Underserved communities, such as those living in hard-to-reach areas, encounter a wide range of inequalities, notably the technological divide compared to the mainstream population. Financial inclusion for all is a major drawback, among other factors, although it has been seen as a crucial component in economic development. Since a majority group of hard-to-reach population in Bangladesh does not have access to traditional banking services, mobile financial services (MFS) have emerged as a powerful tool to help bridge this gap. MFS refers to electronic money services provided to customers using their mobile phones, with a digital general ledger used to record all transactions. MFS can serve individuals who do not have access to or aren't getting enough financial inclusion. It can leverage the sustainable development goal SGD-10 (reduce inequality) one step ahead.
According to the Bangladesh Telecommunication Regulatory Commission (BTRC), at the end of August 2023, the total number of mobile phone users rose to an impressive 188.64 million. Additionally, there were 131.94 million internet subscribers, with a significant portion of 119.79 million mobile internet users. Another report from the Population and Housing Census 2022, 25.73 per cent of people living in rural areas (aged above 5 years) use the internet, with men making up 32.74 per cent of users and women 19.10 per cent. This penetration could potentially help bridge the gap in financial inclusion for individuals who have been unserved or underserved.
In addition, a recent study conducted by the Financial Inclusion Insights (FII) on Bangladesh in 2021, has demonstrated that 47 per cent of the population has access to financial services. These services are being provided through various channels such as banks (5 per cent), mobile money (17 per cent), and non-bank financial organizations (23 per cent). Moreover, it reveals that only 32 per cent of women use digital payments, compared to 56 per cent of males. It also stated that the concept of digital inclusion is expressly absent from the government's digital programmes and policy plans. Furthermore, there are inequalities in access to digital resources that hinder progress towards achieving SGD-10.Therefore, the impact of digital services, FinTech support, and more specifically MFS on financial inclusion in Bangladesh's rural areas remain uncertain.
Inadequate banking infrastructure and a dearth of physical bank branches and ATMs are likely seen in many rural areas in Bangladesh. As a result, accessing basic financial services requires considerable distance travel for rural communities. Effective financial management and investing can also be hampered in rural regions by a lack of financial awareness and literacy. Rural residents cannot effectively use digital services to become financially included in the digital economy systems unless they have access to the necessary digital devices and an easy-to-understand and easy-to-access financial environment. This instance highlights the need to have user-friendly MFS services.
MFS makes it possible for consumers to get financial services without going to a physical bank branch in hard-to-reach areas. As mentioned above, mobile phones are now widely used, and MFS agents are frequently seen there, increasing access to financial services. MFS is more cost-effective for rural consumers because of MFS transactions, which are frequently more economical and generally have lower costs.
Moreover, the impact of monetary value offered by MFS on perceived usefulness is indeed significant and may contribute to SDG-8 (sustainable economic growth). However, to maximise its potential, it is imperative for the relevant stakeholders, including MFS providers, policymakers, and regulatory commissions, to be carefully thoughtful of an extensive list of challenges (e.g., data privacy and security). Recently, consumer's access to financial services has been transformed by MFS platforms like bKash, Nagad, and Rocket, among others. These applications enable users to perform a wide range of financial activities using their smart phones, including transferring, and receiving money, making payments, and even conserving cash. Nevertheless, we must not underestimate the need for data privacy and security in the context of MFS for rural populations, particularly for women, given their limited financial literacy and technological readiness. In this context, It is important to implement secret and unique digital financial identity (DFI) numbers for MFS users to reduce the risk of security breaches. The encryption of this unique DFI number is limited to the sender and receiver of the quick and safe transactions.
In sum, MFSs have the potential to completely revolutionise the financial inclusion landscape in Bangladesh, especially for the unserved or underserved citizens. To make this service reliable, and accessible to all, policymakers and MFS providers should not consider only a single parameter rather than ensuring digital financial literacy, creating awareness and providing safe and convenient financial services. The unique DFI number (like NID) might be a MFS platform that has the potential to make quick and safe transactions that may economically enfranchise individuals, enhance their overall financial well-being and contribute to both SDG-8 and SDG-10. Last but not least, robust privacy and security management, understanding of digital financial literacy, technological readiness, and awareness may enhance financial inclusion and alleviate the financial inclusion gap, particularly for those who are currently unserved or underserved.
Nusrat Sharmin Jemima, Student, and President of Finance and Accounting Club of BRAC University. Dr. Najmul Hasan, Assistant Professor (and Researcher) in Information Systems, BRAC Business School, BRAC University, Dhaka. najmul.hasan@bracu.ac.bd