How can mobile financial services help Bangladesh small businesses?
On Sunday 11 March in Dhaka, we launched our findings from a major study into the opportunities presented by mobile financial services to small businesses in Bangladesh. This blog post summarises the main findings from the report.
Bangladesh's 8 million small businesses employ over half of the country’s workforce and contribute to a quarter of GDP. Their growth is highly dependent on access to and use of formal financial services.
These financial services include credit for investments, digital payments to efficiently send and receive money for goods and services, deposit accounts and digital wallets to safely store excess liquidity, and insurance.
Yet 75% of Bangladeshi small business are unserved by the formal financial sector, while the rest are under-served.
Unreached potential of mobile financial services
Mobile financial services have incredible potential to accelerate small businesses’ participation in the formal economy. These services, known as MFS, reduce the time and effort in dealing with financial service providers.
Likewise, for providers, they reduce the operating costs of distribution.
However, the potential of mobile financial services for small businesses is not being realised, despite dramatic nationwide increases in use of mobile money. In fact, less than half of small businesses with mobile money accounts use them for business purposes.
Policy recommendations to increase adoption of mobile financial services
Clearer policies and simplified registration processes could encourage an estimated 2.73 million registered small businesses to open MFS accounts.
The research recommends several changes to the mobile money ecosystem, including more incentives for financial service providers to launch new and better services. Three policy recommendations from the study:
Simplify registration process for small businesses to remove red tape and to encourage registration
Introduce tiered Know Your Customer-based MFS accounts to encourage small businesses to open merchant mobile wallet accounts
Fast-track adoption of standardised tariffs for unstructured supplementary service data communications protocol based on consensus industry players and in line with international standards