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How can local bank branches in Bangladesh drive Bangla-QR’s adoption?

Posted on by Saumya Dixit

Rahim runs a busy tea stall in Singair Upazila, Bangladesh. Every day, he serves steaming cups of cha to a steady stream of customers. Business is good, but cash payments are a headache. Customers get frustrated when he lacks change. Some walk away when he offers toffees instead of small change. By the end of the day, Rahim struggles to track his sales, and he wonders—is there a better way?

Rahim is not alone. In Bangladesh, 80% of transactions occur in cash, which creates inefficiencies and stalls business growth. The Bangladesh Bank introduced Bangla QR to reduce the burden of cash payments. Bangla QR is a universal QR-based payment system designed to simplify transactions and boost financial inclusion. Yet, cash remains king. What is stopping the shift?

Our research in Bangladesh reveals a critical gap: Local bank branch officials lack the necessary technology, skills, and insights to support digital payment processes. When merchants face challenges, they turn to these branches for help. However, branch officials often cannot assist them. As a result, merchants must seek support from the head office, frequently located far away, which leads to frustration and delays.

This lack of on-ground support erodes merchants’ trust in the banking system and discourages small merchants from adopting digital payments. At the same time, bank staff—who feel unprepared to address these issues—are less likely to promote solutions, such as Bangla QR. Ultimately, this weakens efforts to expand digital payment adoption.

Understanding Bangla QR-based digital payments

QR codes provide a contactless and efficient way for people to pay. They help bridge the gap between traditional banking and digital financial services. The integration with the National Payment Switch makes transactions seamless and allows users to pay easily across multiple platforms.

In Bangladesh, Bangla QR is a key example of this technology in action. It improves transaction efficiency and ensures security for users. Encrypted transactions protect sensitive data and build trust among merchants and consumers. Bangla QR is also cost-effective. It offers lower merchant discount rates (MDR) of 0.5% through bank apps and 0.8% through mobile financial services (MFS) wallets, which makes it more affordable than other DFS payment systems. This makes it a practical choice for small merchants who seek to accept digital payments.

When it comes to QR, local bank branches are in a bind

Our discussions with banks revealed that no local bank staff had the necessary technical knowledge about QR-based digital payments or the merchant onboarding process. Furthermore, they lacked access to the digital payment platform and its data, which limited their ability to assist merchants effectively. As trusted points of contact for local customers and merchants alike, these officials highlighted that the promotion of QR-based digital payments would be futile if customer grievances were not resolved effectively first.

Without proper grievance management, customers may lose faith in the system, which would lead to a decline in digital payments’ adoption. Bank officers believe that access to customer and merchant-related data related to QR-based transactions will revolutionize how effectively they can support customers and merchants. However, the officials highlight another challenge—budgetary and staffing limitations—due to which they struggle to onboard QR merchants and promote digital payments.

Adoption challenges trickle down from branches to merchants

As per MSC’s research in Singair, 64% of retail traders do not understand the value proposition and use cases of QR-based digital payments. This compels them to seek answers at bank branches, which delays adoption. Delays in fund settlements and variations in MDR across providers deter their uptake of QR payments. Bank branches also lack the infrastructure to support these transactions and provide customer support. Bank officials lack knowledge about QR-based payment systems and cannot resolve customer grievances, which erodes customer trust. Concerns over security and fraud are also significant barriers to broader adoption.

How can banks strengthen branch capacity to support local merchants with digital payments?

Banks can cover significant ground with these five easy solutions.

  1. Comprehensive training for local bank staff on digital payments and customer support is essential. Banks can develop standardized training modules for the branches to ensure consistent merchant onboarding. This module should also be available to new or transferred bank officials to ensure smooth integration.
  2. Streamlining merchant onboarding through digital means, such as personal retail accounts, can reduce the administrative burden and speed up merchant acquisition.
  3. A standard operating procedure designed by a regulator or the central management of respective banks can also streamline the QR merchants’ onboarding process.
  4. Banks can develop a dashboard to provide their branches with access to transaction data. Bank officers could resolve customer grievances at the local level with this tool. It would enhance trust and confidence in digital payments. Additionally, banks can provide incentives to local bank officials based on the number of QR merchants they onboard.
  5. Finally, banks can increase funds to promote digital payments. Digitization can help the bottom-line of banks in the long term. For example, Kotak Mahindra Bank doubled its customer base in India from 8 million to 16 million after it launched its fully digital banking service, Kotak 811. The way ahead

