In recent years, agent banking in Bangladesh has gained tremendous impetus to drive financial services and accelerate financial inclusion. The Aspire to Innovate (a2i) program, through MSC, commissioned a study to gauge the impact of the COVID-19 pandemic on banking agents. This report provides recommendations for the Ministry of Social Welfare and Banks to help build resilience to the pandemic.
You can access the online discussion here.
MSC conducted research to understand how the low- and middle-income (LMI) segments cope with the COVID-19 pandemic. We covered five countries—Bangladesh, India, Indonesia, Kenya, and Uganda. In Kenya, we spoke to 162 low- and moderate-income households to examine how this pandemic has affected their lives and their efforts to survive. This report from Kenya offers a glimpse into their challenges, concerns, and new opportunities in these trying times.
Vietnam has benefited greatly from digitized services in battling the pandemic. Wallets saw increased traction for P2P transfers, bill payments, and P2M payments for essential services, owing to the lockdown and aversion to the exchange of cash. Meanwhile, super apps like Grab, Zalo, MoMo, Now, and Tiki gained significance as they offer the convenience of online shopping, digital payments, and delivery services to the average Vietnamese.
The i3 Program, with support from the MetLife Foundation, creates opportunities for merchants to go digital and makes the digital ecosystem of Vietnam more inclusive and seamless.
This video explores the digital journey of Vietnam during COVID-19.
The #COVID-19 pandemic has severely affected the economy of #Indonesia and MSC has been tracking the impact of the pandemic on low- and middle-income (LMI) households, which have uncertain and irregular incomes. Through this report, we want to highlight MSC’s work on understanding the economic and health impact of COVID-19 on low-middle income (LMI) Indonesians.
“I always thought mobile money companies partner only with supermarkets and malls in Dhaka. But, COVID has changed everything. The government wants small shopkeepers to support them by using digital cash. I am happy I am able to contribute and keep my country safe by using digital payments.” says Khushi, a grocery shop owner in Dhaka.
Khushi and her husband have been running a grocery shop for the last 15 years on the ground floor of their house in Khilgaon, Dhaka. Khushi usually attends the business from morning to evening. Her husband works as a clerk in a private company during the day and looks after the business from the evening until around 11 p.m. Their shop caters to around 200-300 customers per day with daily sales of about BDT 15,000 (USD 200). Khushi mentions, “Since all my business transactions are cash-based, I have to keep sufficient cash to ensure smooth functioning of the shop.”
“These days, many superstores and branded shops accept digital payments through mobile financial service (MFS) wallets. I recently used my bKash wallet at a shoe store,” says Khushi. As a customer, she found the process straightforward and simple to follow. Although she is not aware of the backend process of a digital wallet transaction, Khushi finds the process quite fast, attractive, and easy.
Khushi is also interested in opening a merchant MFS account to accept digital payments from her customers. She mentions, “I already receive one or two payments daily in my personal MFS wallet from customers, but only if they are short of cash.” However, Khushi does not encourage digital payments, as cash withdrawal from her MFS wallet is chargeable.
Unfolding the impact of the pandemic
The onset of the COVID-19 pandemic in Bangladesh saw restricted mobility due to lockdowns in Q2 and Q3 2020. This also affected Khushi’s business. She was only allowed to keep the shop open until 2 p.m., less than half of her usual business hours. Khushi also cut down her expenditure to basic household necessities and even dipped into her savings to manage expenses and cover losses. These circumstances persisted until June, 2020. As the situation gradually returns to normal, Khushi feels she will be able to resume regular business operations and continue with her regular business.
Khushi notes, “I hear from other grocers that before COVID-19, MFS providers only partnered with retail chains, branded shops, and large restaurants. They were less interested to tie up with small merchants like us.” Khushi believes this has changed because micro-merchants like her cater to hundreds of customers every day. MFS providers now recognize the value of onboarding these merchants, especially in light of the COVID-19 pandemic. Now customers and merchants alike perceive digital payments as a quicker, easier, and safer way to transact. Khushi is hopeful that some providers will eventually see the value of onboarding women micro-merchants on the MFS platform. She concludes, “I studied until the higher secondary level and I am also comfortable using a mobile or any digital device to conduct transactions. But I suspect providers need to see the value of partnering with us (women-led businesses).”
Key takeaways
Small and emerging micro-merchants like Khushi are part of the thousands of micro-enterprises that operate in Bangladesh. The retail commerce landscape has been changing rapidly. Since 2012-2013, it contributes an average of 13% to the Gross Domestic Product (GDP) of Bangladesh. Micro-merchants are the backbone of the economy and essential to the government’s agenda. This involves achieving targets that include the Sustainable Development Goal (SDG) agenda and the Vision 2021 commitment to provide financial services at the doorsteps of the citizen.
The demand for digital payments as an option is on the rise among urban and semi-urban micro-merchants. A digital-ready merchant can build a credible profile and possibly access credit based on a digital trail of transactions. Ever-increasing smartphone ownership (40% of the population) and internet penetration (25% of the population) can fuel the growing interest in digital transaction options across all demographic strata. The concerted effort of providers will not only bring more merchants into the digital fold but also help retain the money or float of customers within their digital eco-system.
