'Digital Loan' launched on pilot basis by City Bank, bKash

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FE Desk | Thursday, 23 July 2020

City Bank has launched a collateral-free Digital Loan, whereby users can request and receive loans of up to Taka 10,000 instantly through bKash. This is a pilot initiative targeting a limited group of selected bKash users.
Under the pilot initiative, bKash users can request a loan from City Bank from the bKash App, receive the loan disbursement into their bKash accounts as well as repay the loan from their bKash accounts.
City Bank has initiated this pilot scheme with the approval of Bangladesh Bank, and aims to expand access to finance to unbanked populations and contribute towards the journey of financial inclusion, according to a statement.
Upon successful completion of the project, City bank will commercially launch the Digital Loan to eligible bKash users, subject to approval from Bangladesh Bank for commercial launch.
In Bangladesh, people are often compelled to take loans from informal sources at high interest rates and complex terms and conditions to meet emergency needs such as a medical crisis or financial loss caused by natural disasters or even engaging in a small trade. In many cases, due to high cost and onerous terms and conditions, unbanked people find it difficult to repay those loans and are overburdened with even higher debt. City Bank is addressing these problems by introducing a Digital Loan that is transparently priced based on Bangladesh Bank's pricing guidelines and has simple repayment terms and conditions.
City Bank's Digital Loan in the pilot phase has a three (3) month term, and loan repayment involves three equal monthly instalments (EMI) auto-deducted from the user's bKash account on fixed due dates. The user will also be able to repay the EMI amount earlier than the due date and save money due to lower interest cost associated with early repayment. Interest on the Digital Loan is charged on a daily basis, therefore in case of early settlement, users will repay interest based on the number of days for which the loan amount was outstanding. Besides, users will be notified through SMS and in-app notification before every EMI due date.
City Bank will closely monitor users' loan payment behaviour and determine whether users will be eligible for loans in the future, along with fulfilling City bank's regulatory obligations to report any loan defaulters to the Bangladesh Bank.
To avail the loan under the pilot initiative, eligible users will need to click the 'Loan' icon on the bKash app and enter the desired loan amount within the loan limit approved by City Bank, as well as accept the loan terms and conditions. Users will also have to give consent to share their KYC information, available with bKash, with City Bank before availing the Digital Loan. After successfully entering the bKash PIN, the loan amount will be instantly disbursed into the user's bKash account.