Governance Challenges in Mobile Financial Services Sector in Bangladesh

Mobile Financial Services (MFS) have recently played a crucial role in fostering an inclusive financial sector in various countries worldwide, particularly in developing nations. MFS operations were launched in Bangladesh in 2011 with the objective of extending financial services to rural and marginalized populations, especially women and low-income individuals, who are often excluded from the conventional banking system. In addition to facilitating swift and convenient financial transactions, MFS plays a significant role in the Bangladeshi economy by enabling the direct, corruption-free disbursement of government social safety net allowances and incentives to beneficiaries, and by supporting business transactions for farmers, small traders, and women entrepreneurs. Simultaneously, it has created a significant number of employment opportunities. Despite becoming a vital and promising sector for the Bangladeshi economy, evidenced by its growing customer base and transaction volume, the MFS industry is beset by multifaceted limitations and challenges. Analysis of the research data reveals alarming deficits including irregularities and corruption across all indicators of good governance in the MFS sector. A lack of long-term planning for the development and growth of this sector is evident. Key challenges include a tendency for ad-hoc decision-making, weak policies, legislative gaps, and the influence of political and vested interest groups. A section of MFS operators, regulatory and supervisory authorities, and politically influential figures have engaged in a tripartite collusion to achieve policy capture. They have even influenced the oversight mechanism and used state institutions to monopolize the sector. Consequently, this has created an uneven and restricted competitive landscape, hindering the sector's proper development. Simultaneously, it has imposed a financial burden on the public through exorbitant service charges and created opportunities for the misappropriation of customer and state funds through irregularities and corruption.

The research indicates that customers pay approximately 7 to 15 times more in service charges for MFS compared to commercial banks. In 2024, for "cash-outs" totaling BDT 5.5 lakh crore, an estimated maximum of BDT 10,197 crore was collected from customers in service charges. In contrast, commercial banks would have collected an estimated BDT 639 crore for the same volume of cash withdrawals. Furthermore, MFS service charges in Bangladesh are the highest among several neighboring countries.

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