FE Report
Nagad Digital Bank PLC is set to transform Bangladesh's savings culture as it aims to introduce several easy and flexible options for people, especially in rural areas, to park any amount they want.
The country's first full-fledged digital bank aims to bring all kinds of banking services to people's fingertips, thus coming out of the limitations that its MFS faced while serving customers according to their needs.
Many people, especially in rural areas, mainly rely on traditional methods, such as storing cash at home, with a large portion of them being vulnerable and excluded from formal financial systems.
According to recent Bangladesh Bank data, as of March 2024, Dhaka and Chattogram accounted for 62.2 per cent and 21.15 per cent respectively of the total deposits amounting to over Tk 17,623 billion (Tk 17,62,303 crore) in the country's banking sector. People's savings in other parts showed a poor trend because of income disparities and inadequate options available for them, especially in rural areas.
Against this backdrop, experts recommend that banking be decentralized to bridge such an economic divide. In this case, Nagad Digital Bank will fit the bill as it will offer a comprehensive platform that is accessible, secure, and user-friendly for all classes of people, including those with limited income, across the country.
Nagad will champion micro-savings for low-income people who find it difficult to save larger amounts of money. Such accounts allow users to save small, manageable amounts regularly on mobile phones, making it easy for them to deposit money whenever they can -- no matter how small the amount is, according to sources at Nagad Ltd.
There will also be super flexible tenures for savings accounts, letting users choose the length of their saving periods, whether it is a few months or several years. Such flexibility will cater to a wide range of financial goals - from short-term needs to long-term planning. This will benefit individuals with fluctuating incomes, like those in the informal sector, the sources said.
Nagad Digital Bank will also provide savers with immediate access to a portion of their funds without breaking their entire savings account, which will particularly be advantageous during emergencies or unforeseen expenses, where access to quick cash is essential. Customers will simply use their mobile phones to request partial encashment, and the funds will instantly be transferred to their digital wallets.
Another most impactful initiative of Nagad Digital Bank will be its focus on community savings. Community savings groups are popular in rural Bangladesh. These groups allow members to pool their savings and provide each other with loans. However, the informal nature of these groups can often lead to issues with accountability and security.
Nagad's digital platform will formalize these community savings groups by offering an option for group savings, which will enhance security and promote a more disciplined and structured savings habit.
To further encourage savings among low-income people, Nagad is going to introduce micro fixed deposits that require minimal initial investment, making them accessible to a larger section of the population.
Muhammad Zahidul Islam, vice president and head of Media and Communications at Nagad Ltd., said, "Nagad is working to empower people by enabling them to save securely, plan for the future, and improve their economic condition."
"We have already brought about a revolution in the country's financial inclusion by introducing a paperless and instant account opening process, coupled with easy and affordable services. It is because of Nagad that people's access to financial tools has gone up significantly. Now, with digital banking services on cards, we will gradually bring the remaining number into the fold of financial inclusion," he noted.
"Our services will especially be beneficial for women, who often face obstacles to accessing traditional banking services. Through digital banking, they will independently manage their finances, contributing to economic empowerment," the head of Media and Communications added.
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