Thursday, 17 July 2014

Banking the 87 Percent


According to market research conducted by Dutch-Bangla Bank Limited (DBBL) before it started its mobile banking initiative, just 13 percent of the 160 million people in
Bangladesh had bank accounts. The reason was a lack of branch offices in rural areas, where the majority of the population lives. Yet within the unbanked 87 percent,
which is more than 139 million people, 50 percent had mobile phones. Again, access was the key. Mobile operator agents
are widely distributed, the devices themselves are affordable and service coverage is constantly expanding. 
Similar numbers are common in developing nations all over the world for the same reasons, which is why the opportunity for banks to bring basic financial services to the unbanked via the mobile channel is so big.
In mid-2011 DBBL launched a solution for customers to manage money with their mobile phones, depositing and withdrawing funds as well as conducting other financial
transactions. In addition to making banking more convenient and accessible for customers, the mobile channel provides a low-cost methodology for DBBL.
Why Mobile Makes Sense 
Technology is a key business driver for DBBL, established in 1996 as a joint venture between local shareholders and Dutch company FMO. The bank focuses on financing high-growth manufacturing industries in Bangladesh. It has the largest ATM network and electronic processing system in the country, and it is the largest corporate donor. DBBL has won numerous international awards because of its unique approach as a socially conscious bank.
Combining its philanthropic mindset and willingness to put new technology to work, DBBL understood that deploying a mobile banking solution would be much less costly than expanding services through new branch locations or even ATMs. 
Opening branches in the country’s rural areas is difficult and expensive. Each new branch requires the approval of the Central Bank of Bangladesh, which allows only 5 to 10 new branches per bank, per year. 

New branches also require a staff of expert bankers, and generally, expert bankers do not want to work in rural areas. What’s more, rural branches do not take in enough deposits or provide enough loans to make them profitable.
ATMs seem like a better fit for rural areas—and there is no restriction on number—but they still require continuous maintenance, cash restocking from the nearest branch, rent,
electricity and security. Without a network of branches in rural areas, ATMs are not practical either.
For many years, these complications left the rural population cut off from the traditional banking system. That is changing now, however, as mobile phones are providing access and banking opportunities to people who have never had them.
Tapping into an Existing Network 
Mobile phones are not the only access point. DBBL saw an opportunity to leverage a network that already exists throughout rural areas: mobile operator agents. These agents are generally small shop  owners or retailers. As they are already distributed throughout the country, they help new customers open accounts and check account balances, as well as provide cash-in/cash-out services. Customers use their phones to authorize the transactions.
Account holders can arrange to have employers or the government deposit payments to their accounts, or mobile wallets, and transfer money to their relative’s wallets. The accounts remain secure by requiring personal identification number (PIN) access, and customers can change their PINs from their mobiles. The bank’s plans for the next phase of services include mobile airtime top-up, merchant payment, ATM withdrawal and micro financing—all using consumers’ mobile devices. 
Benefits Beyond Banking
Existing and new customers have adopted mobile technology quickly, and a large segment of people that lived too far away from banks to open accounts can now conduct all types of banking transactions. However, DBBL’s mobile solution promises to deliver more than just banking. For people who have never had access to financial services, the numbers show that—as deposits are greater than withdrawals—simply having a bank account helps develop savings habits. 
For illiterate people, who cannot sign their name to paper cheques, the mobile system provides a workaround whereby customers type their PIN into the phone. If the combination
of the PIN  and the mobile number is correct, DBBL releases the money to the agent so he or she can pay the customer.
The system also allows local and international money remittance, so Bangladeshi expatriates can send money home. The receiving family  member can withdraw funds at the nearest participating retailer or cash point.
An Open Network
DBBL’s service will be available on all mobile devices with subscription to any of the six mobile operators of Bangladesh. This openness is key to being able to reach the maximum number of customers, as the business model depends on serving the widest base of the economic pyramid.
DBBL now has a business channel that is much less costly to support than building branch offices and installing ATMs. This
tremendous innovation gives the bank a competitive advantage and ushers in a new era of banking in Bangladesh.
DBBL hopes that banks throughout the developing world will use its mobile banking initiative as a model. Mobile money can increase financial inclusion and bring positive change to economies throughout the world. 
The writer: Abul Kashem Md. Shirin worked for the Bangladesh Sugar and Food Industries Corporation for 10 years and served as head of IT at BASIC Bank, Bangladesh for eight years and head of IT at DBBL for ve years. Since 2008 he has been the deputy managing director at DBBL. 
Published in the Sybase Mobile Commerce Guide - 2012

