ABSTRACT

Policies and interventions for financial inclusion are guided by the argument that in an open and efficient society the entire population should have unrestrained access to public goods and services such as banking services. Financial inclusion is therefore defined as the availability of banking and payment services to the entire population without discrimination of any type. Subsequently, the indicators used for financial inclusion mostly attempt to measure the coverage of formal financial services. However, in Bangladesh, while one third of the adult population still remains outside the formal financial systems, more than two-thirds participate in different forms of financial exchange through services provided by other channels, including Micro-finance institutions and, lately, the Mobile Financial Services. Furthermore, the Bangladesh experience also suggests that for financial inclusion strategies to be fruitful, it is essential that the strategies are adopted to the needs and demands of the target population (for instance, financial services for personal transactions or for business transactions that are unique for small and medium enterprises and for farmers), the demography of the target population (men and women), cultural and social norms. The market systems framework in this context provides an excellent foundation to analyze the demand and supply, rules and support services that dictate financial inclusion of the poor households. Based on secondary literature review and findings from primary investigation, the authors analyze the case of financial inclusion in Bangladesh and draw our attention to the policy directions that are required to sustain and foster an inclusive growth of the financial service delivery systems.