1. Inclusive finance initiatives for
Inclusive growth
Md. Ashraful Alam
Deputy General Manager
Bangladesh Bank
Bangladesh 1

2. Bangladesh is considered a thought leader in financial inclusion, in light of the many initiatives and gains in
agricultural, MSMEs, women entrepreneurs, microfinance and more recently in mobile financial services.
2
Financial inclusion is a key element of
social inclusion necessary in fostering
inclusive growth participated by and
benefiting all population segments.
Dr. Atiur Rahman

3. An Acute Global Problem
Note: According to latest available data, the adult population now is about 5.08 billion
Financial Exclusion
Adults who use and do not use formal or semi formal financial services globally
(Billions of adults)
3

4. Global distribution of unbanked adults
Percentage of total adult population who do not use formal or semiformal financial services
4

5. Asia is home for 59% of the Unbanked Adults
An Acute Global Problem
876
612
0
100
200
300
400
500
600
700
800
900
1000
EastAsia SouthAsia
35% 24%
Millions
5

6. Key drivers of inclusion
Many countries do not fit the
overall pattern. For example,
India and Thailand appear to be
countries with relatively low per
capita income and a large rural
population,
but have greater use of financial
services than many relatively
richer and more urban countries.
Relationship between GDP per capita and
financial services
6

7. Inclusive growth
Inclusive growth defined:
Inclusive growth is a concept
that advances equitable
opportunities for economic
participants in the economic
growth process with benefits
equitably shared by the
participants.
Wide variation in definition
by ADB, World Bank and
others ; however the following
characteristics are critical:
7
Inclusive
Growth
Reduce
poverty and
inequality
Benefit the
most
marginalized
More than
income
Translate into
gains in
human
development
and increased
well-being
Participation,
not just
outcomes
Sustainable

8. Financial Inclusion/Inclusive finance
 Financial inclusion is a state wherein there
is effective access to a wide range of
financial services for all.
 Inclusive financial system is one that serves
all clients—not just the relatively well-off.
This means reaching out to underserved,
unserved, poor and low-income clients and
providing them with affordable and quality
financial services tailored to their needs.
 An inclusive financial system is an
arrangement to achieve financial inclusion.
An inclusive financial system involves
fostering: 8
Financial
Inclusion
Sound
institutions,
Financial and
institutional
sustainability
Multiple
providers of
financial
services,
Broad range
of financial
services,

9. Importance and relevance of Financial Inclusion
Growing body of literature suggests that greater financial inclusion
contributes to financial stability and economic development and is critical for
achieving inclusive growth.
An inclusive financial system is not only pro-growth but also pro-poor, which
along with other interventions, reduces income inequality and poverty which
is central to inclusive growth.
Inclusive growth with stability as a policy choice is not possible without
achieving full Financial Inclusion.
In essence financial inclusion is not an policy option in achieving inclusive
growth rather its a prerequisite.
As agents entrusted with the task of achieving financial inclusion, the role of
the mainstream financial sector participants in achieving inclusive growth
becomes central.
9

10. Inclusive Finance virtuous cycle
Appropriate financial
inclusion
Inclusive economic growth Enhanced access to formal
economy/more savings and
investment
10

11. Goals of Financial Inclusion initiatives
 Main goals of Inclusive Finance:
 Providing access at a reasonable cost to all unbanked households and
enterprises to the range of financial services for which they are
“bankable,”
 Establishing sound institutions,
 Financial and institutional sustainability;
 Multiple providers of financial services; and
 Achieving an `Inclusive growth’
11

12. Exclusion-factors and consequences
The financially excluded
sections largely comprise
• Marginal farmers
• Self employed and unorganized
sector enterprises
• Ethnic minorities and socially
excluded groups
• Women
• disadvantaged and vulnerable
groups
• low income households
• handicapped persons
• women-owned SMEs
• SMEs in rural areas
• Newly established SMEs
Factors Affecting Financial
Inclusion
• Legal identity
• Limited literacy
• Level of income.
• Religion
• Ethnicity
• Geographical barriers
• Terms and conditions
• Complicated procedures
• Psychological and cultural
barriers
• Lack of awareness
Consequence of Financial
Exclusion
• Losing opportunities to grow
• Country's growth will retard
• Business loss to banks
• All transactions cannot be made
in cash
• Exclusion from mainstream
society
• Loss of opportunities to thrift
and borrow
• Employment barriers
12

