An Overview of Financial Inclusion Activities of Bangladesh Bank

Supervised by

Dr. Md. Mohiuddin

Professor & Chairman

Department of Management Studies

Jagannath University, Dhaka

Submitted by

Sania Afrin
ID No: M20190202329

Batch: 19th

Program: MBA(Evening)

Department of Management Studies

Jagannath University, Dhaka

Date of Submission: 15th May, 2023

 Acknowledgement
I would like to pay my gratitude to the almighty Allah, the most Merciful, the Beneficent, for blessing
me with good health & tenacity of mind to complete this internship report.

I also express my sincere & immense gratitude to my honorable supervisor Dr. Md. Mohiuddin,
Professor & Chairman, Department of Management Studies, Jagannath University, Dhaka for
providing valuable guidelines and recommendations related to the preparation of this internship
report. His valuable suggestions & guidance helped me a lot to prepare the report in a well-organized
manner.

I am also grateful to the other officials who gave me their suggestions, assistance & supply of
information that helped me to complete my report successfully.

I have also taken help from the internet & various books. I am thankful to those authors for the
information I have gathered from their resourceful books.

Though I tried my level best to put relevant information as far as possible, there may be some lacking
to make to the report more perfect. Hence, I would to apologize beforehand for any unintentional
mistakes found in this report.

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 Declaration
I do declare that the presented internship report on An Overview of Financial Inclusion Activities of
Bangladesh Bank has been authentically prepared by me. While preparing this report I did not breach
any copyright act intentionally.

I am also declaring that this internship report is only prepared as a prerequisite requirement for my
internship certification & not for any other purposes & I did not submit this report anywhere for
awarding any diploma, degree or certificate.

Sania Afrin

ID: M20190202329

Batch: 19th

Program: MBA(Evening)

Department of Management Studies

Jagannath University, Dhaka.

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 Letter of Transmittal
15 May, 2023

Dr. Md. Mohiuddin

Professor and Chairman

Department of Management Studies

Jagannath University, Dhaka

Subject: Submission of Internship Report.

Dear Sir,

I am pleased to submit my internship report on An Overview of Financial Inclusion Activities of

Bangladesh Bank. It was a great opportunity for me to acquire knowledge and experience in respect
of the functions, procedures, and operational mechanism of a central bank. I believe that the
knowledge and experience that I have gathered during my internship period will definitely help me
in my professional life. I have tried hard to fulfill your expectations by sharing details of each and
every topic and avoiding any unnecessary amplification of the topics.

I sincerely hope that you will find this report satisfactory. Please accept my report and I will be glad
to clarify any discrepancy that may arise.

Sincerely yours,

Sania Afrin

ID: M20190202329

Batch: 19th

Program: MBA(Evening)

Department of Management Studies

Jagannath University, Dhaka.

iii
 Supervisor’s Certificate
I, Dr. Md. Mohiuddin, am very pleased to declare that Sania Afrin, student of EMBA, Department of
Management Studies, Jagannath University has been given the topic, An Overview of Financial
Inclusion Activities of Bangladesh Bank as a prerequisite requirement for the completion of her
internship. She has followed all the guidelines provided by me and undertaken all the required
initiatives to complete this report. I have supervised her throughout the preparation of this internship
report.

I clarify that this internship report is unique and has not been submitted elsewhere previously for
publication in any form.

I wish her the best for her future endeavors.

Dr. Md. Mohiuddin

Professor and Chairman

Department of Management Studies

Jagannath University, Dhaka.

iv
 Executive Summary
Financial inclusion means that individuals and businesses have access to useful and affordable
financial products and services that meet their needs like transactions, payments, savings, credit and
insurance that can be delivered in a responsible and sustainable way. Financial inclusion primarily
focuses on providing financial solutions to the economically underprivileged and aims to offer basic
banking and financial services to everybody regardless of their income or savings. The main target of
financial inclusion is to ensure that the poor and marginalized individuals gain sound financial literacy
and can ultimately apply that knowledge to make the best use of their money. Central bank always
plays the most important role for economic growth of any nation. It acts like a guardian for all other
banks and financial institution. As a central bank, Bangladesh Bank also acts various function to
maintain sustainability in Bangladesh’s economy. Bangladesh Bank has undertaken multiple
initiatives to improve people’s access to credit and other financial services, especially for the
unbanked and financially excluded population of the country. The Financial Inclusion Department of
Bangladesh Bank has multiple projects which are currently active in order to ensure financial inclusion
of Bangladeshi citizens across the country. Bangladesh Bank has been engaged in financial inclusion
initiatives since 2009. Bangladesh Bank has undertaken a comprehensive financial inclusion campaign
to rich out with financial services to the disadvantaged population of the country. These include: No
Frill Accounts, School Banking, Agent Banking, Bank Accounts for street children, Refinance Schemes
etc.

