[🇧🇩] Microfinance and its Impact on Bangladesh's Economy

[Saif]

Date Occurred: Nov 17, 2024

Role of microfinance in empowering women entrepreneurs in Bangladesh
MATIUR RAHMAN
Published :
Apr 19, 2024 21:55
Updated :
Apr 20, 2024 21:30

In Bangladesh, where traditional gender roles and socio-economic disparities have historically marginalised women, microfinance has emerged as a powerful tool for empowering women entrepreneurs and fostering socio-economic development. With its roots deeply embedded in financial inclusion and social empowerment principles, microfinance has enabled women from all walks of life to access capital, start businesses, and become agents of change in their communities.

Access to capital has long been a significant barrier for women entrepreneurs in Bangladesh, particularly those from low-income and marginalised communities. Traditional banking systems often overlook women, citing lack of collateral or credit history as reasons for denial of loans. Microfinance institutions (MFIs) fill this gap by providing small loans, known as microcredit, to women entrepreneurs without requiring collateral or extensive paperwork.

Microfinance enables women to start or expand their businesses, invest in income-generating activities, and improve their household's economic well-being. Whether setting up a small tailoring shop, starting a poultry farm, or launching a handicraft business, microcredit provides women with the financial resources they need to pursue their entrepreneurial ambitions. By accessing microfinance, women gain economic independence, reduce their dependency on male relatives, and contribute to household income generation.

Moreover, the repayment structure of microcredit, often based on group lending models or weekly instalments, fosters a sense of financial discipline and responsibility among borrowers. As women repay their loans and build a positive credit history, they become eligible for more significant loan amounts, enabling them to expand their businesses further and achieve more excellent financial stability.

Beyond economic benefits, microfinance is pivotal in empowering women socially and promoting gender equality in Bangladesh. In a society where traditional gender norms dictate women's roles primarily as homemakers and caretakers, microfinance allows women to challenge these norms and assert their agency as entrepreneurs and decision-makers.

Participation in microfinance programs exposes women to new ideas, skills, and opportunities for personal and professional growth. Through group meetings, training sessions, and networking events organised by MFIs, women entrepreneurs gain access to valuable knowledge on business management, financial literacy, and market linkages. These platforms enhance their entrepreneurial skills and boost their confidence and self-esteem, empowering them to take on leadership roles within their households and communities.

Furthermore, the social collateral inherent in group-based lending models fosters solidarity and mutual support among women borrowers. As members of lending groups, women provide each other with encouragement, advice, and assistance, creating a sense of community and sisterhood. This collective empowerment transcends individual success stories and contributes to broader social transformations, challenging gender norms and promoting women's rights in Bangladesh.

The impact of microfinance extends beyond individual empowerment to encompass broader socio-economic development outcomes in Bangladesh. Microfinance programmes directly address the root causes of poverty and inequality by targeting women entrepreneurs, lifting households out of poverty and promoting sustainable development.

Studies have shown that women are more likely than men to invest their earnings in their families' well-being, including education, healthcare, and nutrition. As women entrepreneurs generate income through their businesses, they reinvest a significant portion of their profits in their children's education, thus breaking the cycle of intergenerational poverty. By improving access to education and healthcare, microfinance contributes to human capital development, laying the foundation for long-term socio-economic progress in Bangladesh.

Moreover, the entrepreneurial ventures supported by microfinance often have positive ripple effects on local economies, creating employment opportunities, stimulating demand for goods and services, and fostering economic growth in rural and urban areas alike. As women entrepreneurs succeed and expand their businesses, they become drivers of local development, contributing to poverty alleviation and inclusive economic growth at the grassroots level.

While microfinance has demonstrated significant potential for empowering women entrepreneurs in Bangladesh, it has challenges. Limited access to financial services in remote and marginalised areas, high interest rates charged by some MFIs, and inadequate regulatory oversight are some barriers that hinder the full realisation of microfinance's impact.