MicroSave Consulting (MSC), with support from MetLife Foundation, has been implementing the i3 Program Bangladesh and Vietnam since 2018. The i3 program, which stands for “Innovate, Implement, and Impact,” works to utilize digital technology and uncover deep insights into the needs, aspirations, and behaviors of low and moderate-income (LMI) people to build and deliver financial services for the mass market. MSC has been working with frontrunners in financial services, from banks to FinTechs and wallet providers to governments, to help LMI segments move toward better financial health by supporting micro-merchants like Khushi through demand- and supply-side interventions.
We look forward to continued dialogue, learning, and supporting financial inclusion in Bangladesh. Stay tuned for more updates on www.i3program.org.
“I thought that mobile money is only used to receive and send money. I can now pay electricity bill, make merchant payment, and even pay my vegetable vendor using mobile money. I see many in my neighborhood use mobile to transact. COVID has taught us many things.” says Kabita, a mother and a MFS user from Bangladesh.
Kabita is 26 years old and a mother of an 8-year-old girl. She graduated from Dhaka University and lives in Louhajong with her in-laws. Her husband Karim works in Saudi Arabia and often sends a significant portion of his earnings to his family as inward remittance, which Kabita withdraws through a local bank branch. Kabita has no trouble receiving the remittance.
Kabita uses a smartphone and is an active Facebook user. She came across bKash, a leading mobile financial service (MFS) provider of Bangladesh, six years ago while exploring easier ways to receive money from her family to pay the university fees. “I downloaded the bKash application on my smartphone earlier this year. It is easy to navigate and I no longer have to visit the local market for airtime recharge,” says Kabita.
Born and brought up in the vicinity, Kabita is well known among her neighbors. Women come to her to seek advice and learn how to operate a smartphone or a basic phone, in some cases. They often request her for an airtime recharge using the application. Kabita has become an influencer in her community.
Despite being an advanced smartphone user, she remains oblivious of other mobile financial service providers in Bangladesh. For over a year, Kabita has been receiving quarterly government stipend under the Primary Education Stipend Program (PESP) for her daughter’s education through SureCash, another MFS provider. However, when asked about other service offerings of the MFS provider, Kabita was unable to respond. She says, “I am comfortable using one provider and do not know much about others. I do not need to look into any other providers since they offer similar services.”
Unfolding the impact of the pandemic
With the onset of COVID-19 and restricted mobility due to subsequent lockdowns in Q2 2020 in Bangladesh, Kabita’s life has transformed completely. The government asked people to stay at home at all times, except to purchase essentials, such as food and medicine. Kabita never thought her recent rendezvous with a digital wallet app would become a necessity and a way of life. Digital payments helped her manage her household during the pandemic. Kabita could pay electricity bills, make merchant payments, pay her regular vegetable vendor digitally, and also receive government benefits. Online payments of utility bills, such as electricity bills saw a rise from 5% to 60% during the lockdown in Bangladesh.
Kabita says, “The pandemic changed people’s reliance on cash payments. Many of my neighbors resorted to direct money transfers (P2P) as they could not collect the cash physically. Having a bank account with adequate savings helped me during the pandemic.” With the government’s push toward digital payments and growing concern over cash as a potential vector of COVID-19, people in her community started to appreciate the safety and convenience of digital payments.
Kabita appreciates the various initiatives of the government, such as the digital payments of salaries of ready-made garment (RMG) factory workers, advance disbursement of government benefits, and distribution of COVID-19 relief to 5 million new households. She says many in her community received these benefits through their MFS and bank accounts. This support helped their community build resilience to fight the COVID-19 pandemic. Kabita feels that mobile money is a promising avenue for communities, with the potential to make transactions quicker, cheaper, and safer in the current unprecedented times.
With time, more people prefer to purchase products online and make cashless payments to avoid health risks. Kabita claims this trend further accelerated during the festive season of Eid-ul Azha from June to July, 2020. Merchant payments shot up dramatically by over 400% in July, 2020 over April, 2020.
Key takeaways
While agent and merchant networks continue to grow in Bangladesh, providers must offer a good value proposition to customers like Kabita to sustain this rapid progress in digital payments. The providers also need to align their product offerings, such as digital savings, credit, and insurance, among others, to the needs of the low- and moderate-income (LMI) segment. They may also consider a new category of mobile agents to encourage customers. These mobile agents can encourage the adoption of digital payments and help more customers, especially women, adopt and appreciate their service offerings.
MicroSave Consulting (MSC), with support from MetLife Foundation, has been implementing the i3 Program in Bangladesh and Vietnam since 2018. The i3 Program, which stands for “Innovate, Implement and Impact,” works to utilize digital technology and uncover deep insights into the needs, aspirations, and behaviors of low and moderate-income (LMI) people to build and deliver financial services for the mass market. MSC has been working with frontrunners in financial services, from banks to FinTechs and wallet providers to governments, to help LMI segments move toward better financial health by supporting customers like Kabita through demand- and supply-side interventions. We look forward to continued dialogue, learning, and supporting financial inclusion in Bangladesh. Stay tuned for more updates on www.i3program.org