There is plenty of room for improving formal financial services offered to unbanked populations. Currently, 75 percent of Bangladeshi small business are unserved by the formal financial sector, while the rest are underserved. To tackle this systemic constraint, there is space to enhance services offered through agent banks, incorporate more digital services, and maximize women’s participation.

To address these constraints shackling the free flow of credit and impeding on the equilibrium of the supply and demand of credit, we recommend three broad areas:

Increase Loan Disbursement

Support New Digital Services

Maximize Women’s Economic Participation

"This quarterly (July - September 2020) progress of agent banking for the quarter of September 2020 is very much indicative that financial services, through agents, are truly reaching the underprivileged segments of the society, even in the pandemic situation."

– Bangladesh Bank report


Farmers in Bangladesh, who are generally not part of the formal sector, have over US$1.5 billion in savings. Despite a steady increase in agricultural lending in recent years, the lack of suitable agriculture products deterred farmers who own SMEs from availing bank loans and averted them to informal money markets. Expanding their agent banking portfolio was a relatively new way for banks to reach this market. Before and during the COVID-19 pandemic, loan disbursement from agent banking outlets remained low. As of September 2020, only nine banks disbursed loans through agent banking. Increasing loan disbursement through banking agents may be an efficient way for banks to reach this market. Increasing loan disbursement through banking agents could also support financial inclusion, particularly of women. More SMEs, especially those owned by women, will likely have access to loans when more loans are disbursed through agent banking outlets. The Activity’s partner banks—BRAC Bank, Bank Asia, and City Bank—make up a significant percentage of existing loan disbursement. BRAC Bank disbursed 51 percent of the total, followed by Bank Asia at 28 percent, and City Bank at 18 percent. There is huge potential to serve more women entrepreneurs in rural areas who can access finance from the banks through agents. Bangladesh Bank is paying attention to this matter and constantly encourages banks to facilitate loans to female customers. As of September 2020, women were only 10 percent of total loan recipients. To tackle current market bottlenecks, engagement of customers must increase. Steps that can be taken to tackle this are as follows:

•Allow non-exclusivity of master agents to serve multiple banks with each agent outlet representing one bank. •Allocate a certain portion of existing refinancing schemes for banks to provide loans through agent banking channels and improve the deposit-to-credit ratio. •Introduce electronic Know Your Customer (e-KYC), using digital signatures and national identifications or the Mobile Network Operator (MNO) database to verify.


If previous trends hold true, banking agents will continue to offer increased digital services. Digital services are faster, more efficient, and typically cheaper than traditional financial services. And they can more easily reach rural communities and SMEs. This is good news for SMEs interested in accessing financial services that have been previously excluded. However, it is important to note the challenges in ensuring digital financial services are inclusive, notably among women. These challenges include digital literacy and unequal access to technology like cellphones. As agents continue to increase their use of digital financial services, it is important to monitor equality. Hiring more women as banking agents and developing financial products that better serve women are steps in the right direction. The International Finance Corporation (IFC) recently reported that “digital transformation gained priority for more than half of IFC clients…62 percent of respondents stated that investments in digital channels such as mobile and internet banking had become an increased or urgent priority as a result of the crisis.” Collaboration with mobile financial service providers is expected to increase. For example, banks may consider moving to more digital and simplified KYC applications. Agents could then analyze the creditworthiness of loan applicants using the digital application, reducing processing costs for banks and serving customers who may traditionally shy away from opening bank accounts or applying for loans given the lengthy procedures. A recent news article mentioned that two banks in Bangladesh already started opening accounts based on e-KYC applications. Additionally, banks are exploring alternates, including facial recognition, that would fundamentally shift banking services toward more digital and, during pandemic times, safer approaches for both agents and customers. Recommendations for continuing to support access to new digital services include the following:

·Tiered- and e-KYC-based requirements to open mobile wallet accounts for merchants ·Facilitate interoperability among mobile financial service providers and across commercial banks. ·Revise mobile financial service guidelines to allow all financial service providers to leverage mobile platforms.


Promoting gender equality and advancing the status of women and girls is a human right and essential to achieving the Sustainable Development Goals (SDGs). The proportion of women in the labor force in Bangladesh has been steadily increasing over the last decade, from about 37 percent in 2011 to 44 percent in 2018 (The World Bank, 2020). There are 94,800 women involved in microenterprises in Bangladesh (UNCDF-SHIFT, 2018). While the retail businesses of micro-entrepreneurs in Bangladesh may be small at the individual level, collectively, this group represents an enormous market force with estimated total market size in annual sales turnover of $18.42 billion in 2018 and a credit market of $778 million. The Activity, through its implementation of projects with commercial banks, has witnessed tremendous growth of female participants at household and enterprise levels availing formal financial services, such as opening savings deposit accounts and receiving remittance inflow from abroad. Expanding the agent bank network can play a crucial role in catalyzing the adoption rate of formal financial services and reducing their dependencies on informal channels for their credit needs. Broad ways in which this untapped market can be reached include the following:

·Provide technical and grant support to fast-track the expansion of agent bank networks to hard-to-reach geographical locations. ·Support the creation of digital identities. ·Use alternative credit channels to engage women, i.e., digital solutions. ·Provide or facilitate access to technical assistance for female borrowers to improve their creditworthiness.

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