Additionally, there is a need to ensure that microfinance programmes are tailored to women entrepreneurs' unique needs and realities, considering factors such as literacy levels, access to markets, and cultural norms. By adopting client-centric approaches and integrating gender-sensitive practices into programme design and implementation, MFIs can enhance the effectiveness and sustainability of their interventions.

Furthermore, the digital revolution presents new opportunities for expanding the reach and impact of microfinance in Bangladesh. Mobile banking, digital payments, and online lending platforms offer innovative solutions for overcoming geographical barriers and increasing financial inclusion among women entrepreneurs. By leveraging technology and partnerships with fintech companies, MFIs can enhance the efficiency, transparency, and accessibility of their services, reaching underserved populations and empowering women in new and transformative ways.

In conclusion, microfinance has emerged as a powerful tool for empowering women entrepreneurs and driving socio-economic development in Bangladesh. By providing access to capital, fostering social empowerment, and promoting gender equality, microfinance enables women to break free from the constraints of poverty and patriarchy, realising their full potential as agents of change and progress in their communities.

As Bangladesh continues its journey towards inclusive and sustainable development, the role of microfinance in empowering women entrepreneurs cannot be overstated. By addressing the barriers that hinder women's access to finance and supporting their entrepreneurial aspirations, microfinance builds a more resilient, equitable, and prosperous society for all. Through strategic partnerships, innovative approaches, and a commitment to gender-responsive programming, microfinance can unlock new opportunities for women's economic empowerment and pave the way for a brighter, more inclusive future in Bangladesh and beyond.

Dr. Matiur Rahman is a researcher and development worker.​

 

[Saif]

Microfinance an important part of Bangladesh’s development: IFC

Martin Holtmann, IFC’s Country Manager for Bangladesh, Bhutan, and Nepal, said that microfinance has been an important part of Bangladesh’s development journey. "As our economy transitions from Least Developed Country (LDC) status to the next level, the Microfinance industry can contin

thefinancialexpress.com.bd

Microfinance an important part of Bangladesh's development: IFC
Published :
Apr 29, 2024 12:48
Updated :
Apr 29, 2024 12:49

Martin Holtmann, IFC's Country Manager for Bangladesh, Bhutan, and Nepal, said that microfinance has been an important part of Bangladesh's development journey.

"As our economy transitions from Least Developed Country (LDC) status to the next level, the Microfinance industry can continue to play a crucial role," Martin said.

He said this is the right time for all stakeholders to discuss the key reforms and capacity building that need to be implemented to transition and support the country's growing economy, as per UNB reports.

"IFC is here to support modernisation of the sector, enable MRA and MFIs to build their own capabilities, introduce modern governance and solid risk management practices, and leverage technology," he said.

The Microcredit Regulatory Authority (MRA) and International Finance Corporation (IFC) organised a seminar this week aimed at sharing insights from their recent Microfinance Sector Development Diagnostic study.

Conducted by FinValue Advisors under the auspices of MRA and IFC, the study delves into two critical components: Digital Transformation and Housing Microfinance (HMF).

These components assess the current landscape of digital initiatives and housing microfinance endeavours within the sector. Moreover, the study illuminates the industry's appetite for change, a crucial aspect in propelling sectoral development and modernisation.

Over 25 Microfinance Institutions (MFI) spanning diverse categories, participated in the diagnostic process alongside key government stakeholders and private sector institutions.

The collaborative effort focused on pinpointing institutional readiness, evaluating existing regulatory frameworks, gauging market infrastructure viability, assessing consumer readiness, and estimating the requisite financial investments for digital transformation and housing microfinance initiatives.

This seminar marks a significant stride towards fostering collaboration and knowledge exchange within the microfinance landscape, ultimately paving the way for a more inclusive and digitally empowered financial ecosystem.

The roadmap laid out by the study is a guide for stakeholders to create a strong housing microfinance portfolio, giving members the chance to build secure futures by owning homes.

