Meaning of Inclusion in Banking Industry, Perspective of Bangladesh

Inclusion
Inclusion means change!! Moving forward, the act of including or something included. Inclusion is the new buzzword in the impact investing and social enterprise space. As poverty, deprivation and exclusion from the development process are substantially overlapped and correlated with financial exclusion; driving financial inclusion for inclusive growth is extremely meaningful. Therefore, there may be an intricate two way relationship between financial inclusion and inclusive growth.

Financial Inclusion
Innovative financial inclusion means improving access to financial services for poor people through the safe and sound spread of new approaches. Financial inclusion is as the process of ensuring access to financial services and timely and adequate credit for low income people at an acceptable cost. An inclusive financial system thus has to provide access to an extended range of services to the poor.

United Nations (2006), in this blue book titled “Building inclusive Financial Sector for Development”, defines financial inclusion as the “access to the range of financial services at a reasonable cost for the bankable people and farms.” Basic financial services include savings, short and long-term credit, leasing and factoring, mortgages, insurance, pensions, payments, local money transfers and international remittances.

In Bangladesh, government’s programs and policies seek to accelerate inclusive economic growth, focusing public expenditure outlays in developing the social and physical infrastructure, crowding in private investments in output activities. The government’s inclusive growth efforts are being supported by Bangladesh Bank’s (BB’s) financial inclusion drive engaging banks in reaching out with credit and other financial services to productive pursuits in under-served areas like small landholder/tenant farming, SMEs, renewable energy and other environmentally benign ventures. To facilitate cost effective reach out by banks to these newer client segments, branch based financial service delivery is being supplemented by mobile phone/smart card based remote delivery, as also by on-lending /co-financing partnerships of banks with locally active regulated Micro Finance Institutions (MFIs).

Banking sector in Bangladesh
Banking sector of Bangladesh is in a healthy state as well. Capital adequacy ratio related BASEL-II has been implemented fully. Actual risk based capital of all banks was 11.31% in 30 June 2012 and 10.85% in 30 September 2012 as against required level of 10% as described in BASEL-II. Banks are preparing to adopt and implement the BASEL-III principles in near future. The capital base of the banking sector has been tremendously expanded during last four years.

The high growth rate alone is not sufficient for economic development; growth needs to be poverty-friendly and sustainable. In addition to its mandated duties, Bangladesh Bank is providing necessary supports so that the benefits of growth can reach to the larger bottom portion of pyramid. Bangladesh Bank is also working to bring financial services for the un-banked people i.e., to accelerate financial inclusion activities by ensuring sufficient and visible credit facility to agricultural, SME, environment friendly and productive sectors of the economy. Loan facility has been increased significantly in agriculture and SME sectors. Appropriate loan policies for agriculture and SME have been adopted by Bangladesh Bank. Those who did not have access to finance like extreme poor, landless, sharecroppers, marginal farmers, poor women, small businessmen, women entrepreneur and the deprived from financial services are now able to get bank loans and financial services.

Central Bank’s Activities for Financial Inclusion
Bangladesh Bank notifies financial inclusion as one of the major tools for fostering inclusive growth and reducing poverty in Bangladesh. Bangladesh Bank’s programs towards extended;

• Credit for agriculture, SME, women entrepreneurs and renewable energy.
• A special project for farmers, account opening @ 10 Taka (BDT) only.
• Refinance line for sharecroppers.
• Cluster Approach has been introduced so that SME credit can be targeted to a particular region with vantage points.
• Special emphasis has been given on opening rural bank branches in order to bring the people of the rural areas under banking/financial services (50% of the branches must be rural branch)
• Collection of foreign remittances in rural area people.
• Bangladesh Bank believes that development of SME sector will ultimately develop the women entrepreneurships. That is why BB allocated 15% of the SME sector refinance fund for women entrepreneur only.
• Bangladesh Bank (BB) has put special emphasis on CSR activities with a view to expanding humane dimension of financial services. BB has given directives to banks to expand financial allocations and services in various fields like education, health, nutrition, sports, disaster management, renewable energy, women development, people with disabilities, freedom fighters and their families, poor and helpless people facing climate change disasters, under CSR.
• In addition, the banking sector of the country is adopting all these IT based activities very fast. Meanwhile, on-line banking, on-line CIB services, E-commerce, on-line payment gateway have already been introduced.
• Bangladesh Automated Clearing House and Bangladesh Electronic Fund Transfer Net-work have been established in order to modernize payment system.
• Activities of introducing national payment switch are also going on very swiftly.
• Mobile banking service is also introduced with a view to providing financial services to the people of remote areas of the country. Under this innovative service, remittance is transferred to the recipients swiftly coming from home and abroad.

As a result of such technology-consolidated, Apart from this, Bangladesh Banking industry is going join to the paper less banking system soon.

Activities of Mutual Trust Bank (MTB)
Mutual Trust Bank is a recognized private commercial bank in Bangladesh, working for financial inclusion through SME landing and sound spread of new approach. MTB focused on the SME operation which is rapidly growing and provides continuous support and sufficient credit to small and medium enterprises (SMEs), agriculture, renewable energy, women entrepreneurs, green financing and other productive sectors.

