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Digital Financial Services use in Bangladesh


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In developing countries like Bangladesh, Digital Financial Services (DFS) usually refers to transactions made over the mobile phone, using variants of the system pioneered in Kenya by m-Pesa. There is much optimism that DFS can revolutionise financial inclusion, though some people are far more cautious, pointing out that just having a mobile money account doesn't mean someone is 'financially included'. In this context, we looked at what the Hrishipara Daily Diaries show us about DFS use in central Bangladesh.

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Digital Financial Services use in Bangladesh

  1. 1. what do the Hrishipara Daily Diaries tell us about the use of Digital Financial Services in central Bangladesh? Stuart Rutherford July 2017
  2. 2. the data daily records of all money transactions, obtained from 50 ‘diarists’ over many months total: almost 30,000 days containing 275,000 transaction records comprising 1.6 million data points collected between May 2015 and June 2017
  3. 3. who are these ‘diarists’? their daily per-person incomes: 14 extreme poor: less than 60 taka a day per person (USPPP$1.50) 15 very poor: 61-100 taka (PPP$1.50-2.40) 17 medium poor: 101-400 taka (PPP$2.40-10) the remaining four have slightly higher incomes day labourers, casual workers, boatmen, fishermen, rickshaw drivers, farmers, newspaper vendor, dressmakers, shopkeepers, barbers, maid-servants, garbage recycler, factory workers, hospital orderlies, brick-breakers, faith-healer, teacher, Imam, farmers, housewives, washerman, mason, plumber, and more……. 31 are men 19 are women household sizes range from 1 to 9
  4. 4. inflows, outflows, and the share that went through Digital Financial Services (DFS) we collected 118,745 records of ‘inflows’ (money coming into the hands of the diarists), with a combined total value of 38,374,704 taka ($PPP 960,000) we collected 155,466 records of ‘outflows’ (money leaving the hands of the diarists), with a combined total value of 37,951,951 taka ($PPP 950,000) of the inflows, 243 (0.2%) came through DFS, accounting for 442,719 taka (1.15%) of the outflows, 118 (0.08%) went through DFS, accounting for 305,571 taka (0.81%)
  5. 5. what was DFS used for? Use Number of records % Value of transactions % receive overseas remittances 23 9.4 taka 171,500 38.7 act as a go-between 9 3.7 94,600 21.4 receive domestic transfers 30 12.3 51,935 11.7 trade in airtime 181 74.5 14,244 3.2 the main uses for inflows via DFS were: the main uses for outflows via DFS were: Use Number of records % Value of transactions % sending money home to the village 62 52.6 192,490 63.0 act as a go-between 3 2.5 33,400 10.9 pay educational fees 2 1.7 10,150 3.3
  6. 6. who used Digital Financial Services? 26 of our 50 diarists have used DFS in some way: 9 used it only once or twice; 8 used it more than 10 times the 8 diarists who used DFS more than 10 times: User, poverty level, and use # records value inflows value outflows shopkeeper (very poor) to trade in airtime, receive remittances 179 108,528 74,500 day labourer (medium poor) to send money to home village 25 - 70,010 housewife (medium poor) to receive remittances from husband abroad 13 65,400 - widowed farmer (medium poor) to receive remittances from son abroad 11 56,000 200 day labourer (extreme poor) to send money to home village 18 1,000 40,600 tea-stall holder (extreme poor) to receive gifts and act as go-between 11 26,695 150 trainee carpenter (very poor) to send money to home village 13 1,000 26,870 mason (extreme poor) to receive pay, pay worker, buy materials, buy airtime 30 10,796 996 the single most frequent user was a small shopkeeper (very poor, 86 taka per person per day) who used it 169 times to sell airtime to his customers
  7. 7. our diarists and their phones we surveyed 40 ‘core’ diarists in early 2016 and again in mid 2017: there has been a steady rise in phone ownership and quality February 2016 July 2017 phone ownership and access: 32 out of 40 diarists owned their own personal phones 34 own their own phones of those without their own phone, all but 2 had access to one in the household all but 1 have access (that one diarist is the poorest in our sample) 5 diarists owned smartphones 8 own smartphones we recruited 20 new diarists in July 2017: of them, 18 have their own phones, 1 has access to a phone in the household, and 1 has no access to a phone at all of the 18 with phones, 7 have smartphones
  8. 8. our diarists and DFS we surveyed 40 ‘core’ diarists in early 2016 and again in mid 2017: there has been almost no change in the use of and attitudes towards dfs 40 core diarists: early 2016 and mid 2017 DFS accounts 12 of the 40 own a dfs account DFS use 21 of the 40 (including the 12 account holders) have used dfs What is dfs? almost all of the 40 have heard of dfs, but only about half believe they understand it Trust no-one expressed distrust in the dfs providers, but about half expressed anxieties about using it we recruited 20 new diarists in July 2017: of them, 17 own dfs accounts: in many cases recently opened to receive school scholarships, but also to receive and to send domestic remittances, and in one case to receive a monthly salary (we also have one diarist who is a dfs agent)
  9. 9. DFS and financial inclusion: putting it into perspective while our 50 diarists were pushing and pulling a total of 748,290 taka through DFS, they were also: pushing and pulling 12,976,929 taka through 25 different MFIs and co-operatives (17 times as much) and pushing and pulling 6,493,026 taka through informal financial arrangements - samities (clubs) and saving and borrowing with neighbours and relatives (9 times as much) and some used banks and insurance companies as well
  10. 10. strong conclusions:  Digital Financial Services play a very small role in the money management of our diarists  It is most useful to some very poor migrant workers sending money back to home villages, and to some moderately poor households who receive remittances  Our diarists use intermediation services (saving and borrowing) intensively, but DFS has no role in this  Our diarists have phones, are aware of DFS, and have access to it  We have a long way to go before DFS plays any serious role in financial inclusion
  11. 11. tentative conclusions:  Trends such as lower phone prices, greater service availability, and growing public awareness, will continue to enlarge the role of Digital Financial Services  But until DFS can offer intermediation services that compete with those offered by MFIS, Co-operatives and informal practices, it may not play a large role in financial inclusion questions and comments to Stuart Rutherford at