High transaction cost is keeping more than half of Bangladesh's micro and small enterprises (MSEs) away from using mobile financial services for business purposes, according to a new study.
Lack of awareness, high risk of security and insufficient transaction limit are also hindering the growth of such services, according to the study titled “Mobile financial services for MSEs in Bangladesh: prospects and challenges”.
The findings of the study, conducted by the Business Finance for Poor in Bangladesh (BFP-B) project, were revealed at a seminar at the Amari Hotel in Dhaka yesterday.
The BFP-B project, funded by the UKaid, organised the seminar.
There are nearly 8 million MSEs in Bangladesh and of which 46 percent use MFS for business purposes, the study found.
It showed 32 percent of the MSEs made at least one business-to-business transaction.
The study was carried out among 500 MSEs, of which 64 percent do not use mobile financial service because of high transaction fee, which is 2 percent for each cash-out and zero for cash-in service.
Among the surveyed MSEs, 27 percent blamed insufficient transaction limit for not using the digital transaction channel.
Some 20 percent of the respondents demanded incentive for using MFS, according to the study. About 94 percent of the MSEs use the service only for cash-out.
The study surveyed three sectors: agriculture, manufacturing and service. The service sector accounts for the highest concentration of MFS users.
Some 51 percent of the MSEs in the service sector use mobile money for businesses. The agriculture sector accounts for a third of the users.
MFS accountholders totalled 5.9 crore in December last year but only 35 percent of the accounts were active, according to the study.
The sector, however, grew 40 percent last year, far ahead of Pakistan's 2 percent growth and India's 1 percent.
At the seminar, Kamal Quadir, CEO of bKash, the leading mobile financial service provider in Bangladesh, said MFS accounts are verified through national identification card.
So, it is illogical to limit the transaction amount, he said.
A special guideline for the sector is necessary, Quadir added. The central bank's strict rule is hindering the growth of the sector, said Arfan Ali, managing director of Bank Asia.
He said the Microcredit Regulatory Authority can join hands with the MFS providers to accelerate the use of the alternative channel.
In January last year, the central bank lowered the deposit ceiling to Tk 15,000 from Tk 25,000 to prevent abuse of the digital money channel.
The BB also directed the MFS providers not to open more than one account per national identity.
SK Sur Chowdhury, banking reforms adviser of the BB, and Mustafa K Mujeri, executive director of the Institute for Inclusive Finance and Development, also spoke.