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Table of Contents
Acknowledgement ............................................................................................................................................... i
Declaration ........................................................................................................................................................... ii
Letter of Transmittal ........................................................................................................................................... iii
Supervisor’s Certificate ........................................................................................................................................iv
Executive Summary.............................................................................................................................................. v
Chapter 1: Introduction ....................................................................................................................................... 1
1 Introduction: ................................................................................................................................................. 1
1.1 Objective of the report: ......................................................................................................................... 1
1.2 Sources of Data: ..................................................................................................................................... 2
1.3 Limitations of the Study: ........................................................................................................................ 2
Chapter 2: Financial Inclusion .............................................................................................................................. 1
2 Financial Inclusion ......................................................................................................................................... 3
2.1 Objectives of Financial Inclusion: ........................................................................................................... 3
2.2 Importance of Financial Inclusion: ......................................................................................................... 3
Chapter 3: Overview of the Organization ............................................................................................................ 5
3 Bangladesh Bank: .......................................................................................................................................... 5
3.1 History of Bangladesh Bank: .................................................................................................................. 5
3.2 Vision:..................................................................................................................................................... 5
3.3 Mission: .................................................................................................................................................. 5
3.4 Functions: ............................................................................................................................................... 6
Chapter 4: Financial Inclusion Activities by Bangladesh Bank ............................................................................. 3
4.1. No-frills Account ....................................................................................................................................... 7
4.2. School Banking: ......................................................................................................................................... 7
4.3. Agent Banking: .......................................................................................................................................... 8
4.4. Bank Accounts for Street and Working Children: ..................................................................................... 9
4.5. NRB Project: ............................................................................................................................................ 10
4.6. Refinance Schemes: ................................................................................................................................ 10
4.7. BDT 3000 Crore Refinance Scheme to Combat Covid-19: ...................................................................... 11
4.8. BDT 500 Crore Refinance Scheme: ......................................................................................................... 12
4.9. Financial Literacy:.................................................................................................................................... 13

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Chapter 5: Concluding Remarks ........................................................................................................................... 5
5.1. Findings ................................................................................................................................................... 15
5.2. Recommendations .................................................................................................................................. 16
5.3. Conclusion ............................................................................................................................................... 17
References ..................................................................................................................................................... 18

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Chapter 1: Introduction
1 Introduction:
Financial inclusion is the delivery of financial services at affordable costs to the sections of
disadvantaged and low-income segments of society, in contrast to financial exclusion where those
services are not available or affordable. Greater financial inclusion allows for financially marginalized
groups to increase their income, reduce its volatility, and build assets, thereby providing resilience to
economic shocks and helping create jobs and promote business activities. Financial inclusion has
become an issue of worldwide concern, relevant equally in the economies of the underdeveloped,
developing, and developed nations. Building an inclusive financial sector has gained growing global
recognition bringing to the fore the need for development strategies that touch all lives, instead of a
select few. Access to a well-functioning financial system can economically and socially empower
individuals, in particular poor people, allowing them to better integrate into the economy of their
countries, actively contribute to their development and protect themselves against economic shocks.
Creation and expansion of financial services targeted to the poor and low-income populations can
play a vital role in enhancing financial access.

Basic financial services such as deposit, credit etc. is considered as entitlement of all people in a
society, this is particularly true in developed countries. Inclusiveness of a greater segment of people
in financial system is prerequisite for economic development of a country like Bangladesh to facilitate
employment to ease credit facilities. Despite a large number of bank branches and micro finance
institutions in our country, a large segment of our population, particularly rural poor, have scant
access to banking services. Bangladesh Bank has started to find a way out of this situation and services
like deposit, small credit etc. need to be made available to the common people for the sake of poverty
reduction. Bangladesh Bank and the Government of Bangladesh have adopted several remedial
measures to bridge these gaps in financial inclusion.

1.1 Objective of the report:

The objective of the study may be viewed as:

a) Primary objective

b) Specific objective

Primary Objective:
The primary objective of my internship program is to gain practical work experience in the field of
Banking Business that helps me to complete my MBA program required under Department of
Management Studies, Jagannath University and get an overall idea on financial inclusion initiatives
of Bangladesh Bank and their impact on stakeholders.

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Specific Objective:
More specifically, this study entails the following aspects:

• To show an overview of financial inclusion activities of Bangladesh Bank.

• To find the impact of existing activities of financial inclusion on individuals, institutions and
the economy of Bangladesh.
• To learn about the way of using funds for social welfare.
• Learning the procedure of developing policies for other banks.
• To know about how Bangladesh Bank is supporting the sustainable economic growth of
Bangladesh through its core policy initiatives.

1.2 Sources of Data:

Primary sources of data:
The primary data of this report is collected through:

• Personal Observation
• Expert’s Opinion

Secondary sources of data:

I gathered the secondary data via following sources:

• Annual and quarterly report of Bangladesh Bank.

• Different publications of Bangladesh bank.
• Website of Bangladesh Bank.
• Different circulars of Bangladesh Bank.
• Printed outlines and documentation supplied by Financial Inclusion Department of
Bangladesh Bank.