A supportive environment across regulations, infrastructure, and institutions is needed to make digital transformation and housing microfinance work on a larger scale.

This roadmap brings together the IFC, MRA, MFIs, and others to take meaningful steps that truly benefit microfinance consumers.​

 

[Saif]

UK offers $50m loan for SME, women businesses

British International Investment, the UK’s development finance institution and impact investor, has announced a loan commitment of $50 million to BRAC Bank, a leading SME bank in Bangladesh, to support small businesses and women entrepreneurs...

www.newagebd.net

UK offers $50m loan for SME, women businesses
Bangladesh Sangbad Sangstha . Dhaka 14 May, 2024, 22:23

British International Investment, the UK's development finance institution and impact investor, has announced a loan commitment of $50 million to BRAC Bank, a leading SME bank in Bangladesh, to support small businesses and women entrepreneurs.

The loan will provide vital funding to support growth of micro-, small- and medium enterprises and women-led businesses - the bedrock of Bangladesh's economy, said a BII press release disseminated by British High Commission on Tuesday.

'This investment reinforces the UK's commitment to support inclusive and sustainable development in Bangladesh and is a great demonstration of the UK's modern economic partnership with Bangladesh,' said British high commissioner in Dhaka Sarah Cooke on the occasion.

She said that it would enable small businesses and female entrepreneurs in Bangladesh to take up more economic opportunities and create more jobs.

There are about 10 million MSMEs in Bangladesh, employing roughly 80 per cent of the population and responsible for half of the country's industrial output.

The central bank of Bangladesh recognises the segment as indispensable for overall economic development in the country and specifically women entrepreneurs as crucial for attaining sustainable economic growth and poverty reduction.

However, access to finance has been a major challenge, with only 20 per cent of total loans in the country going to SMEs, including female-owned enterprises, according to BRAC Bank's data.

Half of BII's loan will be directed to MSMEs and the other half will target women entrepreneurs with an expectation to reach up to 3,500 MSMEs and women entrepreneurs in total and accelerate their business growth.

This investment supports UN SDG 5 on Gender Equality, SDG 8 on Decent Work and Economic Growth, as well as SDG9 on Industry, Innovation and Infrastructure, said the release.​

 

[Saif]

Govt working hard to facilitate business for MSMEs: Titu

The government has been working tirelessly to ease business for the Micro, Small, and Medium Enterprises (MSMEs), aiming to enable small and medium entrepreneurs to conduct business and trade without facing any barriers. The State Minister for Commerce Ahasanul Islam Titu opined this during a semi

thefinancialexpress.com.bd

Govt working hard to facilitate business for MSMEs: Titu
FE ONLINE REPORT
Published :
May 14, 2024 20:59
Updated :
May 14, 2024 21:17

The government has been working tirelessly to ease business for the Micro, Small, and Medium Enterprises (MSMEs), aiming to enable small and medium entrepreneurs to conduct business and trade without facing any barriers.

The State Minister for Commerce Ahasanul Islam Titu opined this during a seminar held on Tuesday at the FBCCI Icon in the capital.

The seminar was jointly organised by FBCCI, CPD and GIZ Bangladesh.

While delivering his speech as the chief guest, the State Minister for Commerce said the government is working to simplify the process so that small traders can operate their business without facing any hurdles.

He stressed the responsibility to ensure successful and smooth business ventures and highlighted the government's focus on creating market access opportunities for traders.

The minister laid special emphasis on ensuring an industrial and investment-friendly environment in the country to build a developed and smart Bangladesh by 2041.

For this, the Ministry of Commerce will work in coordination with all the stakeholders including FBCCI, the country's development organisations and academicians, he stated.

Appreciating the strong contribution of the private sector in the economic progress of the country, Titu said that if the entrepreneurs had not dared to take risks, such rapid economic growth in Bangladesh would not have been possible.

