The Growth of Mobile Financial Services in Bangladesh

10 September 2012

In early 2010, we blogged about the steps identified for mobile financial services to take off in Bangladesh. Bangladesh has moved partly down this path. A newly released overview report on Mobile Financial Services  by Bangladesh’s Central Bank highlights the progress achieved two years on. 

The central bank issued guidelines on “Mobile Financial Services for Banks” in September 2011 clearly stating a choice to make the market bank-led. However, the central bank has advocated for mobile operators and microfinance organizations to be active partners. It has provided 10 licenses to banks to offer the full range of mobile financial services.
This regulatory certainty has allowed the market to move and by late 2011 and into 2012 two early leaders have emerged with the largest customer bases and agent networks. The bKash service is provided by BRAC Bank in cooperation with its subsidiary bKash. And Dutch Bangla Mobile is a new service from Dutch Bangla Bank. Combined these two providers made the largest contribution to the nearly 500,000 new mobile accounts and more than 9,000 new agents. 
The mobile financial services market is at an early stage of development as providers are working to stabilize their technology, build agent networks and acquire new customers. This involves finding and training agents, marketing, helping customers transact and acquiring customers by using know‐your‐customer (KYC) and account opening processes. A survey conducted by Bangladesh’s central bank found that the new services are reaching multiple parts of Bangladesh and that most clients and agents express cautious optimism about mobile financial services being valuable to them.  Three quarters of clients said their main reason to use this service is to send or receive payments, while the remaining one‐quarter highlighted safekeeping as the main reason. Rural users specifically mentioned the benefits of receiving payments.
Initial hopes for international remittances to drive the mobile financial services have not materialized. Similarly, earlier efforts to allow cash-out via mobile phones has not generated much volumes. It seems that Bangladesh is like many other markets where international remittances are more likely to follow rather than lead. 
These developments offer promising signs that mobile financial services could develop in time. However, big questions remain to be answered. There is a significant up front investment required to build momentum and none of the providers are yet covering their running costs. The rapid uptake by customers still needs to be proved. Bangladesh has a large population in a small geography. It is also home to one of the most deeply penetrated microfinance markets. Indeed, Bangladesh’s overall access to accounts for adults of nearly 40% is higher than South Asia’s average of 33% and the global low‐income country average of 27% (source).  Nevertheless, most banks, mobile operators and microfinance institutions agree that mobile financial services are likely to focus initially on domestic person-to-person transfers that are very scarce among formal providers.
Bangladesh Bank’s aim is to ensure that the market develops with several providers, and diverse technologies are tested and used, different kinds of agent networks deployed, and a range of products available so that the consumer is empowered with a full range of choices.
It is an exciting time in Bangladesh for mobile financial services and much will be learned in the coming months. 


Submitted by Ahmed on
Todays latest news is that mobile phone user in Bangladesh is greater than in any other south Asian country which is 75% where is the 2nd largest user country Pakistan is 65%.

Submitted by Chowdhury Mohid... on
I fully agree with Greg Chen. Initially it was thought that a telco led model will also be allowed to offer mobile financial services alongwith bankled model. But subsequently the regulator only agree to allow bank led model. So, Bangladesh is still in the process of progress.

Submitted by Md. Sadab on
As regulator of Bangladesh has clearly spelled out that mobile financial service must be bank-led. Now, it is observed that growth of mobile financial service is significant lethargic (based on number of year MFS launched in Bangladesh). So for rapid mobile financial service growth as test basis (Likes; Safaricom MFS M-PESA in Kenya) regulator could allow atleast one constant telecom to function MFS under close supervision and see the result.

Submitted by Chowdhury Mohid... on
The regulator in Bangladesh has clearly spelled out that mobile financial service must be bank-led. They have issued a dozen of license to banks for introducing operating MFS in 2011. Now, it is observed that only one or two initiatives seem viable. The regulator could allow atleast one trustworthy Telco to operate MFS under close supervision and see the result. It could be like G-Cash in the Philipines or M-PESA in Kenya.

Submitted by sadi mamhud Alo on
l proud that I am the member of mobile banking innovator team in bangladesh. as Territory manager I served 7 district of bogra region in bangladesh. my achievement 1.5 lac mobile account holders, 5 thousand active agents' 7 districts coverage, here I attached unbank and under bank people near about 15 millions whose are transactions under bkash umbrella. I am searving in bkash at Territory manager from april 2011 to august 2013.

Submitted by corey on
i have some questions about agent management.i admire that you are mobile money professor in bkash.if you have time,please reply e-mail.thank you very much.

