Mobile financial services in Bangladesh

What are the opportunities?

There are ample opportunities to design innovative health financing solutions in Bangladesh. Though the COVID-19 pandemic has caused an economic slowdown, we must be preparedtoactastheeconomygearsupinapost-COVIDworld. Inadditiontopilotinghealthfinancingsolutions,actorsshould consider bundling health services with other supports for workers’ wellbeing, such as retail and housing. Employee transactionhistoriescanhelpinprovidingcreditindexingthat allowsforimmediatehealthcareloansthatcanbepaidbackin manageableinstallments. The well-being of workers in Bangladesh’s export-oriented industry has received major international attention during the pastdecade.Slowlybutsurely,theworkersarebenefittingfrom various interventions designed to improve their quality of life and ease their financial burdens. Access to digital technology, innovative financial solutions, health education, and financial literacy services will play a crucial role from here on out. Together through Fintech for Health, we can address these needs through patient-centered, scalable, customized interventionsthatimprovethequalityoflifeforRMGworkersin Bangladesh.

Authors:

Ms Nabila Khurshed, Independent Consultant, ACCESS Health International

Mobile financial services in Bangladesh

The Government of Bangladesh, through the Ministry of Information and Communications Technology, supports the

implementation of Digital Bangladesh, also known as Vision 2021. Digital Bangladesh leverages technology to drive economicgrowth,measuringimpactthroughindicatorssuchas education,health,povertyreduction,andunemploymentrates. Formorethanadecade,Bangladeshhasmadeadvancementsin integratingtechnologyacrossvarioussectorsandstreamlining good governance practices and affairs. One key ingredient for accelerating digital development is the country’s 171+ million cellphone subscribers, among them 112+ million internet subscribers.33 Services such as digital bill payments, online tax returns, academic institution registrations, digital health services, and online banking systems have allowed greater opportunities for financial inclusion and technology adoption. However, despite increasing reliance on newer technologies, a gapremainsindigitalliteracyandaccess.

The push to digitize Bangladesh during COVID-19

Vision2021wentintoeffectatthestartofCOVID-19inorderto rapidly digitize and utilize platforms, especially for vulnerable, underserved communities. Though mobile financial services (MFS)werealreadygrowingquicklyinBangladesh,thepractice of using MFS to access and execute financial services was not broadlyanchoredacrossthenation. Throughout the COVID-19 pandemic, there has been an increased dependence on digital solutions focusing on user experiences in product and service design in order to adapt to the “new normal.” Further, there has been an increased adaptation to MFS due to the guidelines set and enforced by expert health agencies (e.g., the World Health Organization) recommending cashless transactions whenever possible to control the spread of COVID-19. The increased use of digital

transactionsasaformoffinancialinclusionhasacceleratedand strengthened the foundation of digital financial services globally. Bangladesh is no exception with MFS providers experiencingatremendousupturninthenumberofcustomers; from March 2020 to November 2020 alone, around 10 million clientswereadded,takingthenumberofregisteredclientsnow to96.4million.

Havingconvenientaccesstofinancialservicesallowscustomers to keep money in their mobile wallets and send and receive money at any time, from anywhere, to anyone. During the pandemic,whenpeoplewereencouragedorrequiredtoremain in their homes, MFS offered services beyond individual-toindividual money transfers. Communities now habitually buy groceries and other daily necessities online, often paying throughmobilewallets.[JGcomment:Usingacollectivewallet?] Due to the convenience of paying MFS, from February to November 2020, utility bill payments nearly doubled from Tk 4.41 billion to Tk 8.31 billion. Additionally, the Government of Bangladeshprovideddirectcashsupportto5millionCOVID-19affectedfamiliesthroughfourmajorMFSoperators. The combination of fintech innovation, technological development, and increased access to mobile phones creates a range of opportunities for customers. Salaries are now disbursed through mobile wallets, most notably in the readymade garment (RMG) industry and for other unbanked populations such as informal workers. In July 2020, 87% of garmentworkerswerebroughtunderthedigitalwagesystem. However,inNovember2020,digitalwagepaymentsdroppedto 54% due to receded incentive of the government stimulus, laggingintegrationofdigitalwagesystemsinthefactories,and lack of workers’ education and confidence about mobile