1.3 Limitations of the Study:

• Limitation of time is one of the most important factors that shortens the present study. Due
to time limitation many aspects may not be discussed in the present study.
• Shortage of verified data as not much work has been done related to financial inclusion in
Bangladesh.
• Lack of experience in working sector of mine has been another main constraint of this scope
of study.

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Chapter 2: Financial Inclusion
2 Financial Inclusion
Financial inclusion refers to efforts to make financial products and services accessible and affordable
to all individuals and businesses, regardless of their personal net worth or company size. It includes
banking, loan, equity, and insurance products. Financial inclusion efforts typically target those who
are unbanked and under-banked, and directs sustainable financial services to them.

According to world bank, financial inclusion means that individuals and businesses have access to
useful and affordable financial products and services that meet their needs like transactions,
payments, savings, credit, and insurance that delivered in a responsible and sustainable way. Being
able to have access to a transaction account is a first step toward broader financial inclusion since a
transaction account allows people to store money, and send and receive payments A transaction
account can also serve as a gateway to other financial services, which is ensuring that people
worldwide can have access to a transaction account is the focus of the World Bank Group’s Universal
Financial Access 2020 Initiatives, which concluded at the end of 2020.

With advances in financial technology and digital transactions, the scope of financial inclusion has
become widened all over the globe. Financial inclusion plays a crucial role in ensuring proportionate
resource allocation amongst individuals of a society as it strengthens the availability of economic
resources and builds the concept of savings among poor people.

2.1 Objectives of Financial Inclusion:

The objectives of financial inclusion are to provide the following:

• A basic No-frills banking account for making and receiving payments

• Saving products (including investment and pension)
• Simple credit products and overdrafts linked with No-frills accounts.
• Remittance, or money transfer facilities
• Micro insurance (life) and non-micro insurance (life and non-life)
• Micro pension

2.2 Importance of Financial Inclusion:

Financial inclusion has increasingly gained attention as a tool to tackle poverty, promote equality,
and support economic growth. The concept has emerged as a part of the agenda of sustainable
development goals and consequently, attracted the interest of academics and policy makers around
the world to expand financial products and services in a way that provides access to all members of
society for poverty reduction and economic development. Since financial inclusion can facilitate
economic growth, improve living standards, and eliminate poverty, the concept is significant globally
to enhance the access of disadvantaged groups of the population to finances.

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Financial inclusion strengthens the availability of economic resources and builds the concept of
savings among the poor. Financial inclusion is a major step towards inclusive growth. It helps in the
overall economic development of the underprivileged population.

Financial inclusion not only contributes to social and economic development, but also creates new
markets and employment opportunities. Financial inclusion can facilitate the improvement of
economic conditions and living standards as financial services stimulate investments and savings.
Financial inclusion influences the labor market in several ways. Available financial services stimulate
investments and help small businesses to create jobs.

Financial inclusion also allows financing education that strengthens human capital and hence,
increases wages and employment.

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Chapter 3: Overview of the Organization
3 Bangladesh Bank:
Bangladesh Bank is the central bank of Bangladesh. Like other central banks, it must perform
various financial activities with a view to developing the country’s economic condition. Financial
Inclusion is one of them. It is an important member of the Alliance for Financial Inclusion. It has
been working as a guardian of all banks in Bangladesh since after liberation war. It performs all the
core functions of a typical monetary and financial sector regulator and also influences other banks
to work for economic growth.

3.1 History of Bangladesh Bank:

Bangladesh Bank was established as the central bank under the Bangladesh Bank (Temporary)
Order, 1971. It took place of State Bank of Pakistan for the territory of Bangladesh in the wake of
liberation of the country. The office of Deputy Governor of State Bank of Pakistan in Dhaka operates
as its Head Office. After the liberation war and the eventual independence of Bangladesh, the
Government of Bangladesh recognized the Dhaka branch of the State Bank of Pakistan as the
central bank of the country, naming it Bangladesh Bank. After this recognition was done pursuant
to Bangladesh Bank order, 1972, and the Bangladesh Bank came into existence with retrospective
effect from 16thDecember, 1971. The highest official in the bank is the Governor. The Governor
chairs the Board of Director. The Executive Staff, also headed by the Governor, are responsible for
day-to-day affairs. Bangladesh Bank is empowered to act as the watchdog of the country’s banking
system and all scheduled banks are accountable to Bangladesh Bank, which has extensive powers to
ensure soundness of the banking system.

3.2 Vision:
The vision of Bangladesh Bank aspires, through ensuring the quality of services and the competence
of its staff, shall operate as a modern, dynamic, effective, and forward-looking central bank to
manage the country’s monetary and financial system with a view to establishing the internal and
external value of Bangladesh Taka conductive to rapid growth and development of the economy.

3.3 Mission:
For achieving the vision, Bangladesh Bank’s mission is to manage the monetary and credit system of
Bangladesh with a view to establishing domestic monetary value and maintaining a competitive
external per value of the Bangladesh Taka towards fostering growth and development of country’s
productive resources in the best national interest. To achieve these objective Bangladesh Bank
mainly

• Conduct monetary policy.

