Expanding rural banking services

BANKING in Bangladesh has a heavy urban bias. The country's 30 commercial banks (PCBs) have 72.55 per cent of their branches in the urban areas and only 27.5 per cent in the rural areas. The foreign banks have no presence in rural areas. The state-owned banks have been progressively winding up their operations from rural areas. But Grameen Bank and others engaged in non-conventional banking services in the rural areas report high degrees of recovery or success in their loan operations. With easy access to banking services, the rural areas would be fast growing and diversifying economically with positive impact of the same on income generation and poverty reduction while the banks would get dependable clients.

Clearly, the banks must think up innovative ways to extend their services to rural areas for the people of these areas to climb out of the poverty trap. This is a challenge facing the country's banking sector but it needs to be seen as an opportunity also as the success rate of lending activities by some non- government organisations in rural areas has shown. According to various studies, the rural areas provide substantial deposits to the banking system. Such mobilisation of deposits from rural areas could be much greater if the banks' presence in these areas was bigger.

The presence of the banks in rural areas is thin with marginal benefits to rural people. This is helping economic inequalities and contradicting the principle of extending banking services uniformly to all areas. Thus, the banks need to take greater interest in expanding their services to rural areas in their own business interest of greater deposit mobilisation and loan operations. The Bangladesh Bank is expected to be a facilitator in expanding the network of rural banking services.

http://nation.ittefaq.com/issues/2008/06/27/news0618.htm

Business Financial Services

Expanding rural banking services