Daily Diaries Reveal Bangladesh’s Shifting Financial Landscape

Mohammad Emran – shown below in a green shirt in the guardhouse of the fishpond where he works and sleeps – uses bKash, a phone-based money-transmission service, for 54 out of every 100 taka he expends.

Men in Bangladesh sit in a guardhouse by a fishpond
Men in Bangladesh sit in a guardhouse by a fishpond. Photo by Stuart Rutherford.

We know this very precise information because Emran is one of 50 respondents who are providing, on a daily basis, full details of all their transactions for a set of financial diaries being collected in the area around Kapasia, in central Bangladesh. Their household incomes range from well below the Government of Bangladesh’s lower poverty line, to above the upper poverty line.

The objective of the diaries – launched in May 2015 – is to provide insights into the money management behavior of low-income rural Bangladeshis, especially in three areas that CGAP is particularly interested in: the use of mobile phone-enabled services (like the one Emran is using), the financial lives of smallholder farmers, and the changing role of microfinance institutions (MFIs) in Bangladesh.

What are we seeing so far?

Mobile phone-enabled services


chart showing income of study participants
Chart showing income of study participants

Emran, like 40 of our 50 diarists, owns his own phone (six diarists have access to one). Nine of these 46 phones are smartphones, a figure that is growing rapidly as prices tumble. You might, therefore, expect a high level of use of services like bKash. But you’d be wrong.

Emran and the other three like him are in fact exceptions. Only among this very particular group – migrant laborers living away from their families – is bKash in heavy use. Of the 106,000 transactions we have recorded so far in the diary project, less than one fifth of 1% are made using digital technology of any sort. Their value is just 1.05% of the total value of all the transactions we have recorded. All other transactions are in cash.

Why is this? Diarists say that though they can see why Emran uses bKash, they don’t see much need for it for themselves. Our data confirm low bKash use outside the small group represented by Emran. Two diarists were sent money from relatives in the big cities by bKash, another received his overseas remittance via bKash, one diarist uses value stored in his bKash “wallet” to buy his airtime, and one received a government welfare payment via bKash. And that was about it.

It is reasonable to expect that the vast majority of transactions are cash based because most normal everyday transactions tend to be in the moment and occur close by, whereas digital’s value in Bangladesh is currently emerging through superior remittance delivery optimizing distance and time barriers.

The changing role of MFIs

If phone-enabled services are the big story that hasn’t yet happened to our diarists, their need for and use of basic intermediation tools is the big story that is in danger of being overlooked – and where some really big changes are happening.

To see how important basic intermediation is for this group of poor households, start by noting how big a part financial transactions play in their overall money management. Our data for the first quarter of 2016 show that total flows through savings and loan instruments exceeded total flows through income and expenditure. For every taka that they earned and spent, they pushed or pulled just over a taka in depositing and withdrawing savings and taking and repaying loans.

And where are they saving? Low-income Bangladeshis seem to be shifting from the over-reliance on borrowing that characterized the early heady years of microcredit to patterns of saving more in line with international norms, and storing very large amounts of savings in MFIs. Much of these savings are held in the popular deposit savings schemes that MFIs introduced when they began to take savings more seriously around the year 2000.

Our data suggest that while the business model of the MFIs remains the same as before – they still make their money from the loans they extend – their function in the national financial system, especially as a repository for savings – has been transformed.


Based on our small sample of low-income households, digital financial services, offered via phone, may play a limited role in the money management of low-income households in Bangladesh until intermediation services are on offer and popularized. Meanwhile, the demand for good quality basic intermediation services among this group remains very large, and MFIs are the key institutions involved in meeting that demand.

The steady rise in the volume and importance of low-income household savings signifies a profound shift in the function that MFIs play in the national financial system, something that regulators and policy makers should ponder. Innovative thinking needs to focus on whether, and how, the undifferentiated mass of savings held in MFI accounts can be leveraged to offer low-income households such as Emran’s services, like insurance and pensions, that they almost wholly lack. 


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