By Majidul Haque
‘We want to be paid in cash! We are very much happy with the way we are receiving our salaries. We don’t need any banking system or MFS account!’
I heard this from most of the attendees in a town hall meeting I was holding with ready-made garment (RMG) workers in Bangladesh. As a Technical Lead for digital financial services at FHI 360, at the time I was writing a guide for BSR’s HERfinance project on how garment workers could use mobile financial services (MFS). Through the town hall meetings I could better understand workers’ opinions on using MFS instead of cash to receive wages.
Their plea for cash was natural. Cash has a real-life feel that comes from seeing, touching and counting notes, as Mr. Chhavi Ghuliani, Associate Director at BSR, notes in his article ‘Why is cash a problem?’. Digital channels, on the other hand, are intangible.
It might be appropriate to say that these unbanked workers’ preference is to always have something physical, as it ensures direct access to their money. Building trust in MFS might grow slowly unless they can practically feel or see its actual benefits. Therefore, raising awareness of the benefits of MFS among workers can play a vital role in digitizing salary payments.
After I explicitly explained the benefits of using MFS to the group of workers, they replied positively about accepting their wages digitally.
It might be appropriate to say that these unbanked workers’ preference is to always have something physical, as it ensures direct access to their money.
The RMG sector in Bangladesh has significant influence on the Bangladeshi economy in terms of employment, production and foreign exchange earnings. The industry employs over four million people, most of whom are unbanked. In Bangladesh, 90 percent of wages are paid through cash and RMG factories are no different in that regard.
In Bangladesh, 90 percent of wages are paid through cash and RMG factories are no different in that regard.
However, paying salaries in cash brings several concerns to both RMG factories and their workers. Factories face the risk of theft or fraud in the shipment and distribution of cash and the amount of time and resources required to process disbursements is significant. Workers, as well, face the risk of losing their cash through theft while traveling home from factories. Cash can also discourage maintaining savings, which are essential to enabling individuals to adapt to future demand and shocks. Women workers, who represent more than 80% of the total RMG workers in Bangladesh, face even greater risks as they often have little or no control over their money if it is in cash. In many parts of Bangladesh, women are likely to be more economically dependent on men or other family members for their survival due to their limited earnings, the male dominated culture and lower education. In addition, according to research done by the Financial Inclusion Insights (FII) program, less than half of women in Bangladesh have access to formal financial services and even fewer women have a registered account. As a result, they usually handover their cash to a male relative to store.
Given the limitations with cash, the high mobile penetration rate, and the rapid growth of MFS in Bangladesh, MFS has the potential to be one of the best solutions to digitize salary payments—not to mention that it can also serve as a powerful catalyst to bridge the financial inclusion gap of RMG workers. Digitizing salary payments can bring more efficiency and transparency to payroll systems by ensuring access to formal financial services for both men and women. In addition, women can also have more control over their salaries and influence over household financial decision making.
To help the RMG sector capitalize on this opportunity, FHI 360 and BSR recently published a manual titled ‘Digitizing Worker Salary Payments: A Manual for Ready-made Garment Factories.’ This manual provides a blueprint for ready-made garment factories in Bangladesh, and the organizations supporting them, who are interested in using mobile financial services to make salary payments to their workers. It includes background information on MFS, the possible benefits and challenges, and useful tips and checklists for implementing MFS salary payments.
Md. Majidul Haque is the technical lead – digital financial services (DFS) for the USAID Mobile Solutions Technical Assistance and Research (mSTAR) activity implemented by FHI 360 in Bangladesh. He has just under a decade of experience in telecom, banking and international development organizations, with a focus on new business, product development, project management and action research related to DFS, financial inclusion, e-commerce, payment gateways and value-added services (VAS). He has also been a key technical advisor on DFS to BSR’s HERfinance program, supporting the digitization of payments to female garment workers in Bangladesh. Throughout his career, Majidul has successfully introduced DFS to a wide range of segments, including smallholder farmers, local government officers, community health workers, ultra-poor women, slum dwellers, and ready-made garment workers. He worked with eight different RMG factories to roll-out MFS to more than 6,000 workers for salary disbursement.