Local banks must be empowered to accelerate the adoption of QR-based payments in Bangladesh. These branches are the first point of contact for merchants and customers. Their capacity must be strengthened through training, simplified and streamlined processes, and better access to transaction data. This can help rebuild trust, resolve grievances, and encourage the widespread use of Bangla QR.

The shift to a stronger digital payment system can benefit merchants and consumers alike to enable Bangladesh’s progress toward an inclusive digital economy. Only then would millions of microentrepreneurs, just like Rahim, serve up many more cups of refreshing ‘cha’ to his customers and, in the process, chart a better future for themselves and their families.

This op-ed was first published on The Daily Moon on 23rd February 2025

Digital convenience: New ways for India’s MFI borrowers to repay loans

Posted on by Saumya Dixit

Millions of women across India rely on loans from microfinance institutions (MFIs) to support their livelihoods, manage small businesses, and fund essential household needs. While most MFIs have digitized loan disbursements, the vast majority of repayments—nearly 87% as of FY 2021-22—still occur in cash. This reliance on cash makes borrowers’ lives difficult every day.

Take Reena, for example. A factory worker in Bengal, Reena must carve time out of her hectic schedule to withdraw her banked salary to pay her loan for house repairs. Grocery store owner Seema’s story has a similar ring. Hailing from a small village in Bihar, Seema has an irregular income and often relies on her husband for financial support. However, even if she wishes to access her loan repayment details to update him, Seema must first deal with a cumbersome offline process.

Meanwhile, in the southern state of Kerala, fish vendor Asha uses a basic phone. She constantly worries about carrying cash to repay her business loan, which remains a common challenge among borrowers who lack access to digital EMI payments.

Across India, more than 83 million MFI borrowers have a similar story to tell. Despite the clear advantages of digital transactions and the efforts of MFIs to introduce solutions, the shift away from cash repayments is yet to pick up pace.

Several factors contribute to the persistence of cash. Many digital solutions fail to align with the varying technical capabilities and trust levels of a diverse borrower base. Additionally, several borrowers use basic phones or are new to digital platforms, which causes a potential mismatch between the borrowers’ requirements and the solutions’ design. Moreover, the integration of digital payment systems with the MFIs’ existing loan management infrastructure has proved . It involves multiple stakeholders, incompatible software that hinders easy integration across players, and high costs. It calls for substantial technical investment and efforts to achieve a suitable technology fit for the MFI’s systems.

The combination of such issues explains why borrowers continue to rely on traditional cash collections. Existing digital payment options frequently do not suit them. If MFIs wish to scale up digital payments, they must offer customized solutions that consider borrowers’ preferences, levels of digital readiness, and awareness.

The Microfinance Industry Network (MFIN) recognized these challenges alongside the need for tailored approaches and partnered with MSC in 2022. This partnership sought to address the barriers to the adoption of digital repayment solutions and digitize repayments at scale. As part of this initiative, MSC conducted an in-depth study with nine partner MFIs of the MFIN. The study sought to identify tailored digital repayment solutions aligned with each institution’s capabilities and their borrowers’ specific needs.

The study revealed critical insights. While smartphone ownership and internet connectivity are on the rise, borrowers’ ability and willingness to repay digitally vary widely based on awareness, skills, and comfort with technology. Although most borrowers know about digital methods, many lack the literacy to use them independently. Only 24% of borrowers reported using their phones for payments. Even those who use digital payments elsewhere strongly prefer cash. Safety concerns also further discourage borrowers with limited digital exposure.

MSC designed a framework to overcome these barriers that accounts for MFI readiness, cost implications, borrower access, ease of use, and safety. Based on this framework, we recommended tailored solutions and emphasized multitier training programs for MFI staff and borrowers. We share key insights from the study and highlight the solutions implemented across partner MFIs.

