School banking for inclusive growth

School banking, a success story in the banking industry, was initiated by the Bangladesh Bank in November 2010, with a vision to strengthen inclusive growth and engaging the base of pyramid of the population with financial activities. It is one of the components of financial inclusion that helps develop inclusive growth. School banking has been experiencing positive responses of a large population.
Ian Smillie, the author of 'Freedom from Want: The Remarkable Success Story of BRAC', said development does not mean roads, highways or buildings; development means what happens in the brain of the people inside the buildings. What Ian Smillie implied is development lies in the practice or habit that people do for improvement. This very philosophy is true for school banking as well.
Developing saving attitude is the core purpose; changing attitude of individual would change the attitude of the country at large. Habit of savings from early life would allow students to think of better savings in future. And when the base of the population develops a habit of savings and skill of money management, it would have a very firm impact on the national economy. Banks have started school banking programme since 2010. Gradually the number of banks increased and accounting books of school banking got volumes. As of December 31, 2014, 49 out of 56 scheduled banks opened 850,303 school banking accounts. Among 850,303 accounts, 307,764 were opened under rural bank branches while 542,539 accounts were opened under urban bank branches. The urban-rural ratio was 1.76 in the last quarter of 2014. Among nine foreign banks, eight of them (except Citibank NA) started school banking programme and opened 1,269 school banking accounts in the last quarter of 2014. Among newly opened nine scheduled banks, three (Meghna Bank, NRB Commercial Bank and NRB Bank) of them started school banking. As on December 31, 2014, they opened 914 school banking accounts.
Private commercial banks (PCBs) lead the school banking programme and more than 65 per cent of the total number of accounts was opened by the PCBs in all four quarters of 2014 while more than 15 per cent of the total number of accounts was opened by state-owned commercial banks (SoBs) in all four quarters of 2014. Roughly more than 80 per cent of the total number of accounts was opened by PCBs and SoBs. Compared to the first quarter, the number of accounts increased 2.3 times in the last quarter of 2014. The total school banking transaction as of December 31, 2014 was Tk 7.18 billion. PCBs captured the lion's share (roughly more than 75 per cent of the total outstanding) of the total school banking transactions in 2014. SoBs were the second leading banks that possessed the second largest share (on an average of 12 per cent all over the year) of  the total outstanding school banking in 2014. FBs had Tk 18.9 million outstanding on December 31, 2014 while newly opened scheduled banks in 2013 had Tk 18.5 million outstanding as on last quarter of 2014. Compared to the first quarter, amount of total outstanding increased almost 2 times in the last quarter of 2014.
TRANSACTION TRENDS: School banking successfully involved the youth with financial activities through its pro-student functions. At the same time, it paved a way for introducing the students with modern money transaction methods that connect them to the highway of digital money transaction. Students habituated with modern money transaction would find the financial transaction friendlier in future. In the first quarter of 2014, Tk 730 million was deposited in accounts and Tk 470 million was withdrawn among which Tk 45.2 million (9.62 per cent of withdrawn) was through ATM. In the second quarter of 2014, Tk 2.48 billion was deposited and Tk 1.70 billion was withdrawn among which Tk 203.3 million (11.97 per cent of withdrawn) was through ATM. In third quarter of 2014, Tk 2.76 billion was deposited and Tk 1.76 billion was withdrawn among which Tk 206.3 million (11.72 per cent of withdrawn) was through ATM. In the last quarter of 2014, Tk 3.07 billion was deposited and Tk 1.80 billion was withdrawn among which Tk 223.9 million (12.47 per cent of withdrawn) was through ATM.
INCLUSIVE GROWTH: Since the inception (2010), school banking has increased at a decent pace. In 2011, the number of total account was 29,080. In 2012, it increased 4.6 times to 132,537. In 2013, it increased 2.23 times to 295,802. In 2014, it increased 2.87 times and went up to 850,303. Compared to 2011, the total number of accounts increased 29.24 times in 2014. PCBs possessed the lion's share (on an average, 84 per cent accounts was opened between 2011 and 2014) of number of school banking accounts was opened from 2011 to 2014.
The total amount of deposit also increased significantly between 2011 and 2014. In 2011, the total amount was Tk 307.9 million. In 2012, it increased 3.13 times and rose to Tk 965.1 million. In 2013, it increased 3.17 times and was up to Tk 3.06 billion. In 2014, it increased 2.35 times and increased to Tk 7.17 billion. Compared to 2011, the total amount of outstanding increased 23.3 times in 2014. As of December 31, 2014, mathematically, the average amount of per account deposit was roughly Tk 8,438.05.

The potentiality and possibilities school banking has are enormous. The growth of school banking since 2010 was consistent, regular, ever increasing and thus, sustainable. The purpose it started with to develop a savings habit among students and involve them in economic activities has been well served. It illuminates shining beam on the economic horizon of the country. That the urban-rural composition was much higher initially, is getting closer with the progress of time; the use of plastic cards in withdrawing money was impressive and is a very good sign for Bangladesh that 10-12 per cent of total money withdrawal of school banking occurred through ATM. It implies the impact of school banking on students' financial activities and also elicits the initiation and orientation of modern money transaction method in economic behaviour of students of Bangladesh. Moreover, school banking facilitates students to have hands-on banking experience and connects them with banking through service keeping a relation with future customers.
CHALLENGES: As per policy, all financial transactions are to be made by students' guardians; students have little scope to get involved with live banking and experience the banking process. Financial inclusion is well served with the existing practices, yet psychological inclusion remains underserved.
The central bank should come up with a more pro-student and participatory policy guideline that ensures greater involvement of students reducing their passive participation as much as possible. Participation and cooperation of all stakeholders is needed to get the purpose better served. Positive approaches from banks, required assistance from school authorities, active as well as willing participation of guardians, and pro-student policies and timely programme-update are the most needed criteria for unlocking the potential and unveiling the new horizons of school banking.

The writer works at Research and Development Division of Mutual Trust Bank Limited in Dhaka. islam.
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