He put emphasis on business process re-engineering to meet future challenges including facing the challenges of LDC graduation and Fourth Industrial Revolution (4IR).

Earlier, while delivering his speech, FBCCI president Mr Mahbubul Alam said that Bangladesh has a special opportunity to establish itself as the business hub of the South Asia and ASEAN region.

Bangladesh now has a domestic market of 170 million, and eventually, the country will become the ninth-largest consumer market in the world by 2030, the FBCCI president said.

"As a result, both local and international investors are now looking for opportunities to set up their businesses in the country. So, it is high time for the government to make the process smooth and business-friendly," Alam said.

Despite opportunities, businessmen face various domestic and international trade barriers, including regulatory issues, lengthy procedures, taxation complications, and financial instability. The FBCCI president urged the government to promptly address these issues.

While speaking as the special guest, executive chairman of BIDA, Mr Lokman Hossain Miah said that BIDA is working diligently to ensure a business-friendly environment in the country. Meanwhile, investors are getting more than 150 services from 38 agencies under one umbrella through the One Stop Service of BIDA.

The Deputy Head of Mission of the German Embassy in Dhaka, Mr Jan Janowski, spoke as a guest of honour at the seminar.

He expressed the hope that German investment would come here, highlighting the advantages and possibilities of investment in Bangladesh.

FBCCI panel advisor and the research director of the Centre for Policy Dialogue (CPD) Dr Khondaker Golam Moazzem presented the main article in the seminar.

His article suggests a rapid reduction in the length and complexity of obtaining and renewing licences for entrepreneurs while starting a business. To eliminate the complexity of renewing the certificate every year, he urged the government to take the initiative of giving the certificate for a period of three to five years.

Dr Moazzem emphasised making the licencing process completely digital to reduce the sufferings of the entrepreneurs.

FBCCI senior vice president Mr Md Amin Helaly conveyed the vote of thanks at the programme.

Among Others, the Panel Advisor of FBCCI Dr Mostafa Abid Khan (Former Member, Bangladesh Tariff Commission), Mr Ahsan Khan Chowdhury (Chairman of Pran RFL Group), Mohammad Muslim Chowdhury (Former Comptroller and Auditor General -CAG), Cluster Coordinator of GIZ Bangladesh Werner Lange, FBCCI Vice President Dr Joshoda Jibon Deb Nath, Mr Md Munir Hossain, FBCCI directors, business dignitaries, and govt officials were present at the programme.​

 

[Saif]

Inclusive finance & micro enterprise development in Bangladesh

Bangladesh's remarkable economic growth story is intricately woven with the rise of microfinance and its impact on poverty alleviation. Inclusive finance, a broader concept encompassing microfinance and other financial services for the underserved, has emerged as a powerful tool for empowering indi

thefinancialexpress.com.bd

Inclusive finance & micro enterprise development in Bangladesh
MATIUR RAHMAN
Published :
May 20, 2024 21:38
Updated :
May 22, 2024 21:19

Bangladesh's remarkable economic growth story is intricately woven with the rise of microfinance and its impact on poverty alleviation. Inclusive finance, a broader concept encompassing microfinance and other financial services for the underserved, has emerged as a powerful tool for empowering individuals, particularly those living in poverty, and fostering microenterprise development - the engine of rural growth and economic empowerment.

To read the rest of the news, please click on the link above.​

 

[Saif]

Microfinance institutions suspend loan instalment collection in flood-affected areas

Prioritising humanitarian assistance, microfinance institutions across the country have come forward to support the people in flood-affected areas by offering relief and financial aid

en.prothomalo.com

Microfinance institutions suspend loan instalment collection in flood-affected areas
Prothom Alo English Desk
Updated: 26 Aug 2024, 19: 02

Prioritising humanitarian assistance, microfinance institutions across the country have come forward to support the people in flood-affected areas by offering relief and financial aid. From the outset, the collection of loan installments from all members in these areas has been suspended.

