Bank accounts for farmers and students: An example of financial inclusion

FE Team | Published: January 19, 2013 00:00:00 | Updated: February 01, 2018 00:00:00

Afzalul Haq The government and the Bangladesh Bank have facilitated opening of bank accounts for the peasants and minor students. These two hitherto unbanked segments of the population have been effectively motivated to open account and this initiative has been taken by the central bank of the country. The contribution of village farmers in our economy needs no mention, but owing to compulsory minimum balance barrier by the private banks, this class was not in a position to enter into the highly fortified bank doors. Now the farmers are having bank accounts with nominal deposit balance and they are enjoying banking services even through mobile banking. They are no more neglected and no more disqualified for opening account in a bank. This is one of the important drives so far taken by the incumbent government for financial inclusion in our economy. Among other appreciable initiatives of the central bank are Green banking, SME banking, banking for the women entrepreneurs and slogans for sustainable banking and inclusive banking for the country. Another special approach for banking by the students, particularly the minor students, deserves mention. Banking is based on contracts and a minor is not eligible for entering into a contract. As a result, students below 18 do not usually have bank accounts. There are references of 'school banking' in our standard banking books, but in reality these are matters of the past. Before the recent initiative of the Bangladesh Bank, a student account has been a rare case in Bangladeshi banks. In November 2010, Bangladesh Bank issued a circular asking all scheduled banks to give emphasis on school banking operations. The objective is to bring the school-goers under banking service that would enrich their knowledge base and increase financial inclusion of the country. This scheme would facilitate the students to be acquainted with the modern banking services as well as the application of technology well ahead of their entering into the economic life. This would bring about the saving habit of the students. In line with the directives of the central bank, the commercial banks designed the student deposit products in their own ways. There are news of different memoranda of understanding between banks and individual school authorities to facilitate opening of accounts by the students. Different incentives are also offered by the banks. Such incentives include higher rate of profit/ interest, waiver of charges for maintenance of accounts, free/ low cost ATM cards, free fund transfer facilities etc. Some banks are even offering small gifts while opening such accounts under this scheme. Some banks are proposing scholarship for meritorious but poor school account holders. A bank even has got a scheme with provision of bearing the educational expenses of a student up to the SSC or equivalent level where the earning guardian of the student account holder dies. It is indeed a very admirable scheme for the youngsters. Some banks are planning to arrange different competitions among the students as a measure to inspire to build future financial leaders through this scheme. They have designed plans to arrange finance education competition to help create future leaders. Some banks are being associated with different international organisations through student account projects to have greater arms for global child financial education. All these are the privileges the banks are offering to their student account holders to fulfill the dream of financial inclusion. But in this respect the government may also offer some incentives of cost savings for the student accounts, such as: (i) Income tax on the profit of such accounts may be waived irrespective of the balance. Otherwise, it would rather penalise the students by compelling them to pay 15 per cent of profit i.e. 5.0 per cent more than those having Tax Identification Number (TIN). A student is naturally not supposed to be a TIN holder. (ii) Excise duty may not be levied on such accounts. The concerned agency of the government may do this on its own initiative. Alternatively the central bank, as the leader of the financial operators and initiator of the noble project, may bell the cat for implementation of this proposition. This would be an additional inspiration to be involved in the extended financial inclusion for a new financial revolution, expected to bring about in this East Zone before 2050, when the potential student account holders would be seen in the key chairs of the republic. The writer works at Bank Asia Limited. Opinions expressed in the article are of the writer's own and not necessarily of the organisation he works for. afzal@bankasia.com.bd