Are Healthy Partnerships Possible Between Digital Financial Services and Microfinance Institutions in Bangladesh?
Posted: Thu Feb 13, 2025 3:52 am
Bangladesh is home to a large number of globally recognized microfinance institutions (MFIs), along with many smaller MFIs that operate various community-based microcredit programs throughout the country. According to the government’s Microcredit Regulatory Authority report from 2019, the microfinance sector in Bangladesh is comprised of 724 licensed NGO-MFIs, serving 32.37 million clients with a total outstanding loan portfolio of almost BDT 787 billion (US $9 billion).
Digital financial service (DFS) providers have been trying to partner with the country’s MFIs, offering them the value propositions of cashless loan disbursement and repayment via installment payments, and korea whatsapp number data savings deposits through digital wallets. There are four key rationales driving DFS providers’ interest in these partnerships:
Microfinance has the largest financial service branch network in Bangladesh, with 18,977 branches across the country. DFS providers can leverage this network infrastructure to facilitate a quick and efficient expansion in their outreach.
A majority of microfinance beneficiaries are women, and their adoption of DFS will reduce the gender divide in digital inclusion.
The digital transformation of MFIs will enable them to offer value–added services to their customers.
Synergy between DFS and microfinance, two key financial service sectors, will transform the overall market and enable more value propositions for DFS providers, MFIs, regulators and customers.
Partnership Between Digital Finance and Microfinance: A History of Challenges
Despite these benefits, it took almost a decade for the two sectors to realize the benefits of partnerships. And over the years, different attempts at partnership have met with varying degrees of success. For instance, partnerships between mobile financial services (MFS) providers like bKash and Rocket and MFIs like BURO and Shakti Foundation did not progress much on loan disbursement through MFS wallets, due to challenges involving transaction limits and the cost of cash withdrawal. However, thanks to its huge efforts to boost customers’ digital financial literacy, BRAC’s attempt to use bKash’s digital wallet to facilitate savings deposits seems to have had some meaningful impacts. In contrast, an agent banking partnership between Bank Asia (where I serve as a Senior Vice President), BURO and Shakti Foundation didn’t go well, due to the conflict of interest inherent to serving the same target clients with similar products and services.
Digital financial service (DFS) providers have been trying to partner with the country’s MFIs, offering them the value propositions of cashless loan disbursement and repayment via installment payments, and korea whatsapp number data savings deposits through digital wallets. There are four key rationales driving DFS providers’ interest in these partnerships:
Microfinance has the largest financial service branch network in Bangladesh, with 18,977 branches across the country. DFS providers can leverage this network infrastructure to facilitate a quick and efficient expansion in their outreach.
A majority of microfinance beneficiaries are women, and their adoption of DFS will reduce the gender divide in digital inclusion.
The digital transformation of MFIs will enable them to offer value–added services to their customers.
Synergy between DFS and microfinance, two key financial service sectors, will transform the overall market and enable more value propositions for DFS providers, MFIs, regulators and customers.
Partnership Between Digital Finance and Microfinance: A History of Challenges
Despite these benefits, it took almost a decade for the two sectors to realize the benefits of partnerships. And over the years, different attempts at partnership have met with varying degrees of success. For instance, partnerships between mobile financial services (MFS) providers like bKash and Rocket and MFIs like BURO and Shakti Foundation did not progress much on loan disbursement through MFS wallets, due to challenges involving transaction limits and the cost of cash withdrawal. However, thanks to its huge efforts to boost customers’ digital financial literacy, BRAC’s attempt to use bKash’s digital wallet to facilitate savings deposits seems to have had some meaningful impacts. In contrast, an agent banking partnership between Bank Asia (where I serve as a Senior Vice President), BURO and Shakti Foundation didn’t go well, due to the conflict of interest inherent to serving the same target clients with similar products and services.