Sunday, 29 June 2014

Mobile Banking in Microfinace Operations

A Seminar on “Mobile Banking in Microfinance Operations”

MRA organized a seminar on Mobile Banking in Microfinance Operations at CIRDAP auditorium, Dhaka on 10th December, 2013. Dr. M Aslam Alam, Secretary, Bank and Financial Institutions Division, Ministry of Finance was the chief guest in the seminar while Mr. Abul Kashem Md. Shirin, DMD, Dutch-Bangla Bank Ltd. and Mr. Dasgupta Asim Kumar, Executive Director, Bangladesh Bank were present as special guests. The Seminar started with the welcome address by Mr. Khandakar Muzharul Haque, Executive Vice Chairman, MRA. Representatives from NGO-MFIs, networking agencies, Bangladesh Bank, Commercial and Specialized Banks, and Officials of MRA were present at the Seminar. Following presentations were given in the seminar:

Please click at the following link to view the slides posted by the MRA (Microcredit Regulatory Authority):


Mobile Banking in Microfinance Operation



Wednesday, 25 June 2014

Mobile Banking in Bangladesh

Mobile Banking
 
1. Citizen’s right and the Government
 
• People of a remote village has the right to get a nearby school where they can send their children for education

• They have the right to have a road and bridge for their movement

• They have the right to have a nearby Hospital, Post Office etc.

• Similarly they have the right to have banking facility in their nearby village:

• So they do not need to keep the money in house
 
• where money is at risk to be theft
 
• unnecessary expense may happen

• Government of each country has the obligation to provide all the basic facilities to its citizens
 
2. Why the Mobile Banking?
 
• Mainly to bring the rural unbanked into banking channel (financial inclusion)

• There are 160 m people in Bangladesh whereas 13% of them have bank account and 55% uses Mobile phone

• There is a very few bank branch in the remote rural area of Bangladesh
 
• Setup of Bank Branch in Rural area is not profitable
 
• Amount of deposit and loans in the rural area does not generate sufficient income to meet the expenses of a rural branch
 
• Setup of ATM in rural area is not feasible
 
• ATM requires regular cash feeding from a nearby branch
 
• There is no branch in the rural area
 
• Only the Mobile Banking is the solution to financial inclusion
 
3. Specific benefits (other than financial inclusions) of Mobile Banking:
 
• To customers:

i)    Safe deposit of their money and also interest income on deposit
ii)   Transactions in the account on 7 X 24 basis
iii)  Truly on-line banking (anywhere, anytime)
iv)  Sending and receiving local remittance instantly
v)   Receiving foreign remittance from a walking distance
vi).  Hassle free payment for buying goods and services.
 
• To the bank:

i)    Coverage of whole country with minimum cost
ii)    Increased number of customers
iii)   New source of deposit
iv)   New source of income
 
• To the country:

i)    Delivery of banking services to the rural people
ii)   Increase in money circulation
iii)  New employment
iv)  New source of income for the agents
v)  New source of income for the Mobile Operators
vi) Quick and easy delivery of Government allowances like freedom fighters allowance, elderly allowance, salary of primary school teachers etc.
 
4. Mobile Financial Services that Banks can offer through Mobile Banking
 
i. Disbursement of inward foreign remittances
ii. Cash-in (deposit) / cash-out (withdrawal)
iii. Person to Business Payments - e.g. utility bill & merchant payments
iv. B2P  e.g. salary disbursement, dividend and refund warrant payments,
v. G2P  e.g. elderly & Freedom-fighter allowances
vi. P2B  e.g. tax, levy payments
vii. P2P Payments.
viii. Other payments like microfinance, OD facility, insurance premium, Deposit Pension Scheme, etc
 
5. Mobile Banking Business Models
 
Two Types of Mobile Financial Services:
 
A.​ Bank-led model
 
i) Bank is the custodian of each individual deposits
ii) Bank is the custodian of customer’s financial and personal information
iii) Bank is responsible for KYC of each of the account holder
 
B. ​Non Bank-led model
 
The non-bank-led model is where a bank does not come into the picture (except possibly as a safe-keeper of aggregated funds) and the non-bank (e.g. Telco) performs all the functions.
 
Only Bank-led mobile banking model is allowed to operate in Bangladesh
 
6. Bank-led mobile banking model is getting popular day by day
 
- ​Mobile Banking initiated by Banks is getting popularity due to confidence of the customers for banking with banks.
 
- ​Some of the non-bank-led mobile banking systems were used to “Send Money” and “Pay Bills” which are not core banking activities. These models are failed. DBBL starts with Banking activities such as opening account with proper KYC and making transactions (Cash-in and Cash-out) and developing deposit habits among the customers. ‘Send Money’ and ‘Pay Bills’ will be the secondary product for the banks.
 