Based on the assessment and framework, the project focused on implementing key digital payment solutions tailored to borrowers’ varying needs. The partner MFIs implemented three leading solutions:

  • UPI payments via MFI mobile applications:Research showed that borrowers trust mobile apps developed by their own MFI. The MFIN sought to meet this preference and engaged FinTech partners to create customized mobile applications for each participating MFI.
  • UPI 123PAY IVR-based solution:MFIN recognized that 34% of borrowers use feature phones. It introduced a dedicated IVR number for each institution and integrated it with the MFI system to allow borrowers to repay digitally without a smartphone.
  • UPI AutoPay:Targeted to borrowers who seek convenience, this option allows automatic, recurring EMI deductions without manual initiation or PIN entry each time.

Such tailored solutions directly addressed the challenges of borrowers like Reena, Seema, and Asha. Thanks to UPI AutoPay, Reena no longer needs to take time off work to withdraw cash. Her EMI is automatically deducted from her savings bank account, which has freed up valuable time and effort. Seema benefited from the MFI’s mobile application, which gave her easy access to up-to-date loan repayment information. This allowed her husband to conveniently view her loan account details on the app and digitally pay the EMI as per the schedule. Meanwhile, basic phone user Asha used UPI 123PAY as a safe and accessible way to pay her loan installments digitally, which eliminated the risks associated with carrying cash for repayments.

The initiatives introduced through this project showed notable results. Digital repayments increased to 30% of all repayments across the pilot branches. Beyond individual impact, the adoption of digital payments streamlined MFIs’ collection processes as well, which freed up staff’s time and resources for loan sourcing and other services.

Such operational improvements are especially valuable given the way MFIs structure their lending. Typically, MFIs rely on joint liability groups—small groups of female borrowers who come together to access loans and support each other’s repayment efforts. These groups promote financial discipline, mutual accountability, and social support to help women build credit histories and strengthen their economic resilience.

Center meetings, which are regular gatherings of these groups, have shifted their focus away from cash transactions to build awareness and encourage the use of additional financial services. Digital repayments also create a transparent transaction history to benefit borrowers. They help borrowers track finances, demonstrate repayment capacity, and potentially uncover greater financial opportunities.

This initiative’s success offers several key lessons for the microfinance sector:

  • Custom solutions drive adoption: Digital tools tailored to MFI operations and local context lead to higher adoption.
  • Integration with existing systems is essential: Solutions are most effective when they fit seamlessly into staff routines and technology infrastructure, build trust, and save time.
  • Collaboration is vital to encourage digital adoption: Since the initial demand from borrowers may be low, MFIs must proactively build awareness among both staff and borrowers. A collaborative approach nurtures sustainable adoption.

While India’s microfinance sector moves toward digitization, the experiences of borrowers, such as Reena, Seema, and Asha, shine a harsh spotlight on the persistent challenges they face as they try to break free from their dependency on cash for repayments. While this project shows that tailored approaches and focused training can boost adoption, gaps in digital readiness remain a major barrier.

If MFIs are to overcome this hurdle, they must urgently prioritize the development of user-friendly and seamlessly integrated digital repayment tools. Stakeholders must invest substantially to build the digital capacity of staff and clients. Meanwhile, MFIs, FinTech partners, and policymakers must take intense collaborative action to address fundamental infrastructure and literacy barriers and ensure digital systems are both accessible and secure.

Only evidence-based, collective effort will allow the sector to revolutionize repayment processes, deepen financial inclusion, and unlock greater opportunities for the countless Reenas, Seemas, and Ashas across India. We look forward to sharing deeper insights from our ongoing engagement with MFIN to digitize MFI repayments. Watch this space for more details on our lessons and impact as the work progresses.

Women’s financial literacy: What is key to meaningful financial inclusion?

Posted on by Deepesh Singh

Over the past decade, Indonesia has made significant progress in the effort for financial inclusion. The 2025 national survey on financial literacy and inclusion (SNLIK), released on 2 May 2025 by the Financial Services Authority (OJK) and the Central Statistics Agency (BPS), revealed that national financial inclusion had reached 80.51%. However, only 66.46% of the population manages to use financial services effectively. This 14.05% gap indicates a fundamental challenge in the financial inclusion efforts. Additionally, access to financial services has also not kept pace with the increased literacy or the ability to use them meaningfully.