In line with the directives from the government’s Microcredit Regulatory Authority (MRA), microfinance institutions have already begun distributing essential items, including emergency food and medicine, in coordination with local authorities.

The Credit and Development Forum (CDF), the national networking organisation for the microfinance industry in Bangladesh, is committed to provide assistance for relief operations and post-flood rehabilitation work in close collaboration with the government.

CDF has noted with great regret that certain groups have recently used various social media platforms to spread negative propaganda regarding microfinance institutions, falsely claiming that they are collecting loan instalments from those affected by the floods. CDF has expressed deep concern over these baseless, misleading, and deliberately malicious claims.

In reality, CDF member institutions are doing their utmost to support their members and the affected communities in the flood-hit areas. At the same time, communication is being maintained with clients, and initiatives have been taken to return their savings as needed.

In this challenging situation for the country, any form of false propaganda, rumours, or intentional dissemination of misinformation could severely disrupt rescue operations, relief distribution, and post-flood rehabilitation efforts -- outcomes that are highly undesirable. CDF urges everyone to refrain from engaging in such negative activities.

Yesterday, Saturday, representatives of Non-Governmental Organisations (NGOs) and community organisations met chief adviser of the Interim Government Dr. Muhammad Yunus. During the meeting, the chief adviser urged all NGOs to work together to address the severe flood situation affecting 11 districts in the northeastern and southeastern regions of the country. CDF member institutions are fully committed to achieving that goal.​

 

[Saif]

How digital payments are changing microfinance in Bangladesh

Bangladesh's financial services landscape has significantly transformed over the past decade, with the rapid shift from traditional cash-based transactions to digital payments. This evolution is particularly pronounced in microfinance, which has long been crucial in addressing financial inclusion

thefinancialexpress.com.bd

How digital payments are changing microfinance in Bangladesh
Matiur Rahman
Published :
Nov 12, 2024 14:58
Updated :
Nov 12, 2024 14:58

Bangladesh's financial services landscape has significantly transformed over the past decade, with the rapid shift from traditional cash-based transactions to digital payments. This evolution is particularly pronounced in microfinance, which has long been crucial in addressing financial inclusion, poverty alleviation, and economic empowerment. The rise of digital payments in microfinance marks a paradigm shift as it integrates technology with finance, creating opportunities for increased efficiency, transparency, and access.

Microfinance institutions (MFIs) in Bangladesh have traditionally operated through a network of field officers who would physically collect payments, disburse loans, and provide financial services to borrowers, primarily in cash. The growth of digital infrastructure, the availability of mobile technology, and the expansion of mobile financial services (MFS) have set the stage for the transition from cash to clicks.

Microfinance in Bangladesh has historically relied on cash-based transactions, where loan officers would travel to rural and semi-urban areas to disburse loans and collect payments. While this method effectively reached underserved communities, it was fraught with challenges. The physical handling of cash posed security risks, led to inefficiencies in loan disbursement and repayment, and resulted in delays in processing. Moreover, manual record-keeping increased the likelihood of errors and discrepancies.

Digital transformation refers to integrating digital technologies into all business areas, fundamentally changing how the business operates and delivers value to its customers. In Bangladesh's microfinance context, this transformation is marked by the adoption of mobile banking, online payment systems, digital credit scoring, and data analytics using third-party software for better decision-making. Initially, MFIs relied heavily on manual processes, which were time-consuming and prone to errors. With digitalisation, these processes have become faster, more reliable, and more transparent.

The advent of digital payments, primarily through mobile banking services such as bKash, Rocket, Nagad, and others, has enabled a fundamental shift. Microfinance institutions can now offer services digitally, allowing borrowers to receive loans and repay them through mobile devices. This transition has made transactions faster, more secure, and more transparent. Borrowers no longer need to wait for field officers to visit them, and loan officers can spend more time on activities such as customer support and financial education rather than cash handling.