13. Benefits of Financial Inclusion
Opportunities to grow
Enhanced economic activities and inclusive growth
New business opportunities for banks
Enlarge the size of formal sector
Cashless transactions, reduced risk and low cost
More inclusive society and social cohesion
Increased opportunities to thrift and borrow
Employment creation
Other allied financial services
13

14. Financial Inclusion continuum
14
Products Features Channels

15. Measuring Financial Inclusion
Robust, objective and reliable data can provide meaningful insights on the state of financial inclusion that can be used to
identify gaps, establish priorities and craft evidence-based policies. There are four lenses through which financial inclusion
can be measured:
Access
•Supply and
availability of
financial products
and services
Usage
•Utilization of
different products
and services
Welfare
•Impact of a
products or
services on the
lives of the
consumers
Quality
•Consumer
experience;
relevance of a
product or
services
15

16. A Paradigm Shift
 “Access to Finance” is shifting to embrace the idea of providing banking
services (Payments, credit, savings, and insurance) to vast majority of
poor household and MSMEs rather than primarily delivering microcredit
for small scale business.
 Bangladesh Bank has invested huge efforts in mainstreaming inclusion
agenda in its policy regime through various initiatives like:
– No frill accounts
– Agricultural Credit
– MSE and women entrepreneurs financing
– Green financing
– CSR
– Mobile banking
– Agent banking
– Financial education and literacy initiatives
– School banking etc.
16

17.  Institutional framework
– Establishment of a cluster of development financing related
departments in BB
» Agricultural Credit and Financial Inclusion Department(ACFID)
» SME & Special Programs Department (SMESPD)
» Green Banking & CSR Department (GBCSRD)
» Financial Stability Department
» Financial Integrity and Customer Services Department
» Onsite supervision Department for MSME credit
» Mainstreaming Regulation and supervision department
– Engagement with public and private sector organization
– Advocacy and Promotion
– Stakeholders engagement
Inclusive Finance Approach: Institution building
17

18. Inclusive Finance Approach: Operational mainstreaming
 Operational: Bangladesh Bank has taken a number of operational initiatives to
organize the inclusive financial initiative to spur inclusive economic growth:
• Provisioning of low cost Funding
– Refinance window
» ACFID, SMESPD & GBCSRD
– Low cost funding to specific sectors
• Technology
– Bangladesh Automated Clearing House (BACH)
» Bangladesh Automated Cheque Processing System (BACPS) and
» Bangladesh Electronic Funds Transfer Network (BEFTN)
» e-Payment Gateway
– National Payment Switch Bangladesh (NPSB) to facilitate inter-bank electronic payments
– Core Banking software for the banking system
– Online CIB
– Real-time gross settlements system (RTGS)
• Financial Literacy & Education
• Data & Measurements
18

19.  Bangladesh bank has brought a paradigm shift in the policy environment.
The new policy environment is pro-poor, pro-people and driven towards
broadening financial access to the vast majority of unbanked, underserved
population. Inclusive financing policy initiatives are in various areas
Inclusive Finance Approach: Policy intervention
19
 No-frills accounts for marginal farmers, share
croppers, social safety net people
 Share croppers loan
 Target based lending
• Agriculture,
• SME and
• Green finance
 Women entrepreneurs development
 Digital Financial services
• Payments systems
• Bank led mobile financial services

20. –Linkage with MFIs
–Agent banking
– SME & Agricultural branch
–Rural vs Urban branch
–Corporate social responsibility
–Environmental Risk Management
–Green Financing
–Customers’ interest protection Centre (CIPC)
Inclusive Finance Approach: Policy intervention
20

21. Transmitting inclusive growth agenda through Monetary Policy
Bangladesh Bank administers the monetary policy mainly to achieve price
stability and to support projected GDP growth.
Inflation targeting and promoting inclusive growth, not merely growth, has
been the focus of BB’s monetary policy since Dr. Atiur Rahman has joined as
Governor. His first MPS states that-
“The efforts would be directed at gearing up economic activities by
encouraging adequate credit flows to all productive sectors, especially to
agriculture, SMEs, infrastructure, and other rural activities, for
recouping the losses due to floods and cyclone and improving the
domestic supply situation.”
- Monetary Policy Statement
July 2009
21

22. Outcomes
22
Credit Growth Rates
Source: Bangladesh Bank, 2014
Percentage
0%
5%
10%
15%
20%
25%
30%
35%
40%
2011 2012 2013 2014
MSME Agriculture Total Advances MSME+Agriculture

