Dhaka, Bangladesh (BBN)- The central bank has identified ten barriers including poor banking infrastructure, particularly in rural areas, now stand in the way of financial inclusion in the country.

“Keeping in view the number of financially excluded people in Bangladesh, about half of the adult population is un-banked (48.49 percent) in terms of deposit accounts in the banks,” Bangladesh Bank (BB), the country’s central bank, said in a working paper styled ‘Financial Inclusion: The Role of Bangladesh Bank,’ released recently.

The major barrier is geographical or physical access measuring the average distance from household to bank branch; however, the branches per 1,000 square kilometers could be used as crude indicator for providing an initial idea to the barriers of inclusion, the paper added.

Citing an example, the paper said Spain has 96 branches per 100,000 people and 790 branches per 1,000 square kilometers, while Bangladesh has less than seven branches (or ATM) per 100,000 population and about 67 branches (or ATM) per 1,000 square kilometers.

A large section of the population who do not have any physical access to the banking services are in rural and remote areas in the country, according to the paper.

“As a competitive and cost effective strategy, major banks focus on large scale of loans instead of providing services for small size of loan; as a result, rational business decisions prevent a major portion of people from accessing loan services including small and medium enterprises (SME) and agriculture loan,” it said quoting poor level of technological infrastructure.

Promoting technological and institutional innovations as a means could expand the financial system access and usage; however, less than four people per 1,000 population in the country are using credit cards identifying the technological and infrastructural weaknesses, according to the paper.

Other barriers include lack of proper documentation, inadequate financial literacy or education, high requirement of minimum balance, low income, lack of suitable product structure of banks and micro-financial institutions (MFIs), high cost of product and absence of credit bureau and insurance of MFI borrowers.

Recent trend in mobile banking indicates that financial inclusion is scaling up in Bangladesh especially in rural areas where no bank branch is available.

“Recent data show that number of mobile phone subscribers and tele-density have been increasing substantially over time creating an opportunity for banks and MFIs to use the mobile technology in the financial services and serve un-banked people with lower costs specially in the rural areas,” the paper said, adding that rate of overall financial inclusion is increasing in modest pace.

It is observed that financial inclusion of total population increased from 39.76 per cent in 2004 to 56.42 per cent in 2010, the paper noted.

In terms of adult population, it increased from 65.33 per cent in 2004 to 87.23 per cent in 2010 due to opening of a significant number of 10 taka account in the last two years, according to the paper.

BBN/SSR/AD-21Jan21-11:55 pm (BST)