A report by the United Nations Capital Development Fund (UNCDF) of 2019 mentioned that nearly all microfinance organisations in Bangladesh have embraced digitalisation, with only a few exceptions. Most institutions rely on loan management system solutions that integrate data from other applications, such as financial information systems (FIS), management information systems (MIS), and human resource information systems.

Many of these microfinance institutions (MFIs) use third-party loan management solutions provided by companies like Grameen Communication, Datasoft, and Benchmark. Around 75 per cent of organisations have implemented centralised, web-based, real-time loan management systems, with 81per cent utilising third-party services. Only 18 per cent of institutions have digitalised their loan disbursement and repayment processes, and 19 per cent have adopted cashless systems for loan disbursement, repayment, and savings collection.

While all institutions use financial accounting software, 81 per cent have integrated human resource information systems, and 38 per cent use inventory and asset management systems. Despite these advancements, a survey revealed that 77 per cent of institutions have yet to make immediate plans to implement artificial intelligence in their operations.

However, reviewed literature revealed that approximately 60 per cent of the microfinance transactions in Bangladesh have transitioned to digital platforms. This shift was primarily driven by the rapid expansion of mobile financial services and the increased penetration of smartphones, particularly in rural areas. The shift to digital payments has been most prominent among younger borrowers and urban microfinance clients. At the same time, traditional cash-based methods continue to hold sway in more remote and less technologically connected regions.

This figure highlights the shift toward digitalisation, with more than half of all microfinance transactions conducted via digital platforms. The most significant digital adoption has occurred in loan disbursement, where 68 per cent of transactions are now performed digitally. This trend signifies a broad acceptance of digital payments within the sector, though certain areas, such as insurance premium payments, still lag.

One of microfinance's primary goals is to promote financial inclusion by providing low-income individuals and marginalised communities with access to financial services. The shift to digital payments in microfinance has significant implications for financial inclusion in Bangladesh.

Digital payments enable MFIs to reach underserved communities more effectively.

Physical bank branches are scarce in many rural areas, and traditional banking services are often inaccessible to low-income individuals. However, with the proliferation of mobile phones and the widespread availability of mobile banking services, even individuals in remote areas can now access financial services. This reduces the dependency on physical infrastructure and allows more people to participate in the formal financial system.

Furthermore, digital payments reduce the cost of transactions for both MFIs and borrowers. Traditional cash-based transactions involve transportation costs, manual labour, and theft risk. Digital payments, conversely, are cost-effective and secure, reducing the overall cost of providing financial services. This allows MFIs to pass on the savings to borrowers through lower interest rates or reduced fees.

For borrowers, the convenience of digital payments is another critical factor in promoting financial inclusion. Borrowers can make payments at any time, from anywhere, without relying on a field officer's presence. This flexibility is particularly beneficial for individuals with irregular income patterns, such as small farmers, informal sector workers, or women engaged in home-based enterprises.

The transition to digital payments has also significantly impacted the empowerment of women, who comprise most of the microfinance clients in Bangladesh. Many women, particularly in conservative rural communities, face restrictions on mobility and may not have been able to engage in traditional cash-based transactions easily. Digital payments provide a more discreet and convenient way for women to access financial services, helping them gain greater economic independence and autonomy.

The shift from cash to clicks has introduced several operational efficiencies for microfinance institutions. Digital payments streamline the loan disbursement and repayment processes, reducing the need for manual intervention and minimising the chances of human error. This has led to quicker loan processing times and turnaround for loan approval and disbursement, enhancing the overall experience for borrowers.

Moreover, digital payments improve transparency in microfinance transactions. One of the challenges associated with cash-based transactions is the need to track and audit cash flows. Digital payments, on the other hand, provide a digital footprint for every transaction, making it easier for MFIs to monitor and audit their financial activities. This helps reduce fraud and corruption, which can be a concern in cash-based systems, particularly in large-scale microfinance operations.

