Bangladesh Bank has brought in a number of innovations in formulation and implementation of monetary policy. Elaborate stakeholder consultation has become hallmark of formulation of participatory monetary policy. As a result, the central bank can get advance suggestions from the stakeholders about their demands. Once a monetary policy is launched based on those suggestions the transmission mechanism becomes smooth and well understood by them. Indeed, such an approach has helped the central bank to establish one theme: as a developmental central bank, Bangladesh Bank believes that societies and pyramids are as strong as their bases. With such base the country's macro-financial and price stability ought to be stable. And that's exactly what has happened in case of Bangladesh.The inclusive finance initiatives in Bangladesh have covered wider segments: agriculture, Micro, Small & Medium Enterprises (MSMEs), Green Products. The agriculture finance includes some unique initiatives:
Annual Agriculture Policy:
* Refinance facilities for sharecroppers, milk producers, artificial insemination, jute production
* Subsidised credit for exotic crops (spices)
* Women, tribal and coastal farmers receive special attention while disbursing loans
* Area approach, contract farming, horticulture, etc.
The MSME financing includes initiatives:
* 20 per cent of the total credit should go for MSMEs
* 10 per cent of MSMEs credit should go to women entrepreneurs
* All banks and nonbank financial intuitions must set up dedicated desks for women entrepreneurs
* Area approach and cluster-based financing
* Dedicated Refinance Schemes
The Green Finance initiatives include:
* Taka 2.0 billion Annual Refinance Scheme
* USD 50 million Fund from ADB
* USD 200 million Fund for Green Transformation of the textile and leather sectors
* 50 green products for finance and refinance in 11 categories
* Annual consultation with banks and non-bank financial institutions (NBFIs) for setting targets.
Amongst the innovative financial inclusion products and services the followings are important:
* No-frill (ten Taka) accounts for the farmers and the disadvantaged
* Banking services for the physically challenged
* Banking for the school students and street children
* Refinance schemes for:
* No- frill account holders;
* Residents of enclaves who have been newly annexed to Bangladesh.
* Third gender.
A number of initiatives have been taken to diversify the service delivery channels:
* Banks must establish at least 50 per cent new branches in the rural areas.
* Banks must go for agent banking where branch banking is not viable.
* Online banking/internet banking.
* NGO-MFI-Bank linkage programmes for loan disbursement and remittance distribution.
* The digital financial services through mobile agents, post offices and mobile financial service providers like bKash (indeed total mobile financial service accounts have gone up to 35 million by 2015).
Consumer protection and financial literacy using a dedicated hot line for resolution of customer grievances and various digital communication services have helped cement the idea of effective financial inclusion.
Corporate Social Responsibility programmes initiated by banks and the central bank have been helping in improving the standard of living of the unserved and underserved segments of the population. It may be noted that by 2015 grants were given to 70 projects from Bangladesh Bank's own CSR fund for disaster management, health and culture. The banks were also enthused to provide support to the third gender and other neglected segments of population. There was nearly tenfold increase in the total expenditure on projects supported by the CSR fund of the financial sector during 2009 to 2015.
WAY FORWARD: It must be noted that the financial sector alone will not be able to attain the overarching goal of financial inclusion. The central bank and financial service providers require support from the entire eco-system. Three-fold role of public finance is crucial, namely - financial support, market development, and rules and regulations. Coordination and capacity building of the policy ecosystem is crucial.
Regulatory framework has a profound impact on inclusion of the poor and MSMEs. Regulators struggle to keep abreast of new technologies and business models. Digitisation needs to be strategically leveraged and managed to increase efficiency, market gaps, and price discovery.
Standard Setting Bodies (SSBs) need to stress a risk-based approach to balance financial stability/integrity with financial inclusion. With an enabling policy environment together with technology-driven innovations, alternative Financial Service Points (FSPs) and delivery channels can become effective ways to access and use different financial products and services. Peer learning through various platforms (Alliance for Financial Inclusion or AFI, International Finance Corporation or IFC, Global Partnership for Financial Inclusion or GPFI, etc.) plays a critical role in helping countries to implement balanced regulatory frameworks.
Economies like Bangladesh are undergoing complex simultaneous transitions in the fields of demography, industrialisation, urbanisation, and technology. Inclusion is imperative for navigating domestic and external shocks thrown out by these transitions. The above discussion on financial inclusion clearly indicates that the central bank of a developing country like Bangladesh has gone a long way in complementing the inclusive development strategy of the government through its innovative toolkits of financial inclusion.
The advanced countries' central banks have created tons of money to buy government debts and hence created risks of financial instabilities. On the contrary, the central bank of Bangladesh has motivated the entire financial sector to put the money to productive unserved sectors like agriculture, MSMEs, green products, CSR support for the disadvantaged and also ensure consumer protection and financial literacy. The end result has been unprecedented stability of the macro-economy despite some governance challenges and enhanced participation in the financial sector by all the stakeholders. This indeed has been a new kind of economic democratisation bringing in the unbanked and underserved into the financial world.
Dr Atiur Rahman is former governor, Bangladesh Bank.
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