincomegeneratingself
employmentactivities(microcredit)waspioneeredbyNobel
l
laureateDr.Yunus
t D Y i th l t i t
inthelatenineteenseventies,nowreplicated
ti li t d
worldwideextensively.

4
 FinancialInclusion AnOverview(Contd)
Thecoverageoffinancialservicesisstillincompletein
Bangladeshwithgapsbothatthelowestendandatsome
B l d h ith b th tth l t d d t
patchesuptheincomeladder.

Largesegmentsofthepoorerruralandurbanpopulationare
g g p p p
stilloutofthefinancialcoveragerestrictingopportunitiesof
freeingthemselvesfromthepovertytrap.

Financialinclusionis,therefore,viewedasahighpolicy
Fi i li l i i h f i d hi h li
priorityinBangladesh.

5
 FinancialInclusion Definition
Withnowidelyadopteduniformdefinition,financialinclusionis
reckonedinBangladeshasaccesstofinancialservicesfrom:
g

a) Officiallyregulatedandsupervisedentities
banksandfinancialinstitutionslicensedbyBB;
MFIslicensedbytheMicrocreditRegulatoryAuthority(MRA);
registeredcooperatives.

b) Offi
Officialentitiesthemselves
i l i i h l
postofficesofferingsavings;
moneytransferandinsuranceservices;
t f di i
nationalsavingsbureaus.

6
 FinancialInclusion MeasurementIssues
Depositservicesforsafekeepingofsavingsisthestepping
stoneinaccessingcredit.
t i i dit

Thecoverageofdepositservices isthereforea
comprehensiveprimarymeasureoffinancialinclusion.
p p y

Th
Thecoverageismeasuredas:
i d
numberofdepositaccounts/membershipindepositschemes
inMFIs,cooperatives,postofficesaspercentageofadult
population.

7
 MeasurementIssues..(Contd)
Anotheryardstickoffinancialinclusionimportantfromthe
viewpointofcombatingdeprivationandpovertyisthe
i i t f b ti d i ti d t i th
coverageofcreditservices:

Thecoverageofcreditservicesacrossincome/occupational
g / p
/gendergroupsofthepopulationandacrosseconomic
activitysectors.

Thismeasureismorequalitative,expressedintermsofgaps,
Thi i li i di f
exclusionsandbarriersinaccesstofinancialservices.

8
 Approachesinwideningfinancialinclusion
progressthusfar

Earlypostliberationfinancialinclusioninitiativesin
yp
Bangladeshcomprised:

i. Expansionofruralbranchesofbanks(allofwhichwere
nationalizedin1971afterliberationofBangladesh);
ti li di ft lib ti fB l d h)

ii. Promotionofmutuallyownedcooperativesocietiesoffering
financialandotherspecifiedservicestomembers.

9
 Theseinitiativesbenefitedthebetteroff
ruralelite,but

Successinfinancialinclusionofthebroadmassesofilliterate,
innumerateruralpoorremainedlimited.

Thecooperativestendedtofallpreytoelitecapturebypowerfullocal
groups.

Ruralbranchesofbanksfocusedmainlyoncroploanstofarmers,but
Ruralbranchesofbanksfocusedmainlyoncroploanstofarmers but
werenotequippedtoreachouttopoorerilliterateruralpopulation.

Theregulatedlowinterestratesonbanklendingprevalentuptothelate
nineteeneighties,didnotcoverthehighcostsofmanagingsmallloans
toborrowersindispersedrurallocations.
toborrowersindispersedrurallocations
10
 EmergenceofGrameenBankandMFIsin
thelate1990s

TheGrameen BankandtheMFIsbroughtaboutamajor
breakthroughinreachingouttotheruralpoorwith

lendingmodelsspecificallyincludingagendaimparting
necessaryminimalliteracyandnumeracytoaspiringmember
borrowers;

genderpreferenceforfemaleborrowers,intheexpectationof
improvementintheirfinancialstandinginthetraditionally
maledominatedfamilies.
l d i df ili
11
StatusofFinancialInclusioninBangladesh
Num ber of MFI
Population Deposit Num ber of Num ber of Cooperative Financial
Adult bank m em bers
perbank A/Cs as % m em bers m em bers in m em bers as Inclusion** as
Year Population*
Population deposit as % of
branch of adult in MFIs cooperatives % of adult % of adult
(millions) A/Cs adult
(millions) population (m illions) (m illions) population population
(m illions) population