23. Outcomes
23
115
126
138 141
146
111
122
131
147
160
50
70
90
110
130
150
170
FY 10 FY 11 FY 12 FY 13 FY 14
Target Achievement
Agricultural Financing in Bangladesh
Source: Bangladesh Bank, 2014
BDTbillion

24. Outcomes
24
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
0
200
400
600
800
1000
1200
2010 2011 2012 2013 2014
Target Achievement Total Number of Beneficiaries
MSME Financing in Bangladesh
Source: Bangladesh Bank, 2014
BDTbillion
NumberofBeneficiaries

25. Outcomes
25
13,831
16,696 17,362
41,695 42,730
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
2010 2011 2012 2013 2014
Women MSME Finance in Bangladesh
Source: Bangladesh Bank, 2014
NumberofWomenEntrepreneursFinanced

26. Outcomes
26
0
100,000
200,000
300,000
400,000
500,000
600,000
0
5
10
15
20
25
30
Mar 12 Jun 12 Jun 13 Dec 13 Jun 14 Dec 14
No. of Accounts No. of Agent
Mobile Financial Service
Source: Bangladesh Bank, 2014
NumberofAccounts
(inmillions)
NumberofAgents

27. Outcomes
Disbursement : Green Financing
27
Source: Bangladesh Bank, 2014
BDTbillion

28. Outcomes
28
Source: Bangladesh Bank, 2014
Achievements in school banking
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
Dec. 2013 Mar. 2014 Jun. 2014 Sep. 2014
No. of Accounts Outstanding
NumberofBankAccounts
OutstandingDeposits(BDTmillion)

29. Status of Financial Inclusion in Bangladesh
29

30. Account at a formal
Financial Institutions (%,
age 15+)
Account at a formal
Financial Institutions,
Female (%, age 15+)
Loan from Financial
Institutions past year (%,
age 15+)
Saved at a Financial
Institutions past year (%,
age 15+
Account at a formal
Financial Institutions,
Young Adults (%, age
15+)
Account at a formal
Financial Institutions,
income bottom 40% (%,
age 15+)
World 50 47 9 22 37 41
South Asia 33 25 9 11 24.7 26
Bangladesh 40 35 23 17 25.6 35
0
10
20
30
40
50
60
Percentage
Bangladesh Findex
Source: Little Data book on Financial Inclusion, The World Bank- 2012
30
Status of Financial Inclusion in Bangladesh

31. 31
48.08
51.89
53.95
56.39
58.85
61.86
7.96
14.43
20.04
29.36
35.45
37.95
0
10
20
30
40
50
60
2009 2010 2011 2012 2013 2014
Bank Branch ATMs
Number of bank branches and ATMs per 1000 sq. km
Source: Bangladesh Bank, 2014
Status of Financial Inclusion in Bangladesh

32. Status of Financial Inclusion in Bangladesh
32
5.08
5.28 5.31 5.46
5.65 5.78
0.81
1.44
1.97
2.84
3.41
3.55
0
1
2
3
4
5
6
2009 2010 2011 2012 2013 2014
Bank Branch ATMs
Number of bank branches and ATMs per 100,000 population
Source: Bangladesh Bank, 2014

33. Status of Financial Inclusion in Bangladesh
33
267.29
329.58
368.33
385.33
412.84 423.38
60.24 62.60 63.94 62.94 62.91 62.92
0
50
100
150
200
250
300
350
400
450
2009 2010 2011 2012 2013 2014
Deposit AC Loan AC
Number of deposit and loan accounts per 1000 population
Source: Bangladesh Bank, 2014

34. Growth and stability outcomes of
financial inclusion programs

35. o Sustained 6% plus economic growth over the last decade with:
 sound macroeconomic fundamentals
 downward edging inflation
 moderate fiscal deficits
o Incremental domestic output stabilizing domestic prices
o Inclusive financing stabilizing the financial sector by bringing large and
diverse bases of small loans and deposits
o Inclusive growth strategy generating strong internal demand
Growth and stability outcomes

36. GDP and per capita GDP movement over time
37
400
421
496
544
619
685
763
842
862
958
1,115
0
200
400
600
800
1000
1200
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
USD
GDP per capita (current USD)
4
4.5
5
5.5
6
6.5
7
7.5
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Percentage
GDP growth in Bangladesh
Source: World Bank and Bangladesh Bank

