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Sought opinions from industry operators
Every month, Taslima Begum, a garment worker from Kurigram, sends about Tk 5,000 to fund the expenses of her family back home in North Bengal through the mobile financial service platform.
She has to send in an additional Tk 100 as it would cost her mother Tk 18.5 for every Tk 1,000 she withdraws.
“This is quite high and burdensome for me to pay. For someone who lives off hand-to-mouth like me, every paisa matters,” she told Dhaka Tribune yesterday.
With the view to making the platform more affordable for low-income people like Taslima, the main users of the platform introduced nearly a decade ago to bring the unbanked population to the formal banking channel, the Bangladesh Bank has recently sought an opinion from the operators on how to reduce the charges and what could be an optimum rate for both sides.
Currently, a customer has to pay Tk 17.5 for cashing out Tk 1,000 through mobile apps of the respective service MFS providers except for Nagad.
Recently, Nagad, the financial service of the postal department, has brought down the cash-out charge to Tk 11.49 including the value-added tax.
But for cashing out via the unstructured supplementary service data (USSD), the customer has to pay Tk 18.5 for every Tk 1,000 withdrawn.
Seeing the low penetration of smartphones in Bangladesh, it is the latter method that is used more by MFS users to take money out.
“We asked the operators to review their cost modelling,” said Md Serajul Islam, spokesperson of the BB.
Based on the opinions provided a decision will be taken.
“We are reviewing the cost modelling of the MFS service providers for reducing the charges for transactions,” said Islam, also an executive director of the central bank.
Nagad, the latest entrant to the MFS arena, though has broken away from the mould and is offering lower charges than the rest: Tk 9.99 for every Tk 1,000 withdrawn.
“From the onset, Nagad’s target was to stand beside the poor people. Keeping that in mind, we have considered reducing the cost of cash-out and also omitted the send money charges,” Tanvir Ahmed Mishuk, managing director of Nagad, told Dhaka Tribune.
A huge number of poor people use to ‘cash-out’ option every day.
“We are very happy to stand beside them at the cost of our own revenue. In my view, even after this reduction, there is room to bring down the charges further if the industry players work together. If other players take the same steps as us, they can also slash the charges like us.”
Asked if Nagad would be open to sharing the cost modelling for its low cash-out charge with the BB, Mishuk said: “We have regular communication with the central bank for different purposes and we are complying with their requests from time to time.”
However, an industry expert remains sceptical that the charges could be brought down that much.
“It involves more than 250,000 agents and their livelihoods,” he said upon the condition of anonymity.
At the end of September, the total number of agents providing MFS service stood at 1,017,055, the highest yet, according to data from the BB.
Despite the supposedly high charges, the MFS players, particularly the market leader bKash, is not making a profit, he said.
The Bangladesh Institute of Development Studies, the World Bank and development economists around the globe have extensively studied the cost structure of MFS transactions in many countries, including Bangladesh.
“The studies have shown that Bangladesh’s charges are one of the lowest in the world for small amounts of up to $16. After that, it becomes more expensive. But the lion’s share of the transactions on the MFS platform are small-ticket ones,” he added.
In September, the platform saw a total of 27.3 crore transactions for Tk 49,121 crore, meaning the average ticket size is around Tk 1,800, which is about $21.25.
This suggests Taslima’s grievance does hold water somewhat.
“If the charges are brought down, it would be very helpful for low-income people like me,” she added.
(DT)