1999 73.16 18669 27.30 37.32

2000 75.16 18347 28.40 37.79
2001 77.18 19886 30.10 39.00 7.65 9.91
2002 79.59 20753 30.90 38.82 7.67 9.64
2003 80.80 21406 31.30 38.73 14.63 18.11 7.57 9.37 66.21
2004 82.25 21443 31.60 38.42 14.40 17.51 7.76 9.43 65.36
2005 83.80 21420 33.10 39.50 18.82 22.46 7.92 9.45 71.41
2006 84 60
84.60 21171 34 50
34.50 40 78
40.78 22 89
22.89 26 95
26.95 8 03
8.03 9 45
9.45 77 33
77.33
2007 84.95 20920 35.70 42.02 20.83 24.52 8.22 9.68 76.22
2008 85.78 20566 37.60 43.83 20.90 24.36 8.44 9.84 78.04
Source: Scheduled Bank Statistics Bangladesh Bank and Statistical Year Book of Bangladesh BBS
Source:ScheduledBankStatistics,BangladeshBankandStatisticalYearBookofBangladesh,BBS
*AdultpopulationisdefinedbyBBSaspopulation15yearsandabove
**FinancialInclusionismeasuredhereas
(No. of bank deposit A/Cs + No. of MFI members + No. of members in cooperatives)/Adult population*100.
(No.ofbankdepositA/Cs+No.ofMFImembers+No.ofmembersincooperatives)/Adultpopulation 100.
Postofficesandgovernmentsavingsbureausnotincludedastheseoffernocreditservices

12
 BangladeshStatus(Contd)

Whilethenumberofdepositaccountsinbanksand
membershipsinMFIsandcooperativesaregrowingsteadily,
therateofincreasehasslowedintherecentyears.
therateofincreasehasslowedintherecentyears

About25percentoftheadultpopulationisstilltobecovered
Ab f h d l l i i ill b d
bydepositandotherfinancialservicesfromregulated
i tit ti
institutions.

Inaccesstocredit,amissingmiddlehasemergedinthe
recentyearsbetweenthepoorestservedbyMFIs,andthe
relativelybetteroffservedbybanks.
l i l b ff db b k
13
 BangladeshStatus(Contd)

Smallbusinessesoutgrowingeligibilityformicrocreditfrom
Smallbusinessesoutgrowingeligibilityformicro creditfrom
MFIsoftenfindthemselvesconsideredtoosmallbybanksfor
theirlending.
theirlending

Landlesssharecroppersnotsopoorastobeeligiblefor
L dl h b li ibl f
microcreditfromMFIsareconsideredineligibleforcrop
l
loansbybanks.
b b k

Majorareaslikeagriculture,offfarmruraloutputactivities
andenvironmentfriendlyrenewableenergyremain
underservedbybanksandotherinstitutionallenders.
d db b k d h i i i ll d
14
 RemedialMeasuresbyGovt.AgenciesandBB

BBhaskeptopenrefinancelinesforbanksagainsttheirloans
BBh k fi li f b k i h i l
toSmallandMediumEnterprises(SMEs).

MultilateraldevelopmentpartnerssuchastheIDAandADB
aresupplementingBBsrefinanceprogramswiththeirco
financinglines
financinglines.

TheAgriculturalCreditProgram announcedbyBBforFY
10enjoinsallbankstoengageinlendingforacomprehensive
rangeofon andofffarmruraleconomicactivities.
15
 MeasuresbyBB(Contd)

BBhasintroducedTaka2.0billionrefinancelineinFY10
BBhasintroducedTaka2 0billionrefinancelineinFY10
againstbankloansforenvironmentfriendlyinvestmentsin
solarenergy biogasplantsandeffluenttreatment
solarenergy,biogasplantsandeffluenttreatment
plants.

AfirsteverTaka5.00billionrefinancinglineagainstloans
t l dl h
tolandlesssharecroppers.

Urgingbanksandfinancialinstitutionstoembracespecific
commitmenttofinancialinclusionasaCorporateSocial
R
Responsibility(CSR)obligation.
ibili (CSR) bli i
16
 MeasuresbytheGoB

ProvidinglendingresourcestoMFIs(throughPKSF)forrural
P idi l di MFI ( h hPKSF)f l
on andofffarmselfemploymentmicroandSMEcredit
fromthenationalannualbudgets.

PromotingwomenempowermentinSMEsandother
productiveactivities.
productiveactivities

Grantingloanstoruralpoorforconstructionoftheirbasic
shelterhousing,inanumberofschemestitledGrihayan,
Ashrayan,ReturningHome,andOnehomeOnefarm.
17
 Thewayforward

Fairprogresshasbeenachievedinfinancialinclusion,butmuch
F i h b hi di fi i li l i b t h
remainsstilltobedoneindeepeninginclusioninseveralwhereit
isshallow andinbridgingtheremaininggap
isshallow,andinbridgingtheremaininggap.

Anewbreakthroughisneeded.Useofinformationtechnologyin
reducingthecostsofmanagingsmallloanstoborrowersin
remotelocationaffordsawindowofopportunity.
l ff d d f

Smartcardbased/mobilephonebasedarrangementscanbe
appliedcosteffectivelyforremotedeliveryoffinancialservicesto
pp y y
clientsdispersedoverisolatedareas.
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 ConcludingRemarks

OvertheneartermBB
OvertheneartermBBspolicieswillfocusonleveragingsynergies
spolicieswillfocusonleveragingsynergies
frompartnershipsbetweenbanks,MFIs,andtelecom/mobile
p
phoneserviceprovidersinbridgingtheremaininggapsin
p g g gg p
financialinclusionwithdueattentionto:

Riskmanagement;
Consumerprotection;
Co su e p otect o ;
Systematicstability.

Afewsuchpartnershipproposalsalreadyreceivedareunder
scrutiny.
scrutiny
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M
Many thanks
th k

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