7. Making a mobile banking project successful
 
i. ​Selection of right Technology Partner
 
​A strong, reliable, experienced and accommodative technology partner can only help you to go through an extensive trial and error method of designing process flow for a particular market segment as behavior of market segment vary from country to country.
 
ii. ​Handling Security issues to prevent frauds
 
-​ PIN with account access blocking facility after consecutive n-numbers of unsuccessful attempts
-​ Check digit to handle typography error
-​ Proper Know Your Customer (KYC)
-​ Enforcing maximum transaction limits for each type of products – daily and monthly limits
-​ USSD and sms/IVR for PIN transmission
 
iii. ​Keeping the operation simple
 
-​ Customers of the rural area do not use a transaction which is complex to be processed.
 
Example: For P2P fund transfer, initially there was a need of recipient’s registration in the senders mobile. Then he can only send money to a pre-registered customer. Registration required typing alphabets while the illiterate customers can hardly recognize the numeric digits. This was a barrier for the customers to use P2P. However after discontinuing the registration process, the P2P has become very popular method of sending money to others.
 
-​ A simple operation process is required for the mobile banking in which training and education on the system is only required for the agent, not for the customers. Such a system will require that most of the transactions for the initially rolled-out products will be initiated by the agents, not by the customers. Educating relatively small number of agents is manageable than of a huge number of customers.
 
iv.​ Pricing for the service – making both agents and customers happy
 
​Decision on pricing policy affects the success of the mobile banking. Poor rural people are very much price sensitive. However Banks need to pay the agents as they work on behalf of the banks, and Telcos as they are the communication partner. Pricing for the service to be charged to the customers may be fixed at per transaction-basis (fixed or percentage of volume) or may be fixed as a service charge realizable on periodic-basis from the account. Keeping both the agents and customers is a challenging decision.
 
v.​ Proper roll out plan – Products and Regions
 
- ​ Product roll-out may be started with registration, cash-in and cash-out products. After attaining a good number of customers, other products like foreign remittance and salary disbursement, send money, bills pay, air-time top-up, merchant payment, ATM withdrawal, fund transfer between bank account and mobile account, microfinance may be introduced gradually.
 
- ​Regional roll-out planning is very important. Better to start with the capital city and nearby rural areas within 50 Km radius where bank employees have quick access for conducting educational & promotion activities, and dispute management.
 
vi.​ Promotional activities
 
- ​Marketing promotion is a weapon in attracting mass customers.  Budget should be allocated for airing regular TVC, publishing advertisements in newspaper, conducting campaigns, providing Posters and Bill Board, and conducting one-2-one meetings.
 
vii. ​Mobile Banking project is an investment.
 
- ​The associated cost for setting up mobile banking such as price of software, hardware and network, and expenses on manpower, promotional & educational activities versus earnings from the customers and interest spread on deposit may not justify the mobile banking project for the first 3 years. However as the customers will gradually become aware of the service and feel secure and confident, the use will be significant to make the project economically viable in future.
 
8. DBBL perspective
 
i.​ Achievements as on 25 June, 2012
 
​No of Agents ​​​​= 9171

​No of accounts​​​​= 2,75,043

​Deposit (Taka)​​​​= 18.42 Crore

​Cash-in / day (Taka)​​​= 1.76 Crore / 5,466 Numbers

​Cash-out / day (Taka)​​​= 1.49 Crore / 3,469 Numbers

​P2P transfer / day (Taka)​​= 18.03 Lac / 1,432 Numbers

​Top Up / day (Taka)​​​= 0.27 Lac / 1,231 Numbers

​Foreign Remittance (Taka)​​= 1.31 Lac / 11 Numbers
​
 
ii.​ Awards
 
1. Digital Innovation Award-2011

2. Mobile Money Transfer (MMT-Dubai) Award – 2011

3. eASIA Driving Economy Award - 2011

4. The Asian Bankers Award (Bangkok) – 2012

5. The Computer World (USA) Laureate – 2012
 
 
9. National Perspective
 
2009 ​ Bangladesh Payment and Settlement System Regulations, 2009 was circulated by Bangladesh Bank allowing only Bank-led Mobile Financial Services in Bangladesh
 
2010-11​​ Bangladesh bank licensed 23 Banks to start mobile financial services
 
31 March, 2011​​ DBBL, for the first time, started mobile banking in Bangladesh
 
July, 2011​​ bKash started mobile banking
 
Sept, 2011​ Bangladesh Bank circulated ‘Guideline on mobile financial services for the Banks’
 
2011-2012​​  13 Banks started mobile banking in Bangladesh
 
 

Tuesday, 24 June 2014

Meet the Leader - Abul Kashem Md. Shirin

Abul Kashem Md. Shirin at SAPPHIRE NOW





Abul Kashem Md. Shirin is talking at the "Sapphire Now - 2012" held at Orlando, Florida, USA

Link to SAP

Abul Kashem Md. Shirin at Priyo Tech Talk

 

Abul Kashem Md. Shirin is talking on Mobile Banking


Mobile banking to plug gaps in financial inclusion - The Daily Star

Bangladesh can use mobile financial services not only to accelerate financial inclusion, but also to bring more than 85 percent unbanked population to the mainstream at a cost effective manner.

