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Digital transformation of financial services to reduce cost of business

Experts tell BFP-B conference

FE Report | February 27, 2020 00:00:00

Arfan Ali (middle) , president & managing director of Bank Asia, and Mominul Islam (2nd from left), CEO of IPDC Finance Ltd, seen in a session of the conference on Tuesday.

Speakers at a programme on Wednesday stressed the need for easy access to finance, banking services at doorsteps, technological innovation, and better policy support for further development of small businesses.

They also said digital transformation of financial services can reduce cost of financial institutions which may bring positive result in loan disbursement in small enterprises.

The observations came at a conference titled 'Transforming Financial Market for Small Business' organised by Business Finance for the Poor in Bangladesh (BFP-B) at a hotel in the city.

Bangladesh Bank (BB) Deputy Governor Ahmed Jamal inaugurated the day-long programme while Managing Director of Nathan Associates Eamon Cassidy, Deputy Team Leader (growth and private sector) at DFID Bangladesh Afsana Islam, and BFP-B Team Leader Feisal Hussain spoke at the programme.

Mr Jamal, also the project leader of BFP-B, said the country will achieve phenomenal GDP growth of 8.0 per cent in the current fiscal where contribution of small businesses is significant.

He said the number of SMEs in the country is estimated at 8.0 million that contributes 25 per cent of the GDP and employs over 50 per cent of the working population.

To develop the country's SME sector, the central banks has been implementing the BFP-B project to support small entrepreneurs with regulatory and policy reforms, he added.

DFID official Ms Afsana urged for making banking easy and simple for poor people as they still don't feel comfortable going to a well furnished bank.

In this regard, agent banking and mobile financial services (MFS) can bring more people in formal banking channels.

In a panel discussion titled 'Harnessing Digital Transformation', IPDC Finance Ltd CEO Mominul Islam said a well endorsed system for credit rating of SMEs should be developed to reduce financial institution's dependency on collateral- based financing.

Besides, on the age of digital transformation of financial services, data privacy and security has become big concerns for clients, he said adding: introducing blockchain technology in financial services can beef up the security.

Besides, blockchain can bring all stakeholders in one platform where mutual trust can make financial activities more swift and cost-effective, he added.

President & managing director of Bank Asia Arfan Ali said, "The 9.0 per cent lending rate set by the government will create pressure on the banks; at the same time, it is also true that we perform well under pressure."

He also emphasised on increasing efficiency and technological innovation to lessen cost of financing.

According to a study presented at the event, as of 2017, there were 783 licenced Microfinance Institutions (MFIs) with 17,120 branches all across the country having total of around 30 million clients, mostly small entrepreneurs.

These MFIs have disbursed Tk 1.05 trillion of which Tk 409 billion was agricultural loans till 2017.

BFP-B is a £25 million financial sector reform programme funded UK Aid and managed by Nathan Associates, which has worked with the government of Bangladesh, regulators, commercial financial institutions, and technology companies.

The programme was launched in 2015 with a view to improving policy and regulatory environment to create favourable business environment for small entrepreneurs and triggering private sector investment.

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