High cashout rate a major hurdle in expanding MFS: Experts

Grassroots users of mobile financial services (MFS) finding cashout fees too high is a major obstacle in taking the service forward, according to experts.

They urged swift action to address issues such as transaction risk, lack of literacy, weak electricity, and internet infrastructure to increase financial inclusion.

These issues came up at a National Consultation Meeting entitled "Digital Financial Services and Fiscal Inclusion at the Local Level in Bangladesh". Policy Research Institute (PRI) organised the event on Thursday.

While 87% of farmers in Mymensingh and Rangpur use mobile financial services, only 42% of ethnic communities in the northern plains use this service, said the speakers at the event while presenting three separate articles on the issue.

Cashout charges and losses of service providers cannot be curtailed unless the use of agents is reduced, Ahsan H Mansur, executive director at the Policy Research Institute said.

"MFS companies have to do business by sharing revenue with agents. Therefore, it is not possible to reduce the cashout charges," the economist said.

Increasing the use of apps is a big way to solve this problem, he identified.

This will benefit both customers and the companies as it will lessen cashouts and increase digital payments, he added.

Ahsan H Mansur recommended reducing the price of smartphones, encouraging investment to increase production and reducing tax rates.

Besides, he also recommended government steps to improve the quality of electricity and high-speed internet.

Sadiq Ahmed, vice chairman of PRI, said, service providers need to think about ways to ensure quality service at a slightly lower cost.

Lack of trust and fear of fraud also exist among common users, he mentioned. There is also a crisis of poor infrastructure, and anti-women bias is also acting as a major barrier.

He highlighted the need for strong policies by the government in these matters.

The Bangladesh Bank's former executive director Lila Rashid said, "Our digital financial services are stuck in mobile financial services,  which in turn is stuck in cash in and cash out."

She commented that there is an opportunity to expand savings, loans and insurance services in addition to increasing the number of payments through MFS.

The results of three separate surveys on Digital Financial Services (DFS) in Bangladesh were presented at the event.

Professor Nazrul Islam of Shahjalal University of Science and Technology presented the results of the survey titled "Impact of DFS on the lives of the poor people of haor".

He said 52.37% of haor people have DFS accounts. However, 45.65% of them transact with the help of others.

Professor Akhtaruzzaman Khan of Bangladesh Agricultural University presented the survey report on "DFS Adaptation and Effectiveness for Bangladeshi Farmers".

He said bKash (82%) is the most popular among the farmers who participated in the survey, followed by Nagad (30%) and Rocket (23%).

This survey also highlighted the crisis of confidence and various risks in the use of DFS for farmers.

Asrafi Bintay Akram, professor at Hajee Mohammad Danesh University of Science and Technology, said that only 42% of tribal people use MFS.

Due to the high charges in cash out, it is not possible for everyone to utilise this service. Over half of the respondents who took part in the survey recommended reducing the price of the service, she added.