Once more considering the development of SME sector, MTB has started training and workshop for access to finance, financial counseling, commercial linkages, business advisory services and dealing with legal barriers. MTB’s strategic planning for profitable SME banking and sustainable growth for small and medium scale enterprises in Bangladesh. Since inception of structured SME lending, MTB has given top most priority in rural SMEs. MTB has 86 branches (including 14 SME/agri branches), all SME/agri branches of them located in rural areas, where there is limited access to modern banking facilities as well as access to credit. And wide ATM booths network are available for SME customers.

MTB has accomplished with the expansion and diversifications of various business lines for financial inclusion, especially it introduced deposit product for SMEs and a separate business account with incentives for SME business people. These products encourage people financial transaction through banking, specially in rural areas.

Environment friendly business is a new concept in Bangladesh. MTB is the 1st bank in the banking arena, which has developed structured renewable energy loan product and given the 1st loan in a solar driven irrigation in Barguna commonly known as Barguna Model inaugurated by Dr. Atiur Rahman, Honorable Governor of Central Bank. In respect of environment for green financing MTB created the idea to finance in environment friendly business and introduce the loan product “MTB Green Energy”. Renewable energy sector, i.e. solar, bio-gas, SMEs, agri SMEs and farmers are the target customers.

MTB has developed other 12 loan products to serve the different sectors of SMEs, agriculture, women entrepreneurs etc. In addition, MTB has developed special SME products to provide banking service for some different sector in different lending ways for financial inclusion.

 Complete financial solution for agro based firm: Agro based farms need different types of finance for solar irrigation pump, agro instrument purchase, seed and fertilizer purchase and others relevant field for cultivation. MTB provide all these type of facilities as like one-stop-financial facility for farmers. Plan to help build an eco-village following the social enterprise model.

 Introducing NGO linkage program: NGOs are working for sustainable development, through reducing poverty, promoting gender equity and preventing the environment degradation. MTB is proud to support them for their development through NGO linkage program. This is a very effective model of financial inclusion in remote areas. The data shows, MTB has the banking network with 88,72,632 people through the NGO linkage program.

 Financing to community based organizations (CBOs): Mutual Trust Bank, 1st and the pioneer bank to provide financial support to the CBOs. CDF developed their capacity with the financial help of Concern Worldwide, an Ireland based international organization. Under this project, MTB included 16,890 people in financial inclusion.

 Developing group financing to soybean farmers: Under this model MTB has financed soybean farmers, forming groups in rural areas.

 Developing cluster financing model: MTB has financed these types of producers under NGO linkage program with Society for Development Initiatives (SDI) through formation of five clusters areas. Bangladesh Leather Service Center (BLSC) is extending its facilitating support to SDI. BLSC is a project funded by Italian Govt. and implemented by International Trade Center (ITC). In addition to this we are also facilitating cluster financing to Tat Sharee and Lungi industry.

Special attention for women entrepreneurs: In Bangladesh women entrepreneurs are the most disadvantaged group in access to finance facility from commercial bank. They have different needs for bank finance and other banking services depending on social structure and cultures. So products must be designed with flexibility depending on customer needs to ensure good repayment of loan. MTB has two specialized products for women entrepreneurs’ development. MTB has a project, “MTB Gunabati” for women entrepreneurs’ development jointly with SME Foundation (a national organization, working for the SME development). This project is specially working for the financial inclusion of women entrepreneurs.

MTB is providing all types of support to the women entrepreneurs like arrange workshop for bank financing knowledge, link up with other training institute for business based training, support the women entrepreneurs to attend local and international fair to display their products, business advisory services and finally dealing with legal barriers.

Technology and financial inclusion are the popular coinage in banking parleys in the country. While technological up gradation and mobile banking are catching up so fast, financial inclusion is tardy. Financial inclusion is a major agenda for the Bangladesh Bank. Without technological support, it is difficult for the banks to reach the un-banked. The banking sector of the country is adopting all these IT based activities very fast. MTB is one of the leading bank to adopting all these technology based banking. MTB’s technology based banking towards extended;

 Internet banking,
 On-line CIB services, Automated Clearing Houses, Electronic Fund Transfer, Cross Border Operation, Operating infrastructure(Data Centre),
 ATM & POS Network
 Incorporation of Solar Panel ATM (responsibility to environment)
 Almost paperless internal communication through smart internal networking (i-mail).
 Contact Center for quick customer service, covering remote areas.
 Introducing Mobile banking

At Bangladesh Bank we embarked on the process of ingraining the vision of financial inclusion in the financial sector by first issuing guidance for mainstreaming of Corporate Social Responsibility (CSR) obligations in institutional goals and strategies of all banks and financial institutions. With this alignment and orientation of corporate ethos in the financial sector with their social and environmental obligations, banks are now spontaneous and proactive in innovating efficient, cost effective modes of reaching out to the excluded and underserved population segments. We believe that the approach of financial development and inclusive growth adopted in Bangladesh is of broader relevance beyond her borders; and that global success in maintaining broad-based inclusive economic and social growth with commodity price stability and financial stability hinges urgently on similar reorientation of corporate goals and objectives of all banks and financial institutions in all jurisdictions, from sole pursuit of purely private gains to proper alignment with their social and environmental obligations.