Lending money has been a practice since ancient times. Thousands of years ago, people used to take loans or borrow money from the community elites, mainly for agricultural purposes. This process of borrowing gained more structure thanks to the evolution of banks.
In the early part of the 20th century, the banking sector flourished heavily with the frenzied growth of consumer needs, manufacturing, and trading. Banks and financial institutions embarked on programmes to provide credit and loans to stimulate economic and social activities. Thus, lending has benefited the progress of civilisation by providing people with opportunities to meet their needs and materialise their aspirations.
Today, lending money is a common financial practice among banks and financial institutions. With the passage of time and the progress of technology, there has been a revolution in the sector to empower people with as many facilities and conveniences as possible. Credit cards are wonderful examples in this regard. Then came electronic banking, better known as 'online' transactions. The Covid-19 pandemic made everyone realise the importance of online banking.
As technology keeps moving with innovations, the financial domain, like all other sectors, also adapts to new opportunities. One of the most spectacular new developments has been accessing financial services through cellphones, culminating in broadening financial inclusion and facilitating the vast unbanked population due to geographical and social barriers.
Today, mobile financial services are so extensive and have fast-track subscriptions that traditional banking services need to be revamped to, perhaps, rewrite their age-old modus operandi. Mobile financial services have become a dominant game-changer in society because of their convenience, ease, speed, and security.
The interesting part is that the MFS is always on a quest to provide as many services as possible to help create opportunities for comfort and progress. The MFS is not just a tool to send or receive money or pay bills. The services are always expanding to new frontiers.
One of the latest in this regard is the nano loan provided by bKash and the City Bank Limited. As the MFS has helped the unbanked to be empowered and facilitated to use financial services, this nano loan facility is yet another boost for the people who are deprived, or shy away from availing of traditional banking loans because of cumbersome paperwork and other requisites, mainly the issue of collateral.
Offering between Tk500 and Tk20,000 with the requirement of any collateral, the nano loan has been quite the relief for people looking for emergency access to funds. The easy pay-back option has also been a big help.
No wonder, since its formal launch last year, the bKash-City Bank nano loan scheme has been courting satisfaction from all quarters. According to bank sources, over Tk218 crore was disbursed through this scheme until June this year.
Both individual bKash customers and bKash agents down to the grassroots level are availing this facility, which has a three-month payback cycle with a reasonably low-interest rate. The City bank sources maintain that the payment behaviour of the beneficiaries is highly satisfactory. The overdue rate is only 2.5%, while it is about 4% in the case of the traditional loans provided by the scheduled banks in the country.
In fact, the high level of service provided by the MFS through their vast network, backed by technological strength, loyalty, and satisfaction of the beneficiaries, is playing a very important role in adopting this new but useful fintech mechanism. Of course, the support of the regulatory authority—Bangladesh Bank—has been vital to rolling out this service and, more importantly, for enabling financial inclusion for all, irrespective of gender, geographic domicile, and socio-economic status.
As it is said, a microloan is about giving hope. The bKash-City Bank nano loan scheme has started to prove that small loans can reassure and transform lives, especially for people with low incomes and those unbanked in remote areas. All one needs is a mobile device and a bKAsh account. For Bangladesh, it is a step towards financial inclusion and socio-economic security.
Mohiuddin Babar is the CEO at Bizcare.
Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.