• Regulates banks and non-banking financial institutions to develop a sound financial system
formulating monetary and credit policies.
• Managing currency issues and regulating payment systems.
• Managing foreign exchange reserves and regulating the foreign exchange market.

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 • Regulating and supervising banks and financial institutions and advising the government on
interactions and impacts of fiscal, monetary, and other economic policies.

3.4 Functions:
The Bangladesh Bank performs all the functions that a central bank in any country is expected to
perform. Such functions include maintaining price stability through economic and monetary policy
measures, managing the country’s foreign exchange and gold reserve and regulating the banking
sectors of the country. Bangladesh Bank, like most other central banks, exercises a monopoly over
the issue of currency and bank notes. Except for 1, 2 and 5 taka notes and coins, it issues all other
denominations of Bangladeshi taka.

There are some major functional areas in Bangladesh Bank which includes:

• Issuance of currency notes.

• Formulation and implementation of monetary and credit policies.
• Prevention of money laundering.
• Acting as banker to the government.
• Regulation and supervision over the banks and non-bank financial institutions, promotion
and development of domestic financial markets.
• Managing the country’s international reserves.
• Regulating and supervising payment system.
• Collecting and furnishing credit information.
• Implementation of Foreign Exchange Regulation Act.
• Managing a deposit insurance scheme.
• Acting as a lender to the last resort through lending against first class securities, bill of
exchange etc.
• Acting as a Clearing House for settlement of interbank transactions.
• Maintaining and controlling gold reserves.
• Taking initiatives for creating employment opportunities by means of credit-control
mechanism.
• Maintaining the stability of foreign currency exchange rates by means of controlling credit.
• Protecting economic depression for stabilizing business activities.
• Taking necessary measures for stabilizing the price level.

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Chapter 4: Financial Inclusion Activities by
Bangladesh Bank
4.1. No-frills Account
A no-frills account is a bank account that can be opened and maintained with a zero balance, levies
zero or nominal charges and does away with unnecessary services or frills. No-frills account is a type
of bank account that requires an individual to maintain a negligible or no minimum balance along
with following some simple KYC norms. No frills accounts can be opened with an initial deposit of Tk
10, Tk 50, Tk 100 by underprivileged people, school students under 18 years and working children
who are allowed to maintain the accounts with zero or nominal charges.

The target groups of these accounts include farmers, the freedom fighters, disabled persons, the
extreme poor, the beneficiaries of the Social Safety Net (SSN), garment workers, small-scale factory
workers, flood-affected marginal people, small businesspeople, cleaning workers of city corporations
etc. In line with the government’s directives, Bangladesh Bank has taken various initiatives to provide
financial services for the people of all segments of society. These accounts require neither a minimum
balance nor any service charge or fee and such account holders are given higher interest rates than
the existing savings rate to augment the welfare of the marginal people.

Up to December 2022 quarter, the government has disbursed subsidy/salary to 7,187,916 NFAs held
with various segments of marginalized people of the society. In addition, NFAs play a significant role
in channelizing inward foreign remittances. Up to December 2022, the cumulative amount of foreign
remittances received through these accounts reaches Taka 5,685.71 million. The amount is 4.42%
higher than the cumulative amount received by the end of September 2022 quarter. In addition, the
number of School Banking Accounts has grown by 8.87% over the December 2021 quarter and this
increase is due to the resumption of school banking activities by banks after the COVID-19 pandemic.

4.2. School Banking:

School banking program has been taken to extend the financial inclusion. A financially literate child
will have the tendency to save more as well as he/she will be more willing to take the service of banks.
So, literacy at an early age will widen the scope of financial inclusion.

School banking program originates the habit of saving among children. By opening a bank account,
children become habituated to take service of banks at very early age.

The introduction of school banking is one of the most significant milestones in the financial inclusion
initiatives of Bangladesh Bank. This program was initiated by Bangladesh Bank with an aim to develop
savings behavior of the students at an early age. The school banking program introduces banking
services and modern banking technology to students of age less than 18 years.

Bangladesh Bank advised the scheduled banks to introduce school banking activities in November
2010. Since then, banks have started to provide banking services to students through savings
accounts and deposit schemes. The main objective of school banking is to promote savings behavior

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among school going children and to orientate them with banking literacy and modern banking
technology. To enhance the school banking activities of the banks, Bangladesh Bank issued a
comprehensive guideline in October 2013.

Any school student can open a school-banking account through parents or legal guardian by
depositing a minimum of Taka 100. There are some advantages of opening this account, such as
waivers of fees and charges, free internet banking, a waiver of minimum balance requirement, debit
card at lower costs etc.

