Reports: Digital Financial Services Can Help Accelerate Economic Development in Bangladesh

The Bangladesh government’s ambitious “2021 vision” aims to reduce poverty and digitize government services.

To reach this goal, significant improvements to the agriculture sector, the country’s biggest sector, will have to be made. Just under half of the Bangladeshi population works directly in agriculture and roughly 70 percent of the country depends on agriculture to some extent for their livelihood. Agriculture contributes 16.33 percent to the national GDP. As in many countries, agriculture is heavily dependent on weather and susceptible to damage from natural events, making it an unreliable industry. When there is a bad crop, farmers and those affected by agriculture face the possibility of poverty.

In two major reports, Integrating Digital Financial Services into Agricultural Value Chains: A Bangladesh Market Landscape Assessment, and Study on Pattern of Financial Flow Within Agricultural Market System, mSTAR and USAID’s Agricultural Value Chains Project (AVC), led by DAI, have identified that integrating digital financial services within Bangladesh’s agriculture value chains can help stabilize agriculture and help the government meet its 2021 goals.

mSTAR and AVC launched the reports at an event with over 50 professionals representing the central bank of Bangladesh, the Ministry of Agriculture, multi-lateral donor agencies, development organizations, digital financial services (DFS) providers, financial institutions, insurance providers, mobile network operators and impact investors.

Presenting the report Integrating Digital Financial Services into Agricultural Value Chains: A Bangladesh Market Landscape Assessment, mSTAR’s Josh Woodard, Regional ICT & Digital Finance Advisor, spoke about the financial needs of various value chain actors—from smallholder farmers all the way up to wholesalers—and offered up potential opportunities for DFS to address those needs.

Following the presentation, a reputable panel including Joint Secretary from the Ministry of Agriculture, Toufiqul Alam, Joint Director of the Payment Services Department at Bangladesh Bank, Mohammad Akhlasuddin and representatives from Bank Asia and bKash, discussed the potential of financial inclusion and DFS across agricultural value chains. Alam detailed the various initiatives the Ministry has taken to increase efficiency and agriculture production, including the Agricultural Credit Disbursement program that provides farmers a 4% interest rate on loans for high value crops and 2% for spices.

Representatives from Bank Asia and bKash added how both organizations are addressing the needs of the rural segment by connecting the dots between different financial flows.

The event concluded with the note that DFS can help accelerate economic development across agriculture value chains via increased connectivity to formal financial services, ultimately playing a pivotal role in increasing efficiency and productivity.