The Policy Research Institute of Bangladesh (PRI) on Sunday organized a training program for journalists, where they engaged journalists and media representatives in technical and policy discussion on issues related to digital finance system (DFS) and financial inclusion in Bangladesh.
Titled “New Dimensions of Digital Financial Services in Bangladesh”, the training program was organized as part of the “Policy Initiative for DFS in Bangladesh” project.
Dr. Zaidi Sattar, chairman of PRI, highlighted the growing usage of Artificial Intelligence (AI) and generative AI in journalism and digital financial services during his welcome speech.
In his remarks, Dr Sattar also emphasized that it is crucial to ensure accessibility and affordability of digital financial services for all income levels to foster inclusive development.
In his session on “Digital Banks: Opportunities and Challenges”, Ahsan H Mansur, executive director of PRI, shed light on the difference between digital banking and digital banks. He shared the evolution of digital banking services starting back in the 1990s, to digital-only banks starting in 2009.
The core difference between the two is that digital banking is part of the brick-and-mortar, physical banks, where they provide financial services online besides in-person services, but digital banks/digital-only banks are entirely virtual, he also said.
Dr Ahsan Mansur also discussed the current global market size for digital banks and its increasing demand in the future due to its accessibility.
He also elaborated the opportunities and challenges facing digital banks especially in the context of Bangladesh.
Dr Bazlul H Khondker, director, PRI, presented the key findings and policy implications of the study “Assessing the economic and social impact of financial inclusion in Bangladesh: An explorative study using Financial Social Accounting Matrix (FSAM) approach.”
The study investigates the impact of financial inclusion on key macroeconomic indicators, including economic growth, poverty, employment, savings, and investment.
In the study, it was shown that the Bangladesh economy in 2021 was estimated at $399 billion at current prices and $320 billion in constant prices. GDP growth was 6.9%, reflecting recovery from the COVID-19 pandemic. The services sector accounted for over 52% of GDP, with manufacturing accounting for 36% and agriculture accounting for 12.1%.
Two financial inclusion simulations were considered: a 50% increase in financial inflows to rural and urban households and half of borrowing from informal sources channeled through digital nano credit schemes.
The study reveals significant effects on Bangladesh’s economy under two simulations. In SIM 1, nominal GDP may increase by Tk111,900 crore compared to the BAU Scenario, while real GDP may increase by Tk90,500 crore.
In SIM 2, nominal GDP may increase by Tk182,000 crore due to higher financial inflows. Both scenarios show over 10% GDP growth rates, with the impact on development and national policy planning significant.
The simulation results show a positive effect on agriculture, manufacturing, private services, and public services due to higher financial flows.
However, manufacturing and private services have higher impacts. Agriculture activities are considered inclusive and pro-poor, leading to higher food security. Investment and money supply increase significantly in both scenarios.
In his session on “Macroeconomic and trade issues of Bangladesh” PRI research director Dr MA Razzaque shed light on Bangladesh’s exports which are highly concentrated on apparel products.
In the RMG sector our most exported products are t-shirts and about 8 billion T-shirts are being produced every year, he also said.
Dr Razzaque pointed out that while this bulk production of T-shirts is a strength of the economy, it also indicates export concentration which weakens the economy.
He emphasized on the importance of export diversification for boosting growth and resilience.