The number of School Banking Accounts has reached 3,262,425 in the review quarter, 1.40% higher
than that of the previous quarter. Year-to-year comparison has also marked significant growth in
School Banking Activities. The number of School Banking Accounts has grown by 13.80% in the
December 2022 quarter compared to December 2021 quarter. The vaccination program for COVID-
19 in educational institutes has further enhanced the normal class activities in school as well as School
Banking Activities. Deposits in the School Banking Accounts have decreased to Taka 22,855.71 million
during the reporting quarter and decreased by 1.59% over the previous quarter.

4.3. Agent Banking:

Agent Banking means providing limited scale banking and financial services to the undeserved
population through engaged agents under a valid agency agreement, rather than a teller/cashier. It
is the owner of an outlet who conducts banking transactions on behalf of a bank. Agent banking
services was introduced in 2013. Agents can offer limited-scale banking and financial services under
a valid agency agreement. This agent banking system provides more services than mobile banking
system. Agent banking services was introduced with a view to provide safe, secured and sound
alternative delivery channel for banking services to the non-privileged, undeserved population and
the poor segment of the society, especially from geographically remote location. Through this system
banks can extend their services to remote areas without setting up a branch or employing their own
officials to remote location. It has opened a doorway to provide banking services through an outlet
by banks where branch establishment is extremely difficult or not feasible. This new system is cost
efficient for the banks as well as suitable for a local entrepreneur to act for a bank in their locality.

Financial inclusion has gained pace through agent banking in the rural areas creating endless
possibilities for both banks and their customers. Agent banking is helping banks in mobilizing
deposits, disbursing credit and most importantly distributing inbound foreign remittances.

As of December 2022, the total number of agents and outlets reaches 15,126 and 20,736,
respectively. At the end of December 2022, the total number of accounts opened through agent
banking stands at 17,475,949. The number of agent banking accounts has grown by 4.14% over the
previous quarter. At the end of December 2022, the total amount of deposit through agent banking
reaches Taka 301,578.67 million.

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4.4. Bank Accounts for Street and Working Children:
The Bangladesh National Child Labor Elimination Policy 2010 stated that any child fewer than 14 is
strictly prohibited from engaging in employment, and children under 18 are not permitted to engage
in any hazardous work. Unfortunately, many children are involved in child labor primarily to support
their family. Moreover, according to a study commissioned by Save the Children, 25% of family
expenditure in these families is covered by the child labor’s income. However, these children, who
often live at their workplace or on the street, were unable to open bank accounts in which to secure
their savings because under Bangladeshi law, children can’t open a bank account without guardian’s
approval. Consequently, children are more likely to spend their income on non-essential items to
reduce the chance of their money being stolen or lost, or deposit in a way that increases the risk of
exploitation, such as with their employer. Bangladesh Bank circulated a bank order on 9 March 2014,
which enabled for the first-time scheduled banks to provide working and street children with access
to a bank account with support from non-government organizations. This move is significant as it
drops an earlier requirement for the co-signature of a parent or guardian impossibility if the child is
an orphan or has been forced to leave home. The circular empowers street and working children to
access banking services with a small deposit of only BDT 10Tk, in any branch of the scheduled
participating bank, anywhere in the country. On 9 March 2014, Bangladesh Bank, led by Governor
Atiur Rahman, introduced an exciting financial product enabling working street children to open basic
savings accounts using guarantee of a registered NGO in their community. Children under 18 require
an NGO guardian signature but they remain the sole owner of the money in the account. They can
run this account with a minimum deposit of 10TK. Children above 18 with accounts also have an
option to take a loan from the same bank if they want to do business or go to school. This initiative
will help street children to develop their savings habits and eventually help them step towards a
better future.

As of December 2022, 19 banks have opened 30,898 street urchin accounts through 53 NGOs. The
total amount of deposits in these accounts reaches Taka 4.55 million at the end of the reporting
quarter. In the reporting quarter, the number of accounts for street urchin has increased by 10.93%
over the previous quarter. Agrani Bank Limited has ranked the top among the banks in terms of
opening Street Urchin and Working Children accounts. It has opened 26,186 accounts up to
December 2022. Social Islami Bank Limited, on the other hand, has become the top bank in collecting
deposits in these accounts with a total deposit of Taka 1.96 million at the end of this quarter.

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4.5. NRB Project:
Foreign remittance is an important part of Bangladesh’s economy. It is one of the pivotal factors of
the successes of Bangladesh is the direct or indirect contribution of NRBs (Non-Resident Bangladeshi).
Because of their relentless hard-work, Bangladesh has become one of the major remittance recipient
countries in the world. Bangladesh received its highest ever annual remittance of about US$14.5bn
in the just out fiscal year as expatriate Bangladeshis sent home hard-earned money. The central bank
hopes that the remittance inflow will continue to go up in the coming days. To acknowledge their
contribution, Bangladesh Ban recently takes initiatives to collect information of NRBs and maintain
them in NRB database. This database will help to communicate with them and make a communication
channel for themselves. For Bangladesh Bank, this database helps to promote and uphold investment
information arranged for NRBs by government, proper remittance channel and method, important
financial or economic moves of government in which NRBs can participate. Again, NRBs can benefit
in some way. They can submit complaints, queries or feedback and also use this database to link
between themselves and search other NBRs according to country, profession etc.

