Banking sector and inclusive development

Nobel laureate Economist Kenneth Arrow gave a dynamic interpretation of increasing return by emphasising "Learning by Doing". Technological progress and human capital formation are endogenised within development trajectories. Investment in knowledge capital sustains long-run growth. Developing countries need to emphasise human capital even more than physical capital. The banking industries in Bangladesh have excellent potential to contribute in human capital formation.

Already, many banks have emphasised in their CSR (Corporate Social Responsibilities) activities in the following guidelines of  Bangladesh bank. A bank can spend maximum five per cent of its total profit in CSR activities. Every bank has to spend five per cent of its total profit in CSR activities in sectors specifically mentioned by the central bank such as education and research-development activities. The government cannot provide sufficient fund for education sector due to resource constraint. In the fiscal year, 2014-2015, the total allocation for education sector is Tk 155.40 billion which is a negligible amount compared to the demand in the sector.

The Bangladesh bank should make grading or ranking in the banking sector depending on CSR activities and also introduce CSR award. Thus competition over CSR will increase. In recent times, a few banks misused their CSR fund. The central bank of our country always emphasises inclusive financing. The concept is relevant to developing human capital formation in rural area. In rural areas, there is a knowledge gap and information asymmetry in agriculture production and marketing, non-farm activities, health, education, employment and disaster management. The banking service will be for humanity, not just for profit maximising. Every bank must reach its service to rural areas. Business  has reached its saturation point in urban areas. So banks should search different location and strategies to continue its business. Banks can unite farmers in marketing their agriculture products from rural area to urban area so that producers can get maximum benefit. Borrowers of microfinance institutions are successfully coming out of extreme poverty. Such people are still not deemed eligible for larger loans by banks or other formal institutions. Significant market gaps and market failures persist in financing of important growth-oriented economic sectors like agriculture and SMEs.

 So financial inclusion is therefore a high policy priority in Bangladesh  for faster, more inclusive growth and poverty reduction. The bank account for Tk 10, school banking , green banking policy, mobile banking, IT-based cost saving innovations, agriculture credit policy are major breakthroughs in closing the remaining gaps in financial inclusion. The banking industries are a catalyst for economic development of a country. Baking with humane consideration is essential for peace and progress of society.

The writer is serving as a banker. [email protected]