Submitted by Hampus Johansson on
Dear Sadi, We are working with the multinational technology company Ericsson on a big project covering three different markets (Bangladesh, Indonesia, and Vietnam), focusing on m-commerce services from a consumer and merchant perspective. Qualitative, in-depth interviews will be carried out with consumers and merchants in each market as part of an extensive fieldwork process. In order to deepen our understanding of this area, we are also speaking with experts in each respective country. Considering your position as a member in the mobile banking innovator team, your input will be very valuable. This material will only be used internally by Ericsson. Would you consider scheduling a brief telephone interview in the upcoming weeks? Best regards, Hampus Johansson

Submitted by rajib on
Dear hampus, what abot your project ? how i can cotract you? i have some information which i gathered during survey procedure of a mfs provider which could help you for your research.i think my information can give you a new dimention. at present im working with a mfs provider in product design department. if you have any interest please let me know by mail or fell free to call me @ 01711248311

Submitted by sadi mamhud on
Dear Hampus , You have sent a mail to me for giving telephone Intervew . I replied on your mail . But i don't get any response from you. If you got my replied mail please inform on my email Address. Thanks Sadi mamhud TM bkash, Bangladesh.

Submitted by Hampus on
Dear Sadi, I checked my inbox once more, the e-mail must have gotten lost on the road. Please try me one more time at [email protected] Best, Hampus

Submitted by sadi mamhud on
Dear Johansson, I have sent a mail to your following address which you have mentioned in your previous email. Thanks sadi, bkash TM.

Submitted by sadi on
Upcoming star UCASH UCASH is the mobile banking of united commercial bank of Bangladesh . UCASH only for under bank people . It is full of customer oriented . family banking, u cash community , float banking, vending unit of irrigation, woman empowerment etc are Mentionable product of U cash. secure and trust is the main wealth of Ucash. Also commited to connecting of all underbank people gather with Ucash umbrella so that those people make themself become a rich resource. Almost 2 % of 80 % people has connected with mobile financial service . 78 % are beyond ( other 20% of 100% are related with general banking). Thanks, Sadi mamhud

Submitted by Md. Mosiuzzaman on
"UCash" is Live now ! ! ! "UCash", mobile banking service of UCBL has been launched in 23rd Nov, 2013, with more than 10k agent locations around the country. The major feature of "UCash" service is: it gives daily interest on mobile wallet balance. We hope, "UCash" will be able to bring more un-banked people under banking services and help economic growth of the country. We also expect a fair competition in the mobile-banking market of Bangladesh now...

Submitted by ashraf haque on
Yes, Bangladesh has a huge potentiality to grow in mobile banking. Still a large segment of the market is untapped. To me this bank lead model is the right model for Bangladesh. However the banks need to learn a lot about the sales and distribution system used by fast moving consumer goods companies. If so, sky will be the limit for Bangladesh mobile banking.

Submitted by Md. Mosiuzzaman on
The growth of Mobile Banking service market in Bangladesh by two rivals (bKash & DBBL) will face challenges soon from coming competitors like "UCash", the mobile banking service of UCBL which has been soft-launched in july 4, 2013. It's also heard that "UCash" is going to offer some unique and lucrative service to customers which are not yet offered in the market. Now let see what is really coming and how the present rivals are going to react.

Submitted by rased ringku on
yet the contents of mobile payments service growth is not increasing what it would be expecting , in case user is increased but not the transaction also the transaction fee is also high differentiation to other countries , another things in Bangladeshi MFS's who can not implement full phase mobile payments service such as payments throw online using mobile payments , it is another cause where mfs can not increase their services, if it could be the m commerce related service will use that .

Submitted by Hyder Ali Baig on
As a roll model other Asian countries can experiment but its true many changes are required in regulations.

Submitted by Adnan R. Amin on
Forgive my amateurish comments and unfamiliarity with theoretical concepts. Given the current state of the banking industry worldwide - I feel Bangladesh needs to be more cautious in terms of deregulation. Unlike developed countries - it cannot survive a severe banking crisis and/or credit crunch. Very recently (Sep-2012), a major nationalized bank (Sonali) was swindled out of Taka 3600 crores by one group. NGO dealings are also coming under increased scrutiny after it was proven a microlender had misappropriated donor funds. As the country struggles to bring informal transactions within the formal economy - a slightly protectionist stance by the government may be understandable.

