A citizen-centered approach to building an inclusive digital financial ecosystem by catalyzing low-cost, interoperable digital payment systems that solve last-mile delivery challenges and fostering innovation of pro-poor financial products.

Status of digital financial inclusion in Bangladesh

These questions and the lack of concrete answers are a reflection of the status of digital financial inclusion in Bangladesh:

1. Availability and usage of digital financial services is still low

2. Products/services are inadequate

3. Digitization for mostly (OTC) P2P fund transfer

4. Lack of skills among service providers to innovate pro-poor digital financial products/services

5. Digital financial literacy is low

6. Policy reform is top-down, regulation-oriented and supply-centric

7. Fragmented and siloed efforts at digital finance ecosystem building

A citizen’s perspective on the need for digital financial inclusion

Sarbati, a 90+ widow living in Nagorpur, Tangail district, sweeps the local bazaar floor in exchange for half-rotten vegetables and rice which she cooks to feed herself. The only money she has to spend comes from the BDT 1,500 (USD 18.95) quarterly widow’s allowance she receives from the government (G2P) as part of a social safety net programme. But it takes Sarbati hours of just travel time (not to mention the hours of waiting in long queues out in the open often in inclement weather) for her round trip to the bank branch that is 5.5 km away and costs her BDT 120 (USD 1.52). She also needs someone to accompany her as she is unable to travel such distances alone.

It is clear that Sarbati needs G2P cashout points nearby. But how should they be delivered? What other financial services will she need? What does financial inclusion mean to her?

Key initiatives of DFS Lab+

The Digital Financial Services (DFS) Lab+ – a joint initiative by Bangladesh Bank and a2i – attempts to expand and deepen digital financial inclusion through:

1. Citizen-centred product and service innovation: The trend in most emerging markets is towards simply tweaking financial products and services designed for the non-poor and attempting to push them to the poor who neither understand nor have much use for them.

a2i fosters the creation of pro-poor digital financial products and services by linking financial service providers with financial inclusion experts and introducing them to tools, techniques and design principles necessary to understand, create, evolve, and test possible solutions.

Payments digitization: Digitizing large G2P payments and piloting innovative, digital means of delivery. As the government can dictate how it pays recipients, digitizing such payment streams has a high potential to accelerate financial inclusion in the short to medium term by laying the foundation in terms of policies, infrastructure and people’s attitude for enabling further, more comprehensive efforts by the private sector.

1. Assisted rural e-commerce: One of the unique features of DFS Lab+’s strategy is that ‘rural e-commerce’ is regarded as being key to driving the usage of electronic/online financial products/services (and vice-versa) by people who are currently unbanked and underserved. Especially as it brings in the crucial livelihood/economic element into the innovations in digital financial services conversation.

2. Behavior change communication & financial literacy: Interventions in the area of digital financial inclusion too often involve technologies that are made available to the intended users but are then not adopted. To address this demand-side challenge, DFS Lab+ works with development partners and behavioral insights experts to identify design features, price incentives, and marketing messages that will encourage poor people to adopt and actively use digital financial services.

3. Policy and regulatory reform: DFS Lab+ influences policy by demonstrating the potential of innovative, citizen-centered solutions to the type of critical problems faced by Sarbati and millions of other financially excluded citizens in Bangladesh.