As mSTAR’s project in Bangladesh comes to a close this fall, mSTAR/Bangladesh staff write on their perspectives from four years of a successful project, where mSTAR/Bangladesh helped enroll over 25,000 individuals—most of whom are women—into digital financial service accounts and helped USAID IPs and beneficiaries transact around $2.2 million digitally. The activity brought two new financial products to market with Bank Asia and IFIC Bank, including micro-credit to farmers with lower interest rates and more favorable repayment terms than any other alternative on the market today. Through this effort, mSTAR/Bangladesh facilitated loan disbursements to more than 1,500 farmers to date, with more on the way.
By Josh Woodard, Regional ICT & Digital Advisor
When mSTAR first started activities in Bangladesh in September 2013, the mobile financial services (MFS) market was still in its relative infancy, having only launched less than two years prior. At that time, it was very much a domestic remittance service with people using MFS to send money to friends and family elsewhere in the country, much of which was done through unofficial over-the-counter services rather than individual mobile wallets.
Between September 2013 and June 2017:
- The number of registered mobile wallets grew more than five-fold
- Active wallets increased more than seven times
- Average daily MFS transactions grew by almost six-fold.
Source: Bangladesh Bank
Our initial mandate in Bangladesh was to help USAID’s implementing partners digitize their payments, so that implementing partners no longer needed to send people with backpacks full of cash from Dhaka to pay field expenses, such as training allowances. Bangladesh was in some ways an initial testing ground for USAID’s move away from cash in its programming, codified in its Procurement Executive’s Bulletin from August 2014, making electronic payments the new default for USAID awards.
We demonstrated success early on helping two USAID projects transition to mobile payments through a small grants program. The Aquaculture for Income and Nutrition project ended up saving the equivalent of around 600 person days per year in efficiency gains by eliminating cash for training allowances. Digitizing payments for Dnet’s Aponjon initiative reduced processing times to pay their health workers from 30 to 8 days, greatly increasing employee satisfaction.
These benefits inspired other USAID implementing partners to explore transitioning away from cash without grant support from mSTAR. Through a mix of technical assistance and trainings, mSTAR supported 40 USAID programs to better understand digital financial services (DFS), including MFS and agent banking. Through our awareness raising activities over the past four years, we developed more than 70 learning documents and trained close to 600 people on DFS. In total, USAID programs receiving mSTAR support transacted more than $2.2 million, including transactions made to and by their beneficiaries, which numbered more than 25,000 individuals, two-thirds of whom were female.
In 2014, to encourage greater focus on the needs of the financially excluded and underserved, we launched the Mobile Money Consultative Group (MMCG), which promotes dialogue and partnerships and was modeled on previous work done by FHI 360 in Malawi. Over the past three years, the MMCG grew to include dozens of members from the development, telecommunications and financial services sectors, eventually adopting the name Digital Finance Consultative Group to better capture its broader membership base. It was so valued that in anticipation of mSTAR’s closing, members transitioned the group to a new coordinator, UNCDF, which recently hosted the first meeting independently of mSTAR.
As the market grew, mSTAR played a crucial role in ensuring that DFS providers were considering the financial needs of Bangladesh’s millions of financially excluded individuals, many of whom are supported by USAID’s programming in country. We began conducting assessments looking at opportunities for digitizing transactions and expanding DFS offerings, including examinations of saving groups, agricultural value chains, and agricultural mechanization. These have already contributed to the deployment of two digitally-enabled micro-credit products for smallholder farmers, the first-of-their-kind in Bangladesh, as well as modifications to the pricing structure and product offerings of several other providers.
It is refreshing to see that the DFS sector in Bangladesh is finally moving past the pure domestic remittances model to a increasingly holistic one that more broadly meets the financial needs of Bangladeshis—although it still has a distance to travel. In some ways, it is bittersweet to have to end our work in Bangladesh right when the DFS market seems to be picking up momentum. However, I am proud of the contributions we have made to promote inclusive DFS growth in Bangladesh. I am hopeful that our objectives over the past four years will continue to be realized by other actors in the DFS ecosystem we played a small role in shaping.
Josh Woodard is a Regional ICT & Digital Advisor for FHI 360, based out of its regional office in Bangkok, Thailand. He has provided technical oversight to the mSTAR team in Bangladesh since the beginning of implementation in 2013. In addition to the mSTAR blog, he occasionally shares his perspectives on digital technology and development on LinkedIn.