37. Inclusive growth performance
38
0
10
20
30
40
50
60
0
10
20
30
40
50
60
70
1992 1996 2000 2005 2010
Number of poor at national poverty line (millions)
Poverty headcount ratio at national poverty lines (% of population)
GINI coefficient Poverty incidence
32.1032.12

38. -2
0
2
4
6
8
10
12
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Bangladesh India Pakistan Sri Lanka
Projection
Percent
Highest growth prospect in the region
Source: World Economic Outlook (Sept. 2014), IMF

39. 6.77
5.49
4.29
5.73
2.13
2.61
1.95
0.57
0
1
2
3
4
5
6
7
8
India Sri Lanka Pakistan Bangladesh
Average Rate of GDP Growth Growth Volatility
Percent
2nd highest growth and lowest volatility in the
region: 1995-2014
Source: World Economic Outlook (Sept. 2014), IMF

40. 0%
2%
4%
6%
8%
10%
12% Jun-01
Dec-01
Jun-02
Dec-02
Jun-03
Dec-03
Jun-04
Dec-04
Jun-05
Dec-05
Jun-06
Dec-06
Jun-07
Dec-07
Jun-08
Dec-08
Jun-09
Dec-09
Jun-10
Dec-10
Jun-11
Dec-11
Jun-12
Dec-12
Jun-13
Dec-13
Jun-14
Dec-14
Non-Food Food General
Inflation is falling since the end of 2011
Source: Bangladesh Bank

41. 0
2
4
6
8
10
12
14
16
18
20
22
24
1995199619971998199920002001200220032004200520062007200820092010201120122013201420152016201720182019
Percent
Bangladesh India Pakistan Sri Lanka
Projection
Projected inflation shows a downward trend
Source: World Economic Outlook (Sept. 2014), IMF

42. 9.45
8.57
7.31
6.45
4.52
3.84
2.87
2.44
0
1
2
3
4
5
6
7
8
9
10
Sri Lanka Pakistan India Bangladesh
Average Rate of inflation Inflation Volatility
InPercent
Lowest inflation and volatility in the region:1995-2014
Source: World Economic Outlook (Sept. 2014), IMF

43. 10
15
20
25
30
35
40
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
India Pakistan Sri Lanka Bangladesh
Investment as share of GDP is steadily rising
Source: World Economic Outlook (Sept. 2014), IMF

44. 0
10
20
30
40
50
60
1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
India Pakistan Bangladesh
Liberalization
Trade-GDP Ratio: Bangladesh is opening up gradually
Source: World Economic Outlook (Sept. 2014), IMF

45. 0
10
20
30
40
50
60
70
80
90
100
110
120
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Bangladesh India Pakistan Sri Lanka
Lowest Debt-GDP Ratio in the region
Source: World Economic Outlook (Sept. 2014), IMF

46. Financial Inclusion : Challenges
• Holistic approach
• Viability
• Scalability
• Adoption of technology
• Financial Stability
–US Subprime crisis
–Indian MFI credit crisis
• Use of intermediate agencies.
47

47. Way forward
• Regulatory framework has a profound impact on financial eligibility of poor
households and MSMEs
• But regulators struggle to keep abreast of new technologies and business
models
• Standard Setting Bodies (SSBs) have advocated a risk-based approach to
balance financial stability/integrity with financial inclusion.
• With an enabling policy environment together with technology-driven
innovations, alternative Financial Service Points(FSPs) and delivery channels
can become effective ways to access and use different financial products and
services
• Peer learning through various platforms (AFI, IFC GPFI etc.) plays a critical
role in helping countries to implement balanced regulatory frameworks
48

48. o Inclusive and environmentally responsible financing is of high urgency
for low income climate-change threatened economies like Bangladesh.
o Inclusive financing has served Bangladesh well to retain real and
financial sector stability amid the global financial crisis.
o Bangladesh’s approach of internalizing inclusive, green financing within
the framework of traditional stability focused monetary and financial
policies have started attracting external attention.
Concluding Remarks

49. “Those whom you push down will chain you down
Those whom you leave behind will pull you behind
The more you envelope them under darkness of ignorance
The more distant will your own welfare be!”
Literal translation from a poem of Rabindranath Tagore (1861-1914)
“Disgraced” in Gitanjali

50. ধন্যবাদ