In addition, digital payments allow for real-time monitoring and data collection. MFIs can track borrowers' repayment behaviour, assess credit risk more accurately, and use data analytics to improve decision-making processes. This helps identify potential defaulters early and enables MFIs to offer tailored financial products based on individual borrowing patterns and repayment history.

Digital payments offer greater transparency and accountability for borrowers. Through mobile apps or SMS notifications, borrowers can easily track their loan disbursement, repayment schedules, and outstanding balances. This reduces the risk of misunderstandings or disputes regarding loan terms and repayment amounts, enhancing trust between MFIs and their clients.

The transition from cash to digital payments in microfinance has broader implications for Bangladesh's economy. By increasing financial inclusion, digital payments contribute to the formalisation of the economy. As more individuals and small businesses engage in digital financial transactions, they become part of the formal financial system, which helps the government and regulatory authorities track economic activities more effectively. This formalisation can lead to a broader tax base and improved economic planning.

Digital payments in microfinance also support the development of a cashless economy, a key policy objective of the Bangladesh government. By reducing the reliance on cash, digital payments help to reduce the costs associated with cash handling, such as printing and transportation of physical currency. Moreover, a shift toward a cashless economy can help reduce the size of the informal economy, where cash transactions often go unreported and untaxed.

Another economic benefit of digital payments in microfinance is the increased efficiency in financial intermediation. By reducing transaction costs and improving operational efficiencies, digital payments allow MFIs to scale their operations and reach more borrowers. This, in turn, can lead to greater access to credit for small businesses and entrepreneurs, stimulating economic growth and job creation in rural and underserved areas.

Digital payments also play a significant role in promoting financial literacy. As individuals become accustomed to mobile banking apps and digital payment platforms, they gain exposure to a broader range of financial services, such as savings, insurance, and investment products. This can improve financial decision-making and better financial management practices, contributing to overall economic stability.

While the transition to digital payments in microfinance presents numerous benefits, it has challenges. One of the primary obstacles is the digital divide, particularly in rural areas where access to smartphones, the internet, and digital literacy may be limited. Although mobile phone penetration is high in Bangladesh, there are still regions where access to mobile financial services is constrained by inadequate infrastructure or low levels of digital literacy.

Another challenge is the trust deficit among some borrowers, particularly older individuals or those with limited technology experience. Many borrowers are accustomed to cash-based transactions and may hesitate to adopt digital payments due to concerns about fraud, data privacy, or the security of their financial information. Overcoming these trust barriers will require concerted efforts from MFIs, mobile financial service providers, and government authorities to promote digital literacy and build confidence in the security and reliability of digital payments.

Regulatory challenges also exist regarding data privacy, consumer protection, and cybersecurity. As the digital financial ecosystem expands, there is a growing need for robust regulatory frameworks that protect consumers' rights and ensure the security of digital transactions. The Bangladesh government and regulatory authorities must work closely with industry stakeholders to develop and enforce regulations that promote innovation while safeguarding the interests of borrowers.

The transition from cash-based transactions to digital payments in microfinance is reshaping Bangladesh's financial landscape. This shift offers numerous advantages, including increased financial inclusion, operational efficiency, and transparency.

Digital payments enable microfinance institutions to reach underserved communities more effectively, reduce transaction costs, and promote financial independence, particularly among women. The broader economic implications of this transition are equally significant, as digital payments contribute to the formalisation of the economy, the development of a cashless society, and the promotion of financial literacy.

However, challenges remain in ensuring that the benefits of digital payments are accessible to all, particularly in rural areas where the digital divide persists. Addressing these challenges will require collaboration between MFIs, mobile financial service providers, government authorities, and other stakeholders. By investing in digital infrastructure, promoting digital literacy, and developing robust regulatory frameworks, Bangladesh can continue to harness the power of digital payments to drive economic growth and financial inclusion in the years to come.

The writer is a researcher and development worker.​