NRBs sometimes find it difficult to send money via banks. So, they use “Hundi” channels. For this
reason, a big remittance amount has been lost each year. Bangladesh Bank takes initiatives to
encourage NRBs to send their earning via banks. NRBs have numbers of opportunities to invest their
money in different bonds to earn attractive profit like premium bond, investment bond etc.
Bangladeshi nationals living abroad can send Foreign Exchange very easily and directly to bank
accounts maintained in Bangladesh. For this, drawing arrangements is created with Foreign Banks
and Exchange houses. Persons willing to remit their earnings through official channels can buy either
Taka draft or US dollar draft from these foreign banks and exchange houses having drawing
arrangements with different banks in Bangladesh.

4.6. Refinance Schemes:

Refinance schemes function as a helpful tool in widening the reach of financial inclusivity of nations.
Refinance schemes seem lucrative to consumers because these refinance schemes offer more flexible
and favorable borrowing terms, often in response to shifting economic conditions. Refinancing also
allows individuals to enjoy lowered flexible interest rates over the life of the loan which gradually
reduces their financial burden whilst having to pay off loans taken under refinance schemes. With
this view in mind, the financial inclusion department of Bangladesh Bank has currently rolled out two
refinance schemes targeted towards maximizing financial inclusion in Bangladesh.

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4.7. BDT 3000 Crore Refinance Scheme to Combat Covid-19:
The ongoing Covid-19 pandemic has caused an economic slowdown worldwide.The recent Covid-19
has caused an economic slowdown worldwide. Innumerable people have fallen victim to this
unfortunate situation and a large number of these people are suffering from financial instability as
the pandemic snatched away a lot of people’s jobs. Instead of living on a fixed income generated
through regular jobs, certain portion of Bangladesh’s population such as street hawkers, day laborers
etc. are engaged in day-to-day work where it is uncertain how much they will be earning daily. So, it
can be understood that a sizable portion of Bangladesh’s population is facing many hurdles financially
and in these tough times it is the responsibility of the Bangladeshi government to provide financial
aid to support these underprivileged citizens to ensure financial solvency for them. As a reactive
measure to best tackle the ongoing pandemic, the government of Bangladesh directed its central
bank, Bangladesh Bank to put together a refinance scheme to help the people who have been worst
affected as an aftermath coronavirus.

In this situation, the Financial Inclusion Department of Bangladesh Bank undertook a timely measure
and formulated a refinance scheme worth BDT 3000 crore to facilitate financial access to the poor
and underprivileged population of the country by helping them regain their financial stability which
was disrupted due to pandemic. This refinance scheme was put in motion to provide ample aid to
the deprived and disadvantaged people of Bangladesh as a road to recovery by providing stimulus
packages which will help improve their financial condition. This scheme was first introduced on
20thApril, 2020 and further modified on 28th October, 2021 having incorporated the prefinancing
option for Islamic Banks. The tenure of this scheme is expected to expire on 23rdJune, 2023. Till now,
forty-three (43) scheduled banks have already agreed upon a contract with Bangladesh Bank to
disburse loans directly to customers or through Micro Finance Institutions (MFIs) who received
eligibility certificate from microcredit regulatory authority (MRA). Under this scheme, Bangladesh
Bank charges only 0.5 percent interest rate per annum to the banks and the banks lend to the MFIs
at 3.0 percent interest rate per annum. If the consumers borrow loans from MFIs or from banks
directly, the end-users, who are affected by Covid-19, are eligible to get the fund at a maximum rate
of 9.0 percent per annum and 7.0 percent interest per annum.

This refinance scheme of BDT 3000 crore for Covid-19 affected marginal people allows commercial
banks to disburse loans to low-income earners, farmers, street hawkers, small scale entrepreneurs,
women, ultra poor etc. at an incredibly low rate of 9.0 percent. This scheme allows the underserved
citizens of Bangladesh to take loans up to BDT 75,000 individually and group of individuals to take a
maximum amount of loan worth BDT 3 lacs. Small scale entrepreneurs can take loan up to BDT 15
lacs individually and a group of small-scale entrepreneurs can take maximum amount of loan worth
BDT 60 lacs. In the best interest of the customers, the interest charged to this set of people is
calculated at reducing balance method. Bangladesh Bank allows individuals and groups of people to
repay the loan after 2 years and 3 years respectively. Also, Bangladesh Bank has kept the provision

11
for borrowers to repay the loan after the expiration of the aforementioned time period by providing
the borrowers a grace period of maximum 3 years to repay the loan as these loans are specifically
targeted towards including the financially excluded and underserved population of the country within
the formal financial sector and helping them to become independent.

Commercial Banks can either disburse these loans to the borrowers directly or perform this function
through MFIs (Micro Finance Institutions). Bangladesh Bank has strict policies in place to ensure that
the MFI’s and commercial banks are properly distributing the loans to the targeted people and in
case of any discrepancies the central bank also has distinct rules for punishing the involved parties
accordingly.

