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MFS booming but largely confined to fund transfer
SOHEL PARVEZ
More than a decade has passed since the rollout of mobile financial service (MFS) in Bangladesh, but its use has largely been limited to fund transfers though it can become a major vehicle to turn the country into a cashless economy eliminating its over-dependence on fiat currencies.
Bangladesh Bank data showed that the ratio of money transfers – cash-in, cash-out and person-to-person transfers – using the MFS system, which was introduced in 2011, is declining albeit at a slower pace.
The share of money transfers stood at 86 per cent out of all transactions recorded at Tk 10,75,990 crore last year. Four years ago, it was 93 per cent of all transactions involving Tk 442,090 crore.
Industry operators describe the drop as a positive development as the volume of transactions has more than doubled during the period, pointing to the expansion of the overall MFS market.
But, according to industry stakeholders, a number of issues -- lack of digital literacy, high cost of transactions, the reluctance of businesses to carry out transactions digitally, low penetration of smartphones, and a lack of push from the policy-makers – are deterring the faster growth of digital transactions through MFS platforms.
In 2022, the use of MFS for merchant payments, salary disbursements, government cash transfers to persons, utility bill payments, talk-time purchases and other usages accounted for more than 10 per cent of all transactions.
“Despite exponential growth, there are a few challenges that are hindering wider adoption of digital payments,” said Mahfuz Sadique, chief communications officer at bKash, the largest MFS provider in Bangladesh in terms of transactions.
According to him, the barriers include a lack of digital literacy and costlier internet and smartphones.
“We are encouraged that the state and relevant stakeholders are actively working to address these challenges and promote digital payments.”
Still, the success of the MFS industry can’t be overlooked.
In less than 12 years, MFS providers have brought millions under the formal financial channel, accelerating financial inclusion. Bangladesh’s achievement is cited as an example in the world of fintech.
“Today, it is not impossible for anyone to lead a cashless or less-cash life,” Sadique said.
Central bank figures showed that the use of MFS in terms of all types of transactions is growing thanks to an increase in the number of MFS providers and their rising popularity.
About 19.10 crore users were registered with 13 MFS providers in 2022 in a country of 17 crore people, with many using multiple accounts.
Currently, transactions involving about Tk 3,000 crore are made through the MFS system every day, tripling from Tk 1,200 crore four years ago.
Various government and private organisations such as readymade garments, corporates, NGOs, and distribution networks are already using MFS to disburse salaries.
“It is necessary to maximise the use of MFS to become a cashless society,” said Sadique.
Salary payments through MFS platforms increased 3.4 times to Tk 2,886 crore in 2022 from four years ago. Merchant payments that were Tk 518 crore in 2019 grew six times to Tk 3,183 crore last year.
The rate of growth of cash transfers by the government to people under safety net schemes rocketed nearly six times since then. And people paid utility bills such as electricity by four and half times the amount they paid in 2019, according to BB data.
Sadique said in order to make people habituated in diversified digital payments, it is essential for relevant stakeholders to make combined efforts to build and enhance the digital financial ecosystem.
Bkash has put in place innovative technologies and services and formed partnerships with various financial institutions.