Submitted by Anonymous on
The growth of Mobile Financial Service in Bangladesh is encouraging but the main question should be – Should Mobile Financial Services in Bangladesh be much further along today? The raging debate in developing countries is centered on whether banks should be the only entities permitted to offer mobile payments to banked and un-banked customers. In many countries, the banks have been able to prevail with the support of the country’s central bank that this function should only be performed by banks. Banks have been able to maintain a strangle hold on financial services even though they have done a very poor job of promoting financial inclusion in countries where the vast majority of citizens are unbanked. This is true in Bangladesh where the Central Bank would only grant licenses to banks, even though the first request to provide the service came from an MTO in 2007. Regulatory guidelines for non-banks were developed by mid 2008 and that a regime for supervising non-banks offering mobile payment services was practical. Pressure was applied by the banks to limit the licenses for mobile services only to banks. Bangladesh Bank never acted upon the MTO request and Bangladesh has lagged behind some countries that had a more open approach. While the progress that Bangladesh is experiencing is great news. Bangladesh could be much further along in offering mobile payment services if the market was open to all competitors and not restricted to banks only. The vast majority of Bangladeshis do not have bank accounts but do have access to mobile technology. In an open market, it is very possible that Bangladesh could have achieved the same success as Kenya, if MTOs were granted licenses. With 48 banks in Bangladesh, the bank only approach creates a fragmented infrastructure with many banks offering mobile financial services without any central coordination. George Thomas, former RPP Advisor to Bangladesh Bank

Submitted by Shama-e Zaheer on
Hi Mr. Thomas: I would appreciate if you would permit me to contact you for a discourse on this issue regarding Bangladesh & the MFS industry. Thanks & regards!

Submitted by iqubal hossain on
You are wrong in some of the remarks that you made. The first request came from a bank in 2005. It was held back (and still is) due to non-cooperation of MTOs. An MTO asked for formal permission in 2007 shocking all the banksby this move. Then the banks started fighting for their own rights by asking for a free MTO license without any royalty or fees. Competition is good for the industry. But it should be fair competition. While banks are held back by a regulator and are asked to maintain strict ratios, MTOs are allowed to run free? If MTOs can assume that mobile banking falls within their right, then banks should also assume that a MTO license be allowed as their own right. MTOs in Bangladesh were not in favor for issuing their licenses to banks. What people fail to understand is that progress is held back by rules and regulations of the central bank. If the regulatory authority is responsible for holding you back, they are also responsible to guard your and the country's interest which is at stake. All MTOs cited countries such as Kenya as the golden model, when it was clearly far from it. They never mentioned that their home countries do not allow such a risky model of mobile banking. MTOs in developing countries practice a very perverted version of net neutrality where they will block out any competing or better models to have their way. This way they have held back most of the success that would have been achieved. But they have not been fully successful with the spread of bKash. Thankfully Bangladesh now practices the correct form of Mobile Banking which is synonymous to the banking systems of the west.

Submitted by Chowdhury Mohid... on
I am sorry that I do not fully agree with Mr. Iqbal. I still hold the opinion that the regulato should have allowed only a few number of licenses, not 28 all. One is b-Kash, they are doing good. It is a JV attempt. The other is Dutch Bangla. It is purely a bankled venture. Another license was issued in favour of DIGITAL MONEY. This could not be implementd for reasons unknown to me. But anothe license could be given with a lead of a Telco like GP. And Bangladesh could experiment which model is suitable for them. But it did not happen. 'That's why many banks who launched mobile financial services could impact the market. But let us see what happens in future. How the regulator responses.

Submitted by Aronno on
In Bangladesh, the central bank is in trouble handling one 'Subsidiary" called bKash preventing it from telco-like non-compliance attitude. If the service was open to telcos, it could be that the central bank stop the mobile banking services for ever. Handling customers' money vs small value 'talk-time' and KYC for bank account vs telco-SIM are not same. Why CGAP is only referring to Kenya, Tanzania, Pakistan and Bangladesh -- why not India, China, Thailand, Vietnam, Europe, and US-Canada? Because the countries named later know the risk of banking by non-banks and AML/CFT issues.

Submitted by Greg Chen on
You are right that Bangladesh faced a choice in 2007-8 about whether to allow non-banks to do more in mobile financial services. Had non-banks been allowed to do more we might see a different picture than we see today. However, it is not clear what that picture might have looked like. Kenya? Maybe not. We have not seen many repeats of the Kenya experience and even in Kenya it is not clear that a wide range of services beyond payments are widely used yet. Even telco led countries like the Philippines, Tanzania and others are having a different experience than Kenya. But you are correct - Bangladesh does still have a long way to go.

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