Bangladesh: New frontier of financial inclusion during COVID-19 pandemic

• Stimulus package reinforced digitisation in payment system
• Bringing unbanked people under the umbrella of banking channel
• Access and usage of digital payments registered tremendous growth
• Persistent financial inclusion efforts for inclusive and sustainable growth 

The pandemic has accelerated the use of digital financial services worldwide. For many low-income families, the ability to tap into financial resources and accept cash transfers from social networks determines whether there is food on the table. Bangladesh's well-developed digital financial services ecosystem, especially at the grassroots network of mobile money agents, has enabled millions of financial transfers at a time when physical movement was difficult.

In order to prevent the disease from spreading, the government imposed lockdowns and social distancing policy. It affected Bangladesh’s supply chain system badly, as small enterprises and marginal people suffered and impacted their livelihoods.

Stimulus package reinforced digitisation in payment system

The ‘Digital Bangladesh’ Vision 2021 is the country’s blueprint to implement digital technology in all activities, after 50 years of independence. The government engages information technology in management, administration and governance to ensure transparency and accountability.

When the pandemic hit Bangladesh, payments were integrated into some of its economic responses. The government’s BDT 956 billion ($11.20 billion) stimulus package, which is 3.3% of gross domestic product (GDP) helped revive the economy.  The stimulus package for the garment industry enabled factories to obtain low-interest loans from the government to cover workers' wages. The government required companies to disburse wages digitally to qualify for the loans.

Ready-made garment (RMG) factory workers received payments digitally. Some 1.9 million workers had opened accounts to receive their wages. Out of the more than four million RMG workers, more than half are women. In addition, the government has launched an emergency cash transfer programme for five million informal workers and vulnerable families.

Bringing unbanked people under the umbrella of banking channel

One of the biggest challenges was the opening of accounts for millions of unbanked people. Those with smartphones were able to open accounts remotely, but most people do not have this technology. The garment workers have returned to their villages and could not easily open accounts since they were in the factories.

Policymakers have addressed this issue by adopting a realistic know-your-customer (KYC) policy, which enabled garment factories to share public identification information directly with financial service providers resulting in mass account enrolment. Workers who lacked national ID were allowed to open accounts through this process. Between March and May 2020, more than two million garment workers opened their new financial accounts.

Access and usage of digital payments registered tremendous growth