In 2023, MSC conducted the study “Women in the digital economy: Improving job access for informal women workers in the digital economy” in collaboration with the Ministry of Women’s Empowerment and Child Protection (KPPPA). The study revealed that 90% of informal women workers who use digital platforms had financial accounts. However, most lacked the knowledge to manage their finances effectively, safely, and efficiently.

This financial gap deepens the vulnerability of informal women workers in the economic system. Most of these women work over 40 hours a week in paid employment and an additional 20 hours per week in unpaid care work, which includes taking care of the household and children.

These are double burdens that have contributed to the persistent gender gap in labor force participation over the past decade. BPS data from 2024 reveals that the labor force participation rate (LFPR) in Indonesia for men is 84.66%, while for women, it is only 56.42%. This 28.24% gap shows that financial literacy is linked to gender issues and domestic roles.

Why is financial inclusion beyond having a bank account?

Financial inclusion is often defined as simply having a financial account. In practice, the essence of financial inclusion lies in how financial services can be effectively used to help individuals manage their finances, reduce risks, and support life goals.

MSC’s study highlights that increasing access to financial services will not be impactful unless adequate public awareness is provided to manage these financial tools. Therefore, financial literacy must be positioned as a core component in every financial inclusion initiative and program.

In the informal sector, where many women work, access to social protection, information, and financial education is often limited. This is why improving women’s financial literacy is not merely a choice; it has become necessary.

Strategic recommendations: from study to real action

MSC’s comprehensive framework on the financial services space, or the gender centrality framework, addresses women’s financial literacy challenges. It was designed to ensure that financial services are accessible, relevant, user-friendly, and sustainable for women. Such an approach places local context, women’s dual roles, and household decision-making dynamics at the heart of financial solution design.

The Small Firm Diaries research conducted by MSC in Indonesia concludes three strategic recommendations to elevate women’s financial literacy as a national priority:

  1. Integrate financial literacy into every financial inclusion program, not as an add-on but as a foundational element.
  2. Apply a gender-sensitive and local context-based approach that considers women’s socio-economic realities and the specific barriers they face.
  3. Introduce sustained multi-stakeholder collaboration that includes public and private sectors, civil society organizations, and local communities.

At the 2025 Indonesia International Financial Inclusion Summit (IFIS), the government set a target of 91% financial inclusion by the end of 2025 and 98% by 2045. However, achieving this goal is insufficient if efforts are only focused on numbers. The accurate measure of success lies in whether every individual, including informal women workers, can understand, choose, and use financial services to meet their life needs.

Empowering women to use financial services is not just a metric—it is the foundation of a fair, inclusive, and sustainable financial system. As the digital economy expands, leaving women behind is not an option. It must be a shared responsibility.

This article was first published on the Kumparan platform on 5th June 2025.

The path to resilience: MSC’s ecosystem approach to adaptive social protection (ASP)

Posted on by Saumya Dixit

Vulnerable people worldwide rely on social protection systems as vital lifelines. These systems include social assistance, insurance, and labor market reforms. They were traditionally built to address and manage chronic yet predictable risks, such as poverty and unemployment. Today’s world, however, presents more complex and unpredictable challenges—from climate hazards (e.g., shocks such as floods, cyclones, etc., and stresses- such as changing precipitation, rising temperatures, etc.) to other disasters, e.g., pandemics, armed conflicts, or financial crises. Such events endanger people’s lives and livelihoods while also deepening structural inequalities and persistent poverty.

As climate hazards and disasters become more frequent and severe, traditional social protection systems struggle to keep up. Adaptive Social Protection (ASP) has emerged as a response to this and intends to help vulnerable households build resilience. ASP examines and identifies strategies for ex-ante preparedness, ex-durante response, and ex-post recovery.

