Addressing financial literacy: Strengthening efficiency of financial markets

Considering the priorities and challenges of Bangladesh banking sector, training and capacity development programmes demand attention in some critical areas.  In Bangladesh, availability of alternative jobs and growing number of banking and financial institutions are favourable factors for existing employees, especially for the good performers. However, banks have been facing turnover costs in the form of retaining good performers. There is no doubt losing an employee means losing some valuable skills embedded in the departing employee. From the employee point of view, a decision to move to another bank should not be based on short-term goals. Currently, banks generally do not have well-articulated retention strategy although major employee retention-oriented measures include keeping salary and other benefits at a competitive level, following a suitable transfer and posting policy, and arranging training. The HR of banks of the country might face growing turnover difficulties unless banks strengthen their preparedness to face this challenge.
Bank employees need motivational training for developing right kind of banker-customer relationship. In a circumstance of inherent agency problem or principal agent difficulties in the banking industry, it is not easy for bank employees to own their institutions for undertaking wholehearted efforts in credit operations and risk management. It is particularly difficult when customers receive banking services not from banks but from bankers. This is apparent in many instances when managers, desk officers or bankers expose them to the clients instead of their banks. In the banking sector of the country, it is not uncommon when clients shift from a bank with the change of a bank by a particular employee. Such banker-customer relationship hinders development of a bank or institution as a brand.  A critical challenge of the banks in Bangladesh is to motivate and inspire employees to promote their banks or institutions as service provider brands.
Addressing financial literacy in the context of Bangladesh is a crucial need for addressing demand and supply-side constraints. Financial literacy can help reduce these barriers towards financial inclusion. Improved financial literacy can increase awareness about products and services, as well as confidence and ability in using them. In turn, this can help promote the demand for formal financial products and services. It can also empower consumers to better manage their personal and household resources, both on a day-to-day and long-term basis. Furthermore, improved financial literacy can potentially strengthen the efficiency of financial markets. In several instances, financial literacy influences the allocation of resources in the real economy and thus the longer-term potential growth of the economy. 
In connection with intervention in the area of environmental banking in Bangladesh, most of the clients of green financing are from rural areas. It is particularly noteworthy when insignificant number of rural clients gets access to banks' credit. It indicates that this could be one of the crucial ways by which several goals of sustainable and green growth of the country can be attained by offering access to finance and other basic services through improving rural economy and livelihood of the marginalised people. In some instances like solar irrigation, there are evidences of under-performance of renewable energy equipment, inadequate maintenance services, undue pricing of equipment etc. In some instances, local-level bank management is not found adequately motivated to handle such financing. Monitoring and motivational training and workshops could help solve such difficulties. Several financially-included people of the country are having only some information or very basic level of financial literacy. This group needs continuous nursing for up-gradation in terms of financial literacy. Extensive digital drives for awareness development might work for the excluded population and clients of mobile banking services. This would be essential to successfully explore the potential of agent banking which is at a very early stage of development in the country.
The country experienced several instances of crimes and scams connected to the banking sector in recent time. Of the different types, cheque-related and online frauds are more common. However, concerns on willful default and money laundering are probably of the most serious nature. The growing financial crimes in the global context imposed considerable burden in the form of huge compliance requirements on the banks. Though the sets of anti-money laundering rules followed in Bangladesh are in line with globally accepted standards, there is still scope to improve enforcements. Due diligence is thus the most critical institutional challenge to address financial crimes in the banking industry. In response to global development, especially related to money laundering and terror financing, regulators demand stringent Know Your Customer policy on the part of banks. As regards IT-related fraud, lack of knowledge and awareness regarding IT security amongst clients and a section of bankers has been exposed in several instances in recent times. The capacity and skill development programmes targeting the bank employees must put special attention to these issues.
Banks in Bangladesh generally do not have any formal Knowledge Management (KM) strategy. However, banks have some sort of arrangement for knowledge creation, storing and dissemination. These KM functions are performed by the training institutions/centers of the banks. Banks in the country generally have training institutes/wings and have budget allocations for training purposes. A good number of banks have started using e-learning to train their employees for disseminating knowledge. Some banks also send their employees outside the country to obtain training. Though some of the training institutes of commercial banks are called Training and Research Centres, these generally are engaged in designing and facilitating training courses and workshops. Practices of capturing knowledge in the form of research activities are extremely limited.
As a national training, research and education institute, Bangladesh Institute of Bank Management (BIBM) has been undertaking a set of KM functions for the country's banking system. BIBM organises a number of in-campus training courses, outreach training courses, workshops (including e-workshops) and research and review workshops as per the BIBM Academic Calendar which is prepared well ahead of the year in consultation with member banks. Research-based workshops (Research Workshops and Review Workshops) are connected with knowledge creation and capturing of knowledge on banking activities and critical banking issues. In spite of some success, a lot remains to be achieved to offer right kind of KM services to the banking industry. As the national capacity development institution of the bank executives, BIBM mostly offers need based training programmes. Action research based workshops (Review Workshops) and publications (like Banking Review Series) by BIBM received remarkable recognition in the banking industry in recent times. Its certification programme is getting popularity and acceptability. Introduction of extra-curricular activities brought qualitative changes in the training programmes of the institute. As part of its training or capacity development policy, the institute expects to allocate more resources to conduct programmes on risk management, consumer protection, inclusion, corporate governance practices and curbing financial crimes.
Dr Shah Md Ahsan Habib is Professor and Director (Training), Bangladesh Institute of Bank Management (BIBM).
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