Despite the enormous demand for mobile phone-based financial services, a large-scale adoption is yet not seen.

Analysts and policymakers made the observation at a roundtable co-organised by The Daily Star, BRAC Bank and bKash at The Daily Star Centre yesterday.

Former adviser to caretaker government Abdul Muyeed Chowdhury moderated the programme.
Some of the discussants proposed to form a body comprising the officials of the central bank, the telecom regulator, microfinance regulator and other stakeholders, to promote the services.

“A body can be formed to identify the problems and expand the services further,” said Khondkar Ibrahim Khaled, chairman of Bangladesh Krishi Bank and former deputy governor of Bangladesh Bank.

He said microfinance institutions can be the alternatives to the banks in expanding the mobile financial services across the country.

Muhammad Abdul Mazid, former chairman of the National Board of Revenue, also echoed the views of Ibrahim Khaled on the coordination issue.

“There is a necessity of coordination among the regulators to avoid any conflicting situation,” said Mazid who presented a paper on mobile financial services in Bangladesh.

The coordination issue came to the limelight as mobile financial services in Bangladesh are a bank-led model run by mobile phone companies, which are regulated by the Bangladesh Telecommunication Regulatory Commission (BTRC).

Often these two regulators come up with separate orders having no coordination between them.
Iqbal Quadir, a director of bKash and a teacher at the Massachusetts Institute of Technology in the US, also raised the conflicting issues between the banking regulator and the telecom regulator.
AB Mirza Azizul Islam, another former adviser to caretaker government, also stressed the need for coordination in the regulatory framework of the Bangladesh Bank and the BTRC.

Abdul Muyeed Chowdhury also endorsed the idea of forming a separate committee to promote the services.

Bangladesh, with a population of 150 million and a per capita income of around $800, has seen a steady economic growth over the past 15 years. Poverty rates have halved from 60 percent in early 1990s to 31 percent in 2010.

This development has also been reflected in the growth of the country’s financial sector, supported by the recent transformation in banking technology.

Speakers said despite these significant improvements, access to basic financial services is still restricted to only 15 percent people.

They said, for the financially excluded people, opening and maintaining bank accounts can be costly, complex and time-consuming due to a lack of education and awareness.

The central bank has allowed 23 banks to operate mobile financial services. But only two banks — BRAC and Dutch-Bangla — have come up with the services and registered 20 lakh clients so far.

“Identity is a big problem,” said Nazrul Islam Khan, secretary to the ICT ministry, on the security concern in mobile banking services.

Khan said he is trying to convince the government to make an accurate database of the population, which can be used for mobile banking services.

Mahabub Hossain, executive director of BRAC, a non-government organisation, said mobile banking can benefit the poor who feel shy to go to a bank. But further investment is needed to reach out to the people, he added.

Khalid Shams, former chairman of Grameenphone, said there are some risks in the service, but Bangladesh should seize the opportunity.

Shams, a former bureaucrat, also asked the operators to come up with new products for the targeted people.

Abul Kashem Md Shirin, deputy managing director of Dutch-Bangla Bank, said cost is not a big issue in mobile banking as there will be no cost if there is no use. On security concern, he said it is like using credit/debit cards and there is nothing to be anxious.

Michael Kuehner, chief executive officer of mobile operator Robi, said costing and convenience of services are the two main components in mobile banking.

Hassan Zaman, chief economist of the central bank, said they have planned to launch a financial literacy campaign to make people aware. On why other banks are not coming with the mobile banking services, he said may be it is for the investment and profit margin issues.

Zaman also said the BB is trying to disburse money to the targeted people through mobile phones under different government programmes.

Brig Gen (retd) Shahedul Anam Khan, defence and strategic affairs editor of The Daily Star, delivered a welcome address, while Shah Husain Imam and Salehuddin Ahmed, associate editor and managing editor of the daily, and Syed Mahbubur Rahman, managing director of BRAC Bank, also spoke.

Source: The Daily Star