This BDT 3000 crore refinance scheme is doing wonders for Bangladesh’s economy by expanding
financial aid to the underprivileged community of our country by injecting capital in the lives of those
set of people who have been terribly affected due to Covid-19. This refinance scheme is a timely
measure, and it is one of the reasons why Bangladesh’s economy is on the road to recovery from the
negative impacts of Covid-19.

4.8. BDT 500 Crore Refinance Scheme:

Other than BDT 3000 crore refinance scheme, the Financial Inclusion Department of Bangladesh Bank
has another refinance scheme active worth BDT 500 crore called 10/50/100 TK No Frills Account
(NFA) for low grade earners involved in income generating activities such as plumbers, electricians,
marginal farmers etc. Initially it was a BDT 200 crore worth refinance scheme where the fund amount
was upgraded to BDT 500 crore in 2021.

In 2014, a revolving refinance fund of BDT 2.0 billion was created from Bangladesh Bank’s own source
to facilitate the rural economic activities by expanding the income generating activities of the low
income marginal/small traders affected by natural disasters as well as small/marginal farmers with
accounts of BDT 10 to provide access to credit to the financial services strapped people under
institutional financial services. The scheme has been used to refinance loans provided by banks under
contract can lend up to BDT 50,000 to the account holders of BDT 10 for one year period without any
collateral. In contrast to the disbursement of these loans, Bangladesh Bank provides refinance
facilities to banks at bank rate. The maximum interest rate of this loan is 9.0 percent, which is
calculated in the reducing balance method. Besides, banks also get a rebate incentive at a rate of 3.5
percent against successful reclaiming of disbursed loans under this fund.

The new 500 crore refinance scheme aims to incorporate root level borrowers into the clientele base
of commercial banks and this is why Bangladesh Bank allows commercial banks involved in this
scheme to enjoy an interest spread of 6 percent which is double that of the general spread.
Bangladesh Bank chose to exclude Micro Finance Institutions (MFIs) from this scheme as they charge

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an extremely high interest rate, at least 24 percent interest to the root level borrowers which defeats
the purpose of inclusive financing. This scheme also charges the interest rate at reducing balance
method and also has a provision of grace period for 6 months to repay the loan because Bangladesh
Bank wants the borrowers under the refinance scheme to reach a certain level of financial solvency
where they can be involved in income generating activities and use that income to repay the loan
taken under the refinance scheme. The duration of the repayment scheme has also been modified
and now it is 3 years instead of the previous 1 year. Also, a grace period of 6 months has been added
to the BDT 500 crore refinance scheme. Another major change in the BDT 500 crore scheme is that
rebates are no longer offered to the banks anymore as the refinancing rate under the new scheme is
1 percent which is already very low.

It has been seen that a lot of commercial banks involved in the refinance scheme are struggling to
grasp the concept of the BDT 500 crore refinance scheme and for whom this fund is targeted towards.
This mainly happened because most banks do not have the infrastructure to support the activities
needed to distribute the refinancing funds and also because certain banks lack the motivation to get
involved in such activities. The Financial Inclusion Department has taken note of these banks and held
a meeting to explain to them what needs to be done by the banks in order to properly utilize the
funds of this refinance scheme.

4.9. Financial Literacy:

An important corollary to the discussion on financial inclusion is the topic of financial literacy. It has
been posited that financial exclusion is often involuntary, and can take place because of financial
literacy, e.g., perceived barriers in the minds of the underserved. For people to be able to participate
in the FinTech community, the importance of financial literacy, financial awareness, knowledge of
banks and banking channels, as well as available financial products are necessary.

Bangladesh Bank has identified ‘Strengthen financial education and financial literacy initiatives’ as an
important core objective in the strategic plan for 2020-2024. Considering financial literacy as
foundational learning for the future citizen, Bangladesh Bank has been working to include a special
chapter on financial literacy in the national curriculum for secondary level education.

Moreover, as part of the commitment to build a nation with strong financial base, Bangladesh Bank
has undertaken a project financed by Alliance for Financial Inclusion (AFI) named as ‘Striving for a
Financially Literate Society’. This project will primarily be implemented by undertaking the following
three initiatives:

• Developing financial literacy guidelines specially designed for the employees of banks and
non-bank financial institutions to deploy financial literacy by them among the people under
their authority.

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• Producing financial literacy content and website aimed at different segments of people such
as CMSMEs, women, youth, farmers/agro based people, mobile financial service (MFS) users,
social safety net beneficiaries, senior citizens etc.
• Producing short animated financial literacy videos for better dissemination of financial literacy
among the masses.

