59% small borrowers reluctant to go digital

Despite the country’s banks, non-bank financial institutions, and micro finance institutions ((MFIs) have intensified their digital financial services over time, as much as 59 per cent of microfinance and microenterprise borrowers are still reluctant to go digital.

Speakers came out with this statement while revealing a study finding styled ‘Effects and Impact of Covid-19 Pandemic on MFIs and Their Clients’ during a seminar in the capital yesterday.

The finding got released at a time when Bangladesh Bank introduced a Tk 100 crore refinance initiative titled ‘digital nano loan disbursements’, a move designed to bolster financial inclusion in the peripheries to bring the marginalised quarter of the population under the digital financial services.

Presenting the study, Tasnova Farheem, programme manager at INAFI Bangladesh, pointed out five reasons behind the reluctance among small borrowers to receive digital financial services.

According to the study, 38.5 per cent of the respondents said they had not enough knowledge about the digital platform or wallet, while another 31.4 per cent replied that the micro finance institutions were charging additional fees for digital transactions.

Furthermore, 19.5 per cent of respondents had not felt the digital services were convenient, while 16.6 per cent had concerns over risks of sending money to any wrong number, and 5.3 per cent were concerned about having no instant documents of payment.

“During the Covid-19 pandemic, the average monthly recovery rate of MFIs using the digital financial services was 91.23 per cent versus the recovery rate of 87.95 per cent recorded by the MFIs not using digital services,” said Tasnova Farheem.

A total of 10 microfinance institutions out of 22, which took part in the research, had digital payment options.

A big number of participants had expressed their inclination to adopt the digital payment method for installment payments if only they did not have to pay any extra charges for using the mobile wallet, the study said.

Attending the event, many chiefs and executives of different micro finance institutions opined that the ceiling for digital transactions is very low. To make it vibrant, the ceiling should go up.

According to the programme, as many as 11 MFIs in the country are now using digital financial services.