Financial Inclusion Bolstering Inclusive Economic Growth ... inclusion_Dr. Atiur...2 Financial Inclusion: how does it accelerate inclusive growth? o Financial inclusion: a key element

  • View
    212

  • Download
    0

Embed Size (px)

Text of Financial Inclusion Bolstering Inclusive Economic Growth ... inclusion_Dr. Atiur...2 Financial...

  • 0

    Financial Inclusion Bolstering Inclusive Economic Growth in Bangladesh

    Atiur Rahman, PhD

    Governor, Bangladesh Bank

    16 February, 2015

  • 1

    Content

    o Financial inclusion as a tool for bolstering inclusive growth

    o Bangladesh Bank (BB) initiatives for inclusive financing

    o Financial inclusion status in Bangladesh

    o Growth and stability outcomes

    o Concluding remarks

  • 2

    Financial Inclusion: how does it accelerate inclusive growth?

    o Financial inclusion:

    a key element of social inclusion

    necessary to foster inclusive growth

    combats poverty by opening up blocked opportunities

    o Inclusive financing of farm/non-farm output initiatives generatenew employment on the demand side

    matching new domestic output on the supply side

  • 3

    Why do we need inclusive financing

    o Conventional monetary and financial policies do not address inclusivity concerns, liquidity flows into profit seeking from speculative pursuits.

    o Bangladesh Bank therefore stepped in with financial policies steering initiatives financing away from speculative uses towards socially responsible productive pursuits.

    o BB initiatives include interalia motivational efforts, creation of necessary enabling environment, and policy support.

  • 4

    A glimpse of financial inclusion programs in Bangladesh

  • 5

    Three broad pillars of inclusive financing in BD

    o BBs inclusive financing thrusts are on output initiatives in

    Agriculture supporting food security and food price stability

    SME financing promoting output, employment and income generation

    green financing supporting environmental sustainability

    o Widening advancement opportunities for the poorer population segments

  • 6

    Agriculture contributing about a fifth of GDP gets less than 6% share of total bank credits

    o Policy initiatives of ensuring adequate financing for agriculture include:

    Mandatory minimum 25% agricultural lending target for all banks

    Government interest subsidy on loans for specified higher value exotic crops and spices

    Banks with inadequate rural branch presence can lend through local MFIs

    Credit needs of tenant farmers supported by lending through a large reputed MFI

    Bank accounts for farmers available at nominal deposits; 10 million accounts opened so far

  • 7

    Small and medium enterprises (SMEs)

    o Contributes to 22.5% of GDP and 40% of employment.

    o SME financing supported by refinance lines funded partly by development partners (IDA, ADB and JICA) and partly by BB.

    o Taka 3.45 billion disbursed from refinance window

    o 21.9% of the SME credit distributed to women entrepreneurs

    o New Entrepreneurs Fund and Jute Sector Fund launched in 2014

  • 8

    SME credit rose sharply in recent years

    Source: Bangladesh Bank

    19.4317.61

    20.60

    22.88

    27.27

    24.74 24.6225.70

    10.81

    10.47

    13.38

    16.05

    20.58

    18.8219.58 20.27

    0.0

    5.0

    10.0

    15.0

    20.0

    25.0

    30.0

    FY 06 FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY 13

    % s

    hare

    Aggriculture and SME Credit as % of Total Domestic Credit SME % of Domestic Credit

  • 9

    Green financing

    o Macro prudential policy support for green financing includes:

    Banks & financial institutions must allocate 5% of loanportfolio to green finance by 2016.

    Better supervisory (CAMELS) rating for good performers

    Differential equity margin and loan pricing requirementaccording to environmental risk grading

    o Green financing supported by refinance lines funded by BB & ADB

    o Refinance line covers 47 green products.

  • 10

    o Taka 112.57 billion invested so far as green finance.

    Green financing..(contd)

    Amount (million Taka) Number

    Solar home system 154 4,867

    Irrigation pumps 68 12

    Solar PV module plants 421 3*

    Biogas plants 524 1,578

    * Total capacity of 53 MW/year

    Refinance supported green financing covered:

    Source: Bangladesh Bank

  • 11

    Inclusive financing delivery supported by major modernization of financial sector IT infrastructure

    o Multifarious initiatives launched to digitize the financial sector:

    Bangladesh Automated Clearing House (BACH)

    National Payment Switch (NPSB)

    Online credit information and supervisory reporting

    Mobile financial services (MFS)

    Enterprise Data Warehouse

    Online Bond Trading

    Anti-Money Laundering Monitoring (goAML)

  • 12

    Mobile Financial Services (MFS)

    o Why MFS in Bangladesh?