The need for a holistic ASP ecosystem

ASP is a comprehensive strategy that combines social protection, disaster risk reduction, and climate change adaptation. However, despite ongoing progress, some gaps remain:

  1. Coverage and reach: Urban vulnerability remains underrepresented in the literature on ASP. The focus on rural communities leaves gaps in addressing the specific risks urban populations face, especially those residing in informal settlements.
  2. Identification and access: In countries, the effective functioning of ASP is hampered by the lack of social registries or targeting issues due to outdated data, exclusion errors, and lack of interoperability. For example, the national social registry in the Philippines was not updated for four years during COVID-19, which made it unreliable for the rapid expansion of social protection programs.
  3. Service delivery: Manual and fragmented payment systems create delays and leakages in the transfer of benefits. ̌Evidence from a mobile money cash transfer experiment in Niger shows how manual payments add extra costs for recipeints.
  4. Climate adaptation: Most countries lack climate-focused social protection and rely on emergency support. The ILO reports that more than 90% of people in the 20 most climate-vulnerable countries lack any form of social protection. For example, when severe floods hit Cambodia in 2022 and people were still coping with the effects of the COVID-19 pandemic, the government had to rapidly extend cash transfers to address both types of shocks—pandemics and floods. Further, coverage of anticipatory cash transfers worldwide is limited, as it covers only 13 million people, with an approximate allocation of USD 200 million.
  5. Financial stability: For underdeveloped countries, where government spending is already constrained and borrowing from capital markets is very costly, budgetary reallocations for climate-induced shocks and stresses come at a cost. As highlighted by the ILO, little guidance is available on innovative financing mechanisms or successful examples of blended funding streams that developing countries can use to create such systems.

Considering these gaps, MSC follows an ecosystem-based approach to ASP that aims to assist governments in building robust, responsive, and inclusive social protection systems. This blog explores the rationale, methodology, and practical applications of MSC’s ecosystem approach to ASP. It draws from our experience across Asia and Africa and offers a roadmap for governments seeking resilience and equity in the face of new challenges.

The approach stands out for its holistic, evidence-based methodology. It comprehensively evaluates demand and supply aspects to help address climate hazards and disasters. The objective is to enable individuals, households, and communities to anticipate, absorb, and recover from hazards and disasters.

Demand-side analysis

On the demand side, the approach evaluates the sustainability and overall well-being of individuals, households, and communities using the five capitals approach (human, social, natural, physical, and financial). Further, it systematically examines the following four key dimensions.

  1. Exposure: Identifies the degree to which populations, infrastructure, and ecosystems are located in hazard-prone areas and the factors that hinder their ability to prepare, respond, and recover. It measures who or what is at risk and the extent of their exposure to potential shocks.
  1. Vulnerability: Understands the factors that hinder an individual or community’s ability to prepare for, respond to, and recover from climate hazards and disasters.
  2. Perception: Examines citizens’ perceptions of their susceptibility and preparedness and their understanding of the government’s efforts and capacity to respond to shocks, providing insights into factors like trust and awareness.
  3. Experience: Reviews how vulnerable populations interact with social protection programs and government disaster response programs; it focuses on accessibility, adequacy, and timeliness of services received, and highlights successes and areas for improvement in service delivery

The demand-side analysis combines these four dimensions with the five capitals approach. It offers a complete picture of the capacity of individuals, households, and communities to prepare for, cope with, and adapt to hazards and disasters.

Supply-side analysis

A comprehensive supply-side analysis systematically maps and evaluates the policies and institutional structures, infrastructure, market mechanisms, and sociocultural factors. These factors underpin a country’s capacity to support vulnerable populations and ensure inclusive, adaptive, and resilient disaster management. These four pillars are essential to understand and strengthen a nation’s disaster resilience.

