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Mobile Financial Services in Bangladesh: The Market Begins to Grow

Date Posted: Monday, September 10, 2012

In February 2010 we blogged  about the steps identified for mobile financial services to take off in Bangladesh. Bangladesh has moved partly down this path. A newly released overview report on Mobile Financial Services  by Bangladesh’s Central Bank highlights the progress achieved two years on.

The central bank issued guidelines on “Mobile Financial Services for Banks” in September 2011 clearly stating a choice to make the market bank-led. However, the central bank has advocated for mobile operators and microfinance organizations to be active partners. It has provided 10 licenses to banks to offer the full range of mobile financial services.

This regulatory certainty has allowed the market to move and by late 2011 and into 2012 two early leaders have emerged with the largest customer bases and agent networks. The bKash service is provided by BRAC Bank in cooperation with its subsidiary bKash. And Dutch Bangla Mobile is a new service from Dutch Bangla Bank. Combined these two providers made the largest contribution to the nearly 500,000 new mobile accounts and more than 9,000 new agents.

Overview of Market as of March 2012

The mobile financial services market is at an early stage of development as providers are working to stabilize their technology, build agent networks and acquire new customers. This involves finding and training agents, marketing, helping customers transact and acquiring customers by using know‐your‐customer (KYC) and account opening processes. A survey conducted by Bangladesh’s central bank found that the new services are reaching multiple parts of Bangladesh and that most clients and agents express cautious optimism about mobile financial services being valuable to them.  Three quarters of clients said their main reason to use this service is to send or receive payments, while the remaining one‐quarter highlighted safekeeping as the main reason. Rural users specifically mentioned the benefits of receiving payments.

Initial hopes for international remittances to drive the mobile financial services have not materialized. Similarly, earlier efforts to allow cash-out via mobile phones has not generated much volumes. It seems that Bangladesh is like many other markets where international remittances are more likely to follow rather than lead.

These developments offer promising signs that mobile financial services could develop in time. However, big questions remain to be answered. There is a significant up front investment required to build momentum and none of the providers are yet covering their running costs. The rapid uptake by customers still needs to be proved. Bangladesh has a large population in a small geography. It is also home to one of the most deeply penetrated microfinance markets. Indeed, Bangladesh’s overall access to accounts for adults of nearly 40% is higher than South Asia’s average of 33% and the global low‐income country average of 27% (source).  Nevertheless, most banks, mobile operators and microfinance institutions agree that mobile financial services are likely to focus initially on domestic person-to-person transfers that are very scarce among formal providers.

Bangladesh Bank’s aim is to ensure that the market develops with several providers, and diverse technologies are tested and used, different kinds of agent networks deployed, and a range of products available so that the consumer is empowered with a full range of choices.

It is an exciting time in Bangladesh for mobile financial services and much will be learned in the coming months.

- Greg Chen -


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Name: CGAP Group
Title: Technology Program
Company: CGAP
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