Umpteen low-paid wage-earners will be able to access bank borrowings through the digital platform as several fintech firms are set to start latest financing operations in Bangladesh.
Terming this as a welcome development, Prof Syed Farhad Anwar of the Institute of Business Administration told the FE that digital borrowing is very much needed to enable thousands to provide access to liquidity.
"Such digitization is part and parcel of a country striving to be a developed country."
Banks need to go extra mile through using digital platforms, he adds.
But he also voices a note of caution that proper data documentation needs to be carried out by the digital process to avoid misuse.
Already, a UK-based fintech company named AGAM completed piloting under which borrowers got loans after processing the same through an app devised by the firm.
Its first pilot project, backed by an international NGO, Swiss Contact, was launched in 2021 in collaboration with Prime Bank.
Meanwhile, bKash, a leading fintech company, is also providing loans through their app. City Bank Ltd is their partner.
Another platform is Delivery Tiger, which has signed an agreement with BRAC Bank to provide e-loans to SMEs.
Dana fintech has also devised an app for processing loans sanctioned by banking and non-bank institutions. This fintech firm offers a solution that enables banks and financial institutions to provide digital lending services to end-customers.
It features proprietary credit scoring for individuals and a specialized scoring system for farmers, digital onboarding solutions, and more.
"We have an agreement with The Prime Bank Ltd. Borrowers can apply through our app to get access to loans offered by Prime Bank," Shabnam Wazed, CEO of the AGAM, told the FE.
She informed that already the app was tested through a pilot project.
"The result of the project is satisfactory as we got very good response," she said, adding that loans amounting to Tk 2.4 million was disbursed through the test run of the operation.
"AGAM is a next-generation fintech advancing the lives and livelihoods of individuals and SMEs. Its universal platform is designed for leading banks focused on deploying advanced digital services, delivering a positive impact for customers while generating economic growth," Ms Wazed said in describing the company's operational modalities.
Its platform is anchored in a dynamic credit-scoring system (III), based on the LARC Algorithm ((Literacy, Access, Resilience, Confidence - AGAM's scoring technology) to create credit histories that provide better futures.
A borrower needs to be registered with the app and to answer some set MCQ-type questions. An analysis of the answers automatically determines the eligibility of the borrower.
Underprivileged groups like RMG workers, farmers, salespersons can easily borrow money through using apps.
Though these low-wage earners are a huge segment of the population, they are usually deprived of having access to the liquidity as it is required to cross a lot of bureaucratic tangles to get a loan.
According to analysts, to be more successful and to reduce the size of unbanked population, it needs to focus on e-loans as the unbanked population is like the devil to the growth of financial inclusion.
As per World Bank study 2017, 1/3 of the global population is unbanked with 1.0 billion in Asia itself.
A few reasons to be focused on for people being unbanked are: lower financial literacy, unavailability of bank branches, expensive transaction cost for banks etc.
