Monday, 20 May, 2024
This is the first article of my Article Series title MFS Revolution For Poverty Reduction written based on my study findings conducted in different corners of Bangladesh from Chandpur to Chapainobabgonj recently. The articles were published in The Daily Observer & The Bangladesh Express.
A revolution with a new spectrum has started unleashing fortunes for the people at the bottom of the pyramid in Bangladesh. It has added multidimensional effects to the material cultures of financial inclusion, the most efficient frontier of the decade long battle against poverty.
The revolution is nothing other than the Mobile Financial Service (MFS), launched in 2011 by the policy declaration of Bangladesh Bank (BB). The MFS operation has fanned out through 17 operators; thanks to the wide telecommunication coverage across the country from skyscraper capital city to village slums rendered by 5 telecom service providers. The unbanked population comprising 85 per cent adults of Bangladesh have lovingly embraced MFS as a unique platform for easy and quick payment methods through the mobile device.
More than 52.6 million people are now using this unique payment service through much appreciable pro-active role of the government that holds a vision to make Bangladesh at least a 'middle income economy' by 2030. And these people transact over Taka 10 billion a day through 746,000 MFS agents across the country, mostly through bKash, the leading MFS operator in Bangladesh and the largest player across the globe.
This revolution allowed people to make financial transactions and money transfers from the comfort of their homes at lower cost. This lower cost left them with more disposable income, and they now had a secure way to store cash, even those working in the informal economy.
Traditional financial institutions were initially skeptical: it was hard to fathom how financial services, especially banking services, could be provided through a mobile phone. They soon saw the advantages of linking communication and transactions in real time.
The impact was immediate. Such a huge velocity and amount of money flow is indicative of reshaping of the economic pyramid. The financial pundits are appreciating the volume of MFS transactions and considering the exponential growth as a game changer for the economy of Bangladesh.
The World Bank reports show the poverty has dropped more than 13 per cent after the MFS maiden journey in 2011 as the impact was particularly strong for households led by women. Both economists and beneficiaries say the MFS is now a game changer for poor people of Bangladesh.
With less need for cash transactions, now more number of economic agents can send and follow financial market signals, contributing to a more solid and vibrant financial system. As a result, the environment for monetary policy gets improved. Social scientists in developing countries have begun to support marshalling this tool to help thwart poverty from the society.
What drives this development?
Two new WB reports, the Bangladesh Development Update and Poverty and Shared Prosperity 2016: Taking on Inequality, find that Bangladesh is making sustained progress in poverty reduction and increasing opportunities over the years. The country has done an impressive job in reducing poverty over the last decades and has the potential to end extreme poverty by 2030 thanks to its more inclusive growth strategy.
There is no silver bullet to ensure rapid, broad, and equitable economic growth that can reach the poorest of the poor overnight. It is wise to accept practical reality, even at times with a pinch of salt. So, the multinational bank promptly termed Bangladesh as a striking success story in the fight against global poverty and a role model for the rest of the world dismissing the derogatory term used against Bangladesh as the 'bottomless basket' by Henry Kissinger in 1974.
"I'm very much looking forward to seeing firsthand Bangladesh's progress in improving the livelihoods of tens of millions, empowering women, and enhancing the quality of education," said The World Bank President. "Many developing countries in the world can learn important lessons from Bangladesh to reduce extreme poverty and to promote sustainable development".
He visited Bangladesh in 2016 and observed that MFS, primarily bKash has provided economic connectivity to people who remained outside the banking channel for a long time and were deprived to explore opportunity to achieve economic power.
So, before leaving Bangladesh, the World Bank Chief visited bKash office and felt assured of the steady growth of MFS in Bangladesh. He termed the bKash as the most successful service for its "low fee based business model" and "enabling the millions of unbanked to access financial services" and lauded for its overwhelming success in advancing the financial inclusion vision into a reality.
What drives this development?
What drives the Bangladesh to achieve such a global recognition when it was once called as a 'bottomless basket?' The World Bank President Jim Kim has given the answer fingering the mobile revolution for its positive impact on the poverty alleviation effort of Bangladesh.
In 2016, he visited Bangladesh to see the true picture for himself and became surprised at the progress in poverty reduction in the country, which he believed amongst many efforts, fundamentally "for the significant contribution of low cost MFS service".