financing and banking. Donations are now more effectively distributed to marginalized communities and Zakat money is increasingly sent through MFS to various welfare foundations. The remittance, payments for government services, toll payments, credit card bill payments, insurance premiums, and paymentsfordigitalhealthcareservices,amongothers,arealso takingplacemoreoftenthroughdigitalplatforms. Currently,15banksinBangladeshareprovidingMFSwithover 1.03millionagentscountrywide.ThepioneeringMFSoperator, bKash, has been operating under the authority of Bangladesh BankasasubsidiaryofBRACBankLimited.bKashhasbrought in approximately 10 million new customers, bringing its total customer base to 50 million and daily transactions over Tk 10 billion. The popularity of the bKash platform is due to the diversityofservicesprovided,suchassendingoraddingmoney, mobilerecharge,cashout,payments,tickets,news,andpartner offers with recent additions during the pandemic to cover donations and pay bills (e.g. utility bills, government fees, education,creditcard,etc.). Nagad,ajointventurelaunchedin2019andoperatingunderthe BangladeshPostOffice,isthecountry’sfastest-growingmobile financialserviceoperatorandcurrentlyservesover2.5million customers. Rocket, a mobile banking application by Dutch Bangla Bank Limited, is the third leading MFS operator in the country. With cooperation between central banks and government entities, Bangladesh has made tremendous progress in the MFS sector. In order for the spread of MFS to continue, regulatory environments must promote sandboxes and other mediums to test and implement guidelines and regulations that increase MFS opportunities and protect consumerinterests.

The emergence of the mHealth Sector

Digital health services were gaining traction before the pandemic,butitwasquarantinemeasuresthatpropelledtheir growth. Digital health leaders in Bangladesh include Digital HealthcareSolutions,PraavaHealth,andMayaBangladesh,who are currently addressing challenges to healthcare access, affordability, and education. Digital health services have had innovative solutions that have been able toremotely diagnose, cloud-based monitoring of health systems, and rapid dissemination of information to patients and medical professionals. Throughkeypartnerships,digitalhealthleadersarelearningto better address the health and financing needs of the patients they serve. However, these companies still encounter many regulatory hurdles. For example, the companies providing digitalhealthservicesfallundertheMinistryofHealthbutmay alsoneedauthorizationbytheInformationandCommunication Technology (ICT) division and other authorities depending on licenses obtained, whereas the financial services sector is regulated under the Ministry of Finance. The National Digital Health Strategy initiated in 2019 and recently revised in December2020providesguidelinesfordigitaltechnologyused to strengthen health systems. As the focus continues to be on digital health, the need for Fintech for Health partnerships is increasinglyimportant.

Future of MFS in Bangladesh

Theopportunitiestoleveragefintechtosupporthealthwallets are many. The modern digital healthcare experience has been shaped by MFS through continued usage of daily cashless experiences and refined user experiences, particularly in the

healthsectorformedicalexpenditures.InMarch2021,patients used discount and special bundled offers through the partner healthsystemSquareHospital,intheformofmakingpayments for their healthcare packages. Payments are also accepted through digital transactions at United Hospital through Dutch BanglaBankLimited. This is just the beginning of the Fintech for Health story in Bangladesh. Through further conversations between sectors, partnerships, and the continued evolution of payments and healthbehaviors,thefutureofMFSinhealthcarewillbecomeall themorepromising.

Authors:

MrTawfiqHasan,SeniorPartnershipConsultant,ACCESSHealth InternationalSoutheastAsia

Ms Munia Islam, Independent Consultant, ACCESS Health International