  1. Policy and institutional readiness: This element assesses the strength and responsiveness of a country’s policies and institutions in disaster preparedness and response. It examines whether vulnerable groups are identified and protected by law and included in disaster plans and support measures. It also reviews digital public infrastructure within government systems to ensure the smooth flow of resources, information, and government-to-person (G2P) transactions during emergencies.
  2. Infrastructure readiness: This element evaluates the resilience of a country’s infrastructure, including the digital infrastructure, to prepare for and respond to climate hazards and other disasters. Key areas include water, sanitation, and hygiene (WASH) facilities, transportation and logistics networks, financial services, and telecommunications systems, all critical for effective disaster management. Additionally, with the increasing threat of epidemics and pandemics, the resilience of healthcare infrastructure is crucial to operate effectively during crises.
  1. Market readiness: This element looks at how market and economic systems support disaster resilience. Access to finance, agricultural productivity, and climate adaptability across agriculture and food systems are essential to ensure food security. It evaluates the capacity of industries to withstand climate hazards and other disasters to ensure resilience measures are integrated across sectors to support sustainable recovery. For example, India’s market and infrastructure readiness allowed the delivery of free food to ~800 million people during the COVID-19 pandemic.
  2. Sociocultural readiness: the socio-cultural dynamics that influence a society’s resilience to disasters, focusing on inclusivity across race, caste, gender, and ability. It assesses how social diversity is acknowledged and supported in disaster planning, ensuring equitable protections and resources for all groups. This pillar also evaluates the trust between communities and the government and the availability of mental health and cultural support systems to aid in preparedness and recovery. Additionally, it highlights the value of indigenous knowledge, recognizing traditional practices and wisdom that can enhance disaster response and resilience strategies through locally-led adaptation.

The supply-side analysis enables governments to systematically identify gaps and bottlenecks. It pinpoints institutional, infrastructural, and market weaknesses that hinder effective disaster response. By addressing these bottlenecks, governments can strengthen the ecosystem and ensure that social protection systems are robust, inclusive, and responsive to emerging climate and disaster risks.

The design of suitable APS interventions

The demand- and supply-side analyses help us identify the gaps that affect vulnerable groups when they seek to cope with shocks and recover from them. Governments can address these gaps in one of these two ways:

  1. They can adapt existing programs for climate-induced shocks and stresses by expanding cash or in-kind support temporarily during shocks. The governments can use horizontal (coverage expansion) or vertical (benefit increase) mechanisms. Programs can use early warnings, such as rainfall, flood forecasts, or heatwave alerts, which would allow the government to take early actions, such as food or cash disbursement, before a disaster hits. Programs can also add climate vulnerability criteria to existing eligibility rules while creating beneficiary registries.
  2. They can design a new adaptive social protection program specifically designed to address climate-related risks, such as climate-linked cash transfers or adaptive public works that respond predictively to climate triggers. Programs can adjust benefits based on the severity and type of hazard, such as drought-indexed agricultural insurance, conditional cash transfers tied to livelihood diversification, or employment schemes focused on ecosystem restoration.

The path ahead

With this approach, we attempt to provide a flexible and forward-looking framework for governments and stakeholders to address the growing climate hazards and other disasters. This ensures that social protection programs are more inclusive and effective, and can evolve in response to emerging risks. Ultimately, the ASP approach empowers stakeholders to build adaptive, resilient, and equitable systems that protect the most vulnerable people, support their sustainable recovery, and nurture long-term resilience in an increasingly uncertain world.

Youth-focused agri-finance

Posted on by Deepesh Singh

Toolkits on locally-led adaptation for communities and inclusive finance service providers (IFSPs)

Posted on by Deepesh Singh

MSC LLA community Toolkit summary

MSC’s Community Toolkit for Locally-Led Adaptation offers stakeholders a structured, participatory process to assess climate risks and cocreate adaptation plans with local communities. It combines local knowledge with scientific data to map hazards, evaluate vulnerability, identify and prioritize adaptation options, and develop actionable, costed plans. We have designed the toolkit for local governments, civil society, and financial institutions. It builds grassroots ownership, strengthens institutions, and supports inclusive, climate-resilient development at the community level.

Click here to learn more.

MSC LLA IFSP Toolkit summary

MSC’s IFSP adaptation toolkit equips inclusive financial service providers so they can assess climate risks within their MSME portfolios and design tailored, climate-responsive financial products. It also empowers MSMEs to use participatory tools and supply chain mapping to identify exposure and vulnerability and develop adaptation strategies. The toolkit enhances portfolio risk management, supports product innovation, and enables financial service providers to help drive MSME adaptation and long-term sustainability. Through the toolkit, MSMEs can also cocreate solutions to build their resilience.

Click here to learn more.