    Agro-based livelihood

    Cash based economy

    Significant domestic remittance flows

    Growing urbanization

    Omnipresent mobile telephone network

    o Guidelines on MFS and agent banking issued to facilitate inclusive financing

    o 25.2 million mobile bank accounts opened so far, employing 0.5 millionagents

  • 13

    Regulatory Structure for MFS

    o Stakeholders Banks Mobile Network Operators Technology Providers Distributors Agents Involvement of other Regulator (i.e. BTRC)

    o Bank-led Model

    Regulated by Bangladesh Bank

    Financial institutions provide the service

    MNOs provide mobile connectivity for fees

    Customers and agents use their handsets

    Guidelines issued in September 2011

    28 banks were permitted; now over 20 million accounts

  • 14

    Common people transferring money from urban to ruralBA

    GER

    HAT

    BARG

    UN

    A

    BHO

    LA

    BRAH

    MAN

    BARI

    A

    CHAP

    AIN

    AWAB

    GAN

    J

    CHU

    ADAN

    GA

    COXS

    BAZ

    AR

    DIN

    AJPU

    R

    FEN

    I

    GAZ

    IPU

    R

    HO

    BIG

    ANJ

    JESS

    ORE

    JHEN

    AID

    AH

    KHAG

    RACH

    HAR

    I

    KISH

    ORE

    GAN

    J

    KUST

    IA

    LALM

    ON

    IRH

    AT

    MAG

    URA

    MAU

    LVIB

    AZAR

    MU

    NSH

    IGAN

    J

    NAO

    GAO

    N

    NAR

    AYAN

    GAN

    J

    NAT

    ORE

    NIL

    PHAM

    ARI

    PABN

    A

    PATU

    AKH

    ALI

    RAJB

    ARI

    RAN

    GAM

    ATI

    SATK

    HIR

    A

    SHER

    PUR

    SUN

    AMG

    ANJ

    TAN

    GAI

    L

    Cash In Count Cash Out Count

    $1 billion transaction per month

    Source: Bangladesh Bank

  • 15

    Other financial inclusion programs

    o Bank accounts for school children

    itinerant wage labourers

    street children

    o 850 thousand school bank accounts opened so far

    o 5 million 10 Taka accounts opened to distribute financial aid to:

    social security program beneficiaries

    hardcore poor, freedom fighters

    destitute beneficiaries under Hindu Welfare Trust

  • 16

    Status of financial inclusion in Bangladesh

  • 17

    2009 2014 % Change

    Total number of bank branches 7,187 8,821 23%

    a) Urban 3,051 3,787 24%

    b) Rural 4,136 5,034 22%

    o Banks are obliged to maintain 1:1 ratio in rural-urban areas for opening of new bank branches.

    Status of financial inclusion in Bangladesh

    Source: Bangladesh Bank

  • 18

    6.98 7.197.44 7.65

    7.848.19

    0.82 1

    .25 2

    .05

    3.61

    4.89

    6.33

    0

    1

    2

    3

    4

    5

    6

    7

    8

    9

    2008 2009 2010 2011 2012 2013

    Commercial bank branches per 100,000 adults

    ATMs per 100,000 adults

    Demographic Penetration of Bank Services

    816 12

    67

    2121

    3797

    5248

    6797

    69027244

    76418009

    83788742

    0

    1000

    2000

    3000

    4000

    5000

    6000

    7000

    8000

    9000

    10000

    2008 2009 2010 2011 2012 2013

    Number of Automated Teller Machines

    Commercial banks: Number of Branches

    Number of Bank Branches & ATMs

    Status of financial inclusion...(contd)

    Source: Financial Access Survey (Sept. 2014), IMF

  • 19

    Growth and stability outcomes of financial inclusion programs

  • 20

    o Sustained 6% plus economic growth over the last decade with:

    sound macroeconomic fundamentals

    downward edging inflation

    moderate fiscal deficits

    o Incremental domestic output stabilizing domestic prices

    o Inclusive financing stabilizing the financial sector by bringing large and diverse bases of small loans and deposits

    o Inclusive growth strategy generating strong internal demand

    Growth and stability outcomes

  • 21

    -2

    0

    2

    4

    6

    8

    10

    12Bangladesh India Pakistan Sri Lanka

    Projection

    Perc

    ent

    Highest growth prospect in the region

    Source: World Economic Outlook (Sept. 2014), IMF

  • 22

    6.77

    5.49

    4.29

    5.73

    2.132.61

    1.95

    0.57

    0

    1

    2

    3

    4

    5

    6

    7

    8

    India Sri Lanka Pakistan BangladeshAverage Rate of GDP Growth Growth Volatility

    Perc

    ent

    2nd highest growth and lowest volatility in the region: 1995-2014

    Source: World Economic Outlook (Sept. 2014), IMF

  • 23

    0%

    2%

    4%

    6%

    8%

    10%

    12%Ju

    n-01

    Dec

    -01

    Jun-

    02D

    ec-0

    2Ju

    n-03

    Dec

    -03

Recommended

View more >