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Digital Financial Service (DFS) sector have been playing a key role in financial inclusion of the people in the country, thus connecting thousands to the mainstream economic activities, experts at a conference on Tuesday observed.
They said technological innovation, Mobile Financial Services (MFS), agent banking and other DFSs are now most important for financial inclusion in Bangladesh.
Observations were made at the second academic session of the two-day long International FIN-B Financial Inclusion Conference and Inclusion Fair 2019, held at Krishibid Institute of Bangladesh (KIB), organised jointly by Financial Inclusion Network-Bangladesh (FIN-B) and Institute for Inclusive Finance and Development (InM).
Dr Atiur Rahman, former Bangladesh Bank governor, chaired the session titled 'Regulatory and policy framework: Challenges and opportunities.'
A total of three papers on MFS, DSF, agent banking and technical innovations were presented in the session.
General Manager of sustainable finance department of Bangladesh Bank Khondkar Morshed Millat, Bangladesh Garment Manufacturers and Exporters Association (BGMEA) President Dr Rubana Huq and Executive Director of Integrated Development Foundation Zahirul Alam were designated speakers of the session.
Maj Gen Sheikh Md Monirul Islam of bKash presented a paper titled 'Regulatory and policy framework: Challenges and opportunities for MFS sector in Bangladesh,' which revealed the sector was rapidly bringing unbanked population to formal financial service.
It said Bangladesh Bank's oversight is instrumental for the transparency and high compliance.
The paper said MFS' KYC (know your customer) has been designed to suit the unbanked population.
The paper sorted out two key regulatory challenges-first technological challenges like data, digital privacy and secondly business challenges like pacing problem and disruptive business.
Opportunities in the sector was pointed out as inward remittance using distributed ledger technology and self registration using e-KYC (know your customer).
For applying the e-KYC, a close coordination between MFS sector and the Election Commission (EC) is needed. Customer verification should be done automatically through the EC database, it said.
Bank Asia Managing Director Md Arfan Ali delivered a paper on 'Technological innovations, agent banking and digital financial services for financial inclusion in Bangladesh' which said cost of using cash in Bangladesh is about Tk 90 billion every year.
The paper, citing from a World Bank report, said above half of the population are unbanked in Bangladesh. So, technological innovation, agent banking and DFS are effective instrument for financial inclusion in Bangladesh, the paper said.
Mr Ali said innovative technology-based banking is related to building digital Bangladesh within 2021 and achieving the sustainable development goal (SDG) within 2030.
The internet banking users are increasing enormously as 80 per cent of banking is done though mobile phones.
"For the last few years, both foreign and local banks have come up with their very own apps to provide their banking service," he said.
He said agent banking transaction has reached Tk 37.34 billion with 2.90 million of customers.
Galib Ibne Anwarul Azim of United Nations Capital Development Fund presented a paper on 'Promoting digital finance innovations though regulatory sandbox in Bangladesh: Next steps', which said Bangladesh's DFS sector's evolution has passed the nascent stage through wider uptake of mobile wallets and agent banking services in recent years.
It said currently 47 per cent adults are financially included. A 17 per cent adults are digitally included via mobile money accounts.
Mr Azim proposed for 'a regulatory sandbox' that means a cross sector dynamic partnerships among government agencies, readymade garments, retail supply chains, e-commerce platforms, microfinance institutions, insurance companies, DFS providers and others.
He said, "Many innovative and disruptive fintech (financial technology) products will soon appear in the market which may not necessarily rely only on financial service providers".
These high potential and high risk innovations will fall under jurisdiction of multiple regulators and tap into different value chains beyond conventional financial service channels.
Sandbox model is necessary to reduce regulatory uncertainties for these innovators, at the same time addressing risk for the consumers is also crucial for the regulators, he said.
Dr Atiur Rahman said stability and good governance are must in the financial service sector, and the regulators need to have accommodating approach.
He said if project proposals are correct and viable, it should take seconds to be approved by the regulators.
And all innovative financial services, taken by the private sector, will have to be under the regulation of Bangladesh Bank, he added.
BGMEA President Rubana Huq said she is conducting a pilot project to provide digital salary payment to her company's 150 workers.
She said a worker should get salary, transfer it and cash out any amount through 'the digital wallet'.
She insisted on one-stop service for investors which could minimise hassles of the companies.