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Chapter 5: Concluding Remarks
5.1. Findings
Financial inclusion becomes a key tool for economic development and financial stability. Bangladesh
improved a lot in recent years by providing financial services to financially excluded people through
mainstream financial institutions. As we see, with the increase of financial inclusion of total
population, Bangladesh is improving in term of reducing poverty rate at national poverty line.
Financial inclusion initiatives of Bangladesh Bank have a significant impact on improving economic
welfare of poor disadvantaged and unbanked people. Some key findings are given below:

1. Before taking initiatives by Bangladesh Bank, farmers, poor people, underprivileged people,
and mostly the rural people cannot even think about access in bank account. Now they are
having banking services and taking loans from banks. It makes a change of their standard of
living. Especially for sharecroppers, they need not go for loan at a higher to informal sector.
All this can be possible by using No-frill accounts.
2. Because of refinance schemes, banks are also getting interest in opening No-frill accounts and
giving loans to the poor people at a low interest rate of 7%.
3. Using school banking services, students start saving their money and getting a part of the
investment.
4. Banking services by agent banking are increasing. It has a good impact on the banking world.
Bank can easily reach to the remote areas’ customer through agents.
5. NRB projects and NRB award encourage people to send more remittance through banking
channel rather than “hundi”. It increases our national income and influence GDP growth.
6. People who have potential and innovative business ideas but have a shortage of capital can
take loansfrom banks easily.
7. Bank accounts for street children can play a significant role in making these children’s lives
better. Their future can be safe and secure with saving habits.

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5.2. Recommendations
The policies and measures which have been undertaken by Bangladesh Bank in the context of
Financial Inclusion are of course essential and in the right direction and have already started creating
positive impacts. Continuation and expansion of these initiatives would provide the economy with a
better inclusive financial system. In this journey of inclusive financial system by including financially
excluded people and by providing better financial services to already included people, the role of
Bangladesh Bank would be significant as the central bank of Bangladesh. More research work on
financial inclusion can provide new thoughts and scope of its expansion. To eradicate poverty and
reduce unemployment rate of Bangladesh, Financial Inclusion programs should be maintained
regularly. There are some recommendations which could be taken into consideration for increasing
impact of Financial Inclusion in Bangladesh are given below:

1. School banking service is still unknown to some people. It can be added as a part of study on
board book., so that students can automatically know about banking services that they can
access.
2. More awareness program can be arranged for agent banking in remote areas.
3. Effective training program should be arranged for SME projects. Learning by training will help
poor people to establish their own business and generate new ideas.
4. Less costly money transfer service should be provided to non-resident Bangladeshi so that
they get encouraged to send more remittance in legal way.
5. Initiatives regarding financial literacy and establishment of credit counseling centers are very
necessary.

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5.3. Conclusion

This report summarizes the financial inclusion activities conducted the Financial Inclusion
Department of Bangladesh Bank, the central bank of Bangladesh. Bangladesh Bank through multiple
projects such as agent banking, school banking, no-frill accounts etc. is trying to expand the scope of
financial inclusion in Bangladesh. This report tried to highlight the importance of financial technology
in further expanding the role of financial inclusion in Bangladesh. Bangladesh’s financial inclusivity
has increased rapidly in the past decade and a massive contribution to this goes to MFS. Although we
still have a lot to achieve, more than 40 percent of the population is still out of the formal financial
system. FinTech can scoring financial inclusion in Bangladesh by making financial services more
accessible, streamlining the process of credit granting, providing alternative methods for credit
scoring, and cutting the cost of providing financial services. This report suggested that the central
bank may incorporate fintech as a tool to make financial inclusion more accessible and expandable
in future. Supporting technologies like e-KYC and regulation technology (RegTech) could be
implemented to make financial inclusion projects wider throughout the nation. Also, accessible credit
products, Insurtech, smart contracts, open banking and NID enabled payment systems have the
potential to bring a massive shift in the economy and increase financial inclusion, as they have proven
to be in the other parts of the world. The journey to enriching FinTech in Bangladesh and increasing
financial inclusion is a long one but we are off to a great start. If the central bank chooses on bringing
more financial technology that aid in financial inclusion, building the right infrastructures to support
them and improving financial literacy and IT skill development, financial inclusion in Bangladesh can
be proliferated to a much greater extent.

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References
Websites:

• Bangladesh Bank (bb.org.bd) [Accessed Date: 25/04/2023]

• Financial Inclusion: Definition, Examples, and Why It's Important (investopedia.com) [Accessed
Date: 25/04/2023]

• Financial Inclusion Overview (worldbank.org) [Accessed Date: 28/04/2023]

• What is Financial inclusion, Financial inclusion Definition, Financial inclusion News (business-
standard.com) [Accessed Date: 29/04/2023]

• The Promise of Financial Inclusion for Developing Economies - Research leap [Accessed Date:
29/04/2023]

• No-frills bank accounts get popular - Bangladesh Post [Accessed Date: 30/04/2023]

• Two Days Training on Financial Literacy for Street & Working Children of Bangladesh –
Narayanpur Integrated Development Society (nidsofbengal.in) [Accessed Date: 05/05/2023]

• no_frill_accounts_ december_2022.pdf [Accessed Date: 08/05/2023]

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