And BIDS researchers have pointed out that the country's rural economy has shown surprising resilience over the years mainly for "the growing share of non-farm activities like trade, transport and processing, which now account for 46 per cent of rural income compared to 37 per cent in 1987". And this was "because of the better access to capital, credit and capacity to invest in skill-building available for the non-farm sector", said the BIDS report.
The MFS has multidimensional impact on poor people. It allows the poor and unbanked people to make financial transactions and money transfers at lower cost from the comfort of their homes. It supports them in their needs: to withstand financial shocks and save money to address their medical requirements.
It helps safest domestic remittance that allows millions of garment workers, rickshaw pullers and employees of low scale jobs to send their earnings to their dependents in most affordable, convenient and secured manner.
So, both economist and development thought leaders see this financial service innovation as a revolution in the nation's decade long battle for poverty reduction. Because, according to BB's financial stability assessments, this innovative payment service not only stimulates financial inclusion, also supports financial stability that helped Bangladesh economy to remain resilience even in the global economic meltdown.
Does it really a game changer?
"Is the MFS simply a new payment system? Does it actually fundamentally change the lives of the poor? Does it help people to cut poverty rate?"
With these questions, The Daily Observer visited different corners of the country from Chandpur to Chapainawabganj in last two months and examined the whole situation through a study on MFS agents and users of different stratum. The study shows the MFS service has hit the poverty everywhere from big city to small town and village to chor and haor areas through its transitional effects on poor. Most respondents said they trust it and use it to meet their urgent needs. So, poverty has started fleeing away from their homes.
Most MFS users under the study are poor and low income people who are fighting to change their fate- doing business and trade. This unique real time payment facility is helping them to remain safe from potential business risks, explore income opportunity, produce more goods, push up sales and improve living standard of their households.
So, they see the MFS as a game changer for them. But it needs to sail harder, reform faster, and implement better. Respondents of the study who are living at the bottom of the pyramid told The Daily Observer.
MFS is not the micro-lending with which developing and emerging markets are associated, or an economic programme that spends foreign aid to improve their living standard with. It is an innovation, which are still controversial.
It is something at the other end of the financial spectrum in the traditionally least exciting part of the financial system- payments. So, the obvious questions are: How it helped Bangladesh to reduce poverty? Does it really a game changer? How do we fight poverty in the most effective way?
Comments
This is the first article of my Article Series title MFS Revolution For Poverty Reduction written based on my study findings conducted in different corners of Bangladesh from Chandpur to Chapainobabgonj recently. The articles were published in The Daily Observer & The Bangladesh Express.
A revolution with a new spectrum has started unleashing fortunes for the people at the bottom of the pyramid in Bangladesh. It has added multidimensional effects to the material cultures of financial inclusion, the most efficient frontier of the decade long battle against poverty.
The revolution is nothing other than the Mobile Financial Service (MFS), launched in 2011 by the policy declaration of Bangladesh Bank (BB). The MFS operation has fanned out through 17 operators; thanks to the wide telecommunication coverage across the country from skyscraper capital city to village slums rendered by 5 telecom service providers. The unbanked population comprising 85 per cent adults of Bangladesh have lovingly embraced MFS as a unique platform for easy and quick payment methods through the mobile device.
More than 52.6 million people are now using this unique payment service through much appreciable pro-active role of the government that holds a vision to make Bangladesh at least a 'middle income economy' by 2030. And these people transact over Taka 10 billion a day through 746,000 MFS agents across the country, mostly through bKash, the leading MFS operator in Bangladesh and the largest player across the globe.
This revolution allowed people to make financial transactions and money transfers from the comfort of their homes at lower cost. This lower cost left them with more disposable income, and they now had a secure way to store cash, even those working in the informal economy.
Traditional financial institutions were initially skeptical: it was hard to fathom how financial services, especially banking services, could be provided through a mobile phone. They soon saw the advantages of linking communication and transactions in real time.
The impact was immediate. Such a huge velocity and amount of money flow is indicative of reshaping of the economic pyramid. The financial pundits are appreciating the volume of MFS transactions and considering the exponential growth as a game changer for the economy of Bangladesh.
The World Bank reports show the poverty has dropped more than 13 per cent after the MFS maiden journey in 2011 as the impact was particularly strong for households led by women. Both economists and beneficiaries say the MFS is now a game changer for poor people of Bangladesh.
With less need for cash transactions, now more number of economic agents can send and follow financial market signals, contributing to a more solid and vibrant financial system. As a result, the environment for monetary policy gets improved. Social scientists in developing countries have begun to support marshalling this tool to help thwart poverty from the society.
