Access to financial services
Saturday, 24 November 2007
The findings of a recent study report by the World Bank (WB) about only about 32 per cent of the adult population in Bangladesh having access to financial services illustrate amply well the need for expanding the coverage thereof. This paper carried a report the other day, drawing from the findings of the WB study. It noted that the situation about access to financial services even in South Asian neighbours such as Sri Lanka and India is better than that of Bangladesh. The related figures in those two countries stand at 59 per cent and 48 per cent respectively. Thus, a very strong case exists to deliver financial services extensively to various segments of the population of Bangladesh. As it is, the services are too discriminatory bypassing largely the rural areas of the country where about 85 per cent of the people are concentrated, notwithstanding urbanisation and diversification of the economy.
The urban bias of the financial services in Bangladesh has meant the denial of the same to the country's preponderant number of people, despite their having considerable potential to take on greater economic activities and improve their lot with access to these services. Even in the urban areas, the urban poor find themselves largely excluded from the services. The credits are also usually found to be utilised greater for trading than manufacturing whereas credit utilisation for manufacturing have greater economic spin-offs from value addition or creation to generation of employment and income.
The hitherto nationalised commercial banks (NCBs), now converted to public limited companies (PLCs), have earlier played the biggest role in providing services in the relatively neglected rural areas of the country. But under new policy prescriptions and also for profitably running their services, these banks have closed a number of their rural branches over the recent years. Thus, the opportunities for financial services in the rural areas have further shrunk when its opposite should have been the case. The private commercial banks (PCBs) are yet not in a position to expand their operations much beyond the urban domain. This situation needs to change. The central bank will require to take appropriate steps to help expand the coverage of financial services to the country's population, particularly those living in the rural areas.
Under a well-thought-out programme, expansion of financial services to the still-uncovered areas can be a feasible proposition. The rural areas are not otherwise so devoid of resources as it is commonly thought. Until now, a sizeable part of the total banking deposits in the country have a rural origin. But the credit operations of the banks have still a strong urban tilt. Moreover, the dominant collateral-based credit operations by the banks in general have tended to favour the elite groups. Such factors, alongwith others, have, thus, made it operationally difficult for the banks to extend coverage of their financial services. The central bank should find out innovative ways to deal with this situation. Access to finance is very important to expansion of opportunities for economic growth to the widest segment of the population. When such opportunities are made available, growth will facilitate the way for an inclusive process of development. That process is sine qua non for alleviation of poverty. It is, therefore, imperative to find out ways and means for expanding meaningfully the banking services to help widen the coverage of financial services for sustainable long-term growth. Not only the banks, all other financial institutions including insurance businesses, housing companies etc., should actively be encouraged to expand their operations covering new areas. The need here has to be appreciated by all concerned. This appreciation, backed by pro-active policy-supports, will bring about more breadth and depth of the country's financial sector that are compatible with its long term growth. In the process, this will facilitate the circulation of more finance, leading to growth and expansion of resource base of the financial institutions, their profits and, thus, their lending and other related capacities.
The urban bias of the financial services in Bangladesh has meant the denial of the same to the country's preponderant number of people, despite their having considerable potential to take on greater economic activities and improve their lot with access to these services. Even in the urban areas, the urban poor find themselves largely excluded from the services. The credits are also usually found to be utilised greater for trading than manufacturing whereas credit utilisation for manufacturing have greater economic spin-offs from value addition or creation to generation of employment and income.
The hitherto nationalised commercial banks (NCBs), now converted to public limited companies (PLCs), have earlier played the biggest role in providing services in the relatively neglected rural areas of the country. But under new policy prescriptions and also for profitably running their services, these banks have closed a number of their rural branches over the recent years. Thus, the opportunities for financial services in the rural areas have further shrunk when its opposite should have been the case. The private commercial banks (PCBs) are yet not in a position to expand their operations much beyond the urban domain. This situation needs to change. The central bank will require to take appropriate steps to help expand the coverage of financial services to the country's population, particularly those living in the rural areas.
Under a well-thought-out programme, expansion of financial services to the still-uncovered areas can be a feasible proposition. The rural areas are not otherwise so devoid of resources as it is commonly thought. Until now, a sizeable part of the total banking deposits in the country have a rural origin. But the credit operations of the banks have still a strong urban tilt. Moreover, the dominant collateral-based credit operations by the banks in general have tended to favour the elite groups. Such factors, alongwith others, have, thus, made it operationally difficult for the banks to extend coverage of their financial services. The central bank should find out innovative ways to deal with this situation. Access to finance is very important to expansion of opportunities for economic growth to the widest segment of the population. When such opportunities are made available, growth will facilitate the way for an inclusive process of development. That process is sine qua non for alleviation of poverty. It is, therefore, imperative to find out ways and means for expanding meaningfully the banking services to help widen the coverage of financial services for sustainable long-term growth. Not only the banks, all other financial institutions including insurance businesses, housing companies etc., should actively be encouraged to expand their operations covering new areas. The need here has to be appreciated by all concerned. This appreciation, backed by pro-active policy-supports, will bring about more breadth and depth of the country's financial sector that are compatible with its long term growth. In the process, this will facilitate the circulation of more finance, leading to growth and expansion of resource base of the financial institutions, their profits and, thus, their lending and other related capacities.