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On the first Friday of every month, Sabina Begum makes the short trip from her single-room shack in a crowded Dhaka slum to a nearby grocery. The grocer, in addition to selling her much-needed supplies, doubles as her financial-services provider.

Ms. Begum hands the grocer cash, and with a few clicks on a basic key-press mobile phone, he sends the money on its way.
At roughly the same time, in a village 300 kilometers away, Ms. Begum’s father, Bosir Uddin, partially blind and slowed by arthritis, walks to a tea shop in the village square, where he waits for the money transfer from Dhaka. It duly arrives in the form a text message to the tea shop owner, who pays out the money Uddin’s daughter sent.

For 70-year-old Uddin, who has no source of income and no bank account, the mobile money transfer system is a lifeline. His family of three, which includes his wife and Ms. Begum’s nine-year-old daughter, is entirely dependent on the remittances from Dhaka.
“If she doesn’t send money, we don’t eat,” he says.

The system Ms. Begum uses is bKash, by far Bangladesh’s most popular mobile-money service. Launched in 2011, bKash is now used by over 17 million Bangladeshis, and handles more than 70 million transactions a day, according to the company.

In cash-focused Bangladesh, mobile-money services are still a novelty, and some traditional bankers worry about potential security risks that users of private services like bKash face. But experts at Bangladesh Bank, the country’s central bank, describe mobile money as a key strategy to expand financial access in this nation of 160 million people, where fewer than 30% have a bank account.

Four years after Bangladesh Bank started handing out mobile-money licenses, about $42 million is flowing through mobile banking systems daily. The number of registered mobile-money users has topped 23 million, around 15% of the total population, according to the central bank.

Because of a supportive regulatory framework that allows over-the-counter mobile money transactions and the efforts of companies like bKash, Bangladeshis can now use their phones like a bank account—depositing, withdrawing and transferring money with their handset. They can also pay utility bills and in a limited way, pay for goods and services. And local businesses can use their phones to provide these services for customers without accounts or phones.

For Ms. Begum, a seamstress who is part of Bangladesh’s 4-million-strong garment-factory workforce, mobile money has changed her approach to handling cash. Like many garment workers, who work long hours and struggle to save money, she has rarely seen the inside of a bank.

“I don’t have time to queue up at a bank,” she says. Her only day off is Friday, the weekend in Bangladesh. “Of course, the bank is also closed then.”

Instead, she saves money in a virtual wallet on the bKash platform. Before mobile money took off in Bangladesh, she had trouble sending money to her village to support her parents and her daughter, who has been living with her grandparents since Ms. Begum got divorced six years ago.

“I had to ask people to carry cash for me,” she said. “I used to give the money to bus drivers headed that way. Sometimes the money got lost or arrived late.”

Mobile money transfers are not only instantaneous, they also reduce the costs associated with handling cash, the service providers say. In a country where many factory workers and rickshaw drivers regularly send money to their families in the rural areas, this is a massive advantage, they say.

People using the over-the-counter bKash service typically have to pay the agent 2% of the transferred amount as a fee. Muhammad Ershad, the agent Ms. Begum uses, says his mobile money transfer business earns him an average of 15,000 takas ($190) a month.

“It’s my best product after rice and cooking oil,” he said.
Although Ms. Begum has a mobile phone, she hasn’t been able to open her own bKash account, forcing her to use the agent’s services. With her own mobile cash account, she would be able to send money at one-fourth the cost. “You need documents, you need a national ID card. I don’t have those documents, so I couldn’t open the [bKash] account,” she said.

Kamal Quadir, the CEO of bKash, who also helped found the company four years ago, says his goal is to get more people to open their own accounts and carry out transactions with their own phones.

But, he says, “we understand that a lot of people don’t have the documents or feel they may make a mistake in sending the money, even though the system is really simple and can be done on a basic phone.”

Quadir says bKash grew quickly by focusing on serving the people overlooked by banks. “We’re not competing in the traditional space occupied by commercial banks—we serve the small fry who are unbanked,” Quadir says.

Although the central bank has pushed hard for commercial banks to open branches in the villages—one recent regulation requires banks opening branches in a city to open a corresponding branch in a rural area—it may simply not be viable for banks to operate branches in many villages.

Mohammad Abdul Mannan, Managing Director of Islami Bank Bangladesh Limited, one of Bangladesh’s largest private-sector banks, says mobile money is a much cheaper solution and could be the “perfect platform for Bangladesh to take financial services to the country’s largely unbanked population.”
Source: The Wall Street Journal