What drives this development?
Two new WB reports, the Bangladesh Development Update and Poverty and Shared Prosperity 2016: Taking on Inequality, find that Bangladesh is making sustained progress in poverty reduction and increasing opportunities over the years. The country has done an impressive job in reducing poverty over the last decades and has the potential to end extreme poverty by 2030 thanks to its more inclusive growth strategy.
There is no silver bullet to ensure rapid, broad, and equitable economic growth that can reach the poorest of the poor overnight. It is wise to accept practical reality, even at times with a pinch of salt. So, the multinational bank promptly termed Bangladesh as a striking success story in the fight against global poverty and a role model for the rest of the world dismissing the derogatory term used against Bangladesh as the 'bottomless basket' by Henry Kissinger in 1974.
"I'm very much looking forward to seeing firsthand Bangladesh's progress in improving the livelihoods of tens of millions, empowering women, and enhancing the quality of education," said The World Bank President. "Many developing countries in the world can learn important lessons from Bangladesh to reduce extreme poverty and to promote sustainable development".
He visited Bangladesh in 2016 and observed that MFS, primarily bKash has provided economic connectivity to people who remained outside the banking channel for a long time and were deprived to explore opportunity to achieve economic power.
So, before leaving Bangladesh, the World Bank Chief visited bKash office and felt assured of the steady growth of MFS in Bangladesh. He termed the bKash as the most successful service for its "low fee based business model" and "enabling the millions of unbanked to access financial services" and lauded for its overwhelming success in advancing the financial inclusion vision into a reality.
What drives this development?
What drives the Bangladesh to achieve such a global recognition when it was once called as a 'bottomless basket?' The World Bank President Jim Kim has given the answer fingering the mobile revolution for its positive impact on the poverty alleviation effort of Bangladesh.
In 2016, he visited Bangladesh to see the true picture for himself and became surprised at the progress in poverty reduction in the country, which he believed amongst many efforts, fundamentally "for the significant contribution of low cost MFS service".
And BIDS researchers have pointed out that the country's rural economy has shown surprising resilience over the years mainly for "the growing share of non-farm activities like trade, transport and processing, which now account for 46 per cent of rural income compared to 37 per cent in 1987". And this was "because of the better access to capital, credit and capacity to invest in skill-building available for the non-farm sector", said the BIDS report.
The MFS has multidimensional impact on poor people. It allows the poor and unbanked people to make financial transactions and money transfers at lower cost from the comfort of their homes. It supports them in their needs: to withstand financial shocks and save money to address their medical requirements.
It helps safest domestic remittance that allows millions of garment workers, rickshaw pullers and employees of low scale jobs to send their earnings to their dependents in most affordable, convenient and secured manner.
So, both economist and development thought leaders see this financial service innovation as a revolution in the nation's decade long battle for poverty reduction. Because, according to BB's financial stability assessments, this innovative payment service not only stimulates financial inclusion, also supports financial stability that helped Bangladesh economy to remain resilience even in the global economic meltdown.
Does it really a game changer?
"Is the MFS simply a new payment system? Does it actually fundamentally change the lives of the poor? Does it help people to cut poverty rate?"
With these questions, The Daily Observer visited different corners of the country from Chandpur to Chapainawabganj in last two months and examined the whole situation through a study on MFS agents and users of different stratum. The study shows the MFS service has hit the poverty everywhere from big city to small town and village to chor and haor areas through its transitional effects on poor. Most respondents said they trust it and use it to meet their urgent needs. So, poverty has started fleeing away from their homes.
Most MFS users under the study are poor and low income people who are fighting to change their fate- doing business and trade. This unique real time payment facility is helping them to remain safe from potential business risks, explore income opportunity, produce more goods, push up sales and improve living standard of their households.
So, they see the MFS as a game changer for them. But it needs to sail harder, reform faster, and implement better. Respondents of the study who are living at the bottom of the pyramid told The Daily Observer.
MFS is not the micro-lending with which developing and emerging markets are associated, or an economic programme that spends foreign aid to improve their living standard with. It is an innovation, which are still controversial.
It is something at the other end of the financial spectrum in the traditionally least exciting part of the financial system- payments. So, the obvious questions are: How it helped Bangladesh to reduce poverty? Does it really a game changer? How do we fight poverty in the most effective way?
Comments
