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The Mobile Money Revolution Is Transforming Bangladesh

A mobile phone retailer in Bangladesh loads a customer’s mobile phone with credit. Image by Shafiqul Alam. Copyright Demotix (18/1/2013)

A mobile phone retailer in Bangladesh loads a customer’s mobile phone with credit. Image by Shafiqul Alam. Copyright Demotix (18/1/2013)

Mobile financial services are a recent phenomenon in Bangladesh, but they have created a radical change in the country's banking system. On average, 3.33 billion taka (about 42 million US dollars) worth of transactions are made every day via mobile banking systems.

There are more than 50 government and private banks in Bangladesh, yet a lot of people, mosty in remote and rural areas, remained unbanked. In 2010, the central bank of Bangladesh introduced mobile financial services to facilitate services for the country's unbanked people. To date, a total of 28 banks have received permission from Bangladesh Bank for mobile banking; 19 banks have already launched the services.

As per the statistics of the central bank, these 19 banks have more than 23.31 million registered customers as of October 2014. This comes to about 15 per cent of the total population, which is significant because only about 15 per cent of Bangladesh’s population have access to formal financial services. There is great potential in mobile money, as more than 70% of Bangladeshis have mobile phones.

Jhalmoori Blog notes in an overview of mobile banking in Bangladesh:

Mobile Banks are not limited itself with the money transfer service instead continuously introduced various kinds of services for their customers. So far mobile banks come up with buying airtime service, insurance service, bill payment service, money disbursement service etc.

Mobile banking is not only the most common way to send money in Bangladesh, but it also gives strength to the Bangladeshi economy. People are increasingly using these services to pay for electricity, gas and water bills and remit salaries and living expenses to family members far away. This has created new business activities and a lot of new jobs.

According to The Economist magazine's September 20-26 issue, the total value of mobile money in Bangladesh was worth 5.6 per cent of the country's gross domestic product (GDP) as per a local news report [bn]. 

American business magnate, philanthropist, investor, computer programmer, and inventor Bill Gates has praised mobile financial services program in Bangladesh. In addition, the Bill and Melinda Gates Foundation has invested in mobile banking in Bangladesh.

Mobile financial services were targeted at rural people, but 48 per cent of mobile money users reside in urban areas, according to a study by PI Strategy Consulting in partnership with the CGAP (the Consultative Group to Assist the Poor) of World Bank. Another study by the public administration department of the Dhaka University, found that nearly 76 per cent of rickshaw-pullers in Dhaka send money back home to their villages through mobile banking due to its safety and cost efficiency.

Rickshaws are the main means of transportation in Dhaka. Most of them send money to their rural home via mobile banking. Image by Mohammad Asad. Copyright Demotix (6/11/2013)

Rickshaws are the main means of transportation in Dhaka. Most of them send money to their rural home via mobile banking. Image by Mohammad Asad. Copyright Demotix (6/11/2013)

70 per cent of mobile banking customers who send money in Bangladesh use mobile money transfer service Bkash, a Brac Bank subsidiary. Moreover, BKash's technology allows 98 per cent of the country's mobile users to access its service via very basic handsets. So you hear the phase “Bkash me” frequently in Bangladesh. CGAP tweeted:

According to a study conducted by MicroSave with financial support from the Bill and Melinda Gates Foundation, most mobile payment agents in Bangladesh are making profits. Mobile banking has also increased the amount of remittance from expatriates, eliminating traditional middlemen or hundi traders. Aaron Oliver tweeted:

bKash is one of the world’s fastest-growing mobile money platforms, reaching more than 10 million Bangladeshi users, notes Isabel Whisson.

Not only sending money, mobile money creates an opportunity to make shopping transactions. Maria May tweeted:

A large number of people are already benefiting from mobile financial services in Bangladesh, but only 3 per cent have an account. As a result, the transaction does not contain the customer's complete information. Mr. Pial Islam, a researcher from PI Strategy Consulting, told BBC Bangla that if the complete information of a customer were available, it may create security risks and pave the way for fraudulent transactions, risking the economy. Jhalmoori blog quotes from the study by PI Strategy Consulting in partnership with the CGAP:

52% mobile banking transactions are Pure OTC which means this sender and receiver none have the mobile bank account whereas only 3% transaction are Pure Wallet which means both the sender and receiver have the mobile bank account. It increases the opportunity of misusing mobile banking facilities.

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