Bank branches in rural areas as opposed to urban areas declined by 11.5 percentage points in the past 18 years despite the central bank’s initiatives to ensure rural people’s access to finance.
A Bangladesh Bank research, ‘Survey on Impact Analysis of Access to Finance in Bangladesh banks’, shows that in 2000, there were 6,119 bank branches, with 2,460, accounting for 40.2 per cent, in urban areas and 3,659 in rural areas, accounting for 59.8 per cent.
However, the percentage of bank branches in urban areas increased to 51.7, with the percentage of branches in rural areas declining to 48.3 as of June 2018. But the total number of branches increased by 65.3 per cent to 10,114 in 18 years — with 3,944 in urban areas and 4,890 in rural areas.
The distribution of bank branches in rural and urban areas implies that the branches were largely concentrated in the urban areas, the BB report said.
Former chairman of Association of Bankers, Bangladesh Mohammed Nurul Amin told New Age that the banks were mainly focused in expanding their branches into areas where the branch would become profitable quickly.
In terms of profitability, it takes 3-5 years for a rural branch to become profitable whereas an urban branch could become profitable within a year, said Amin, adding , ‘that’s why many of the banks often remain reluctant to open branches in rural areas.’
The central bank in its survey report mentioned upgradation of rural areas into urban areas as a reason behind the decline in ratio of rural branches against urban branches.
Echoing with the BB’s observation, Amin said that setting up branches in the urban areas was the preference of banks in their early stage.
Although the banks afterwards started expanding branches in rural areas, the ratio remained poor, he said.
Besides, he also mentioned that the foreign banks have only a few branches in the rural areas.
Rural areas were also deprived in terms of getting advances or loans as banks disburse 10 per cent of their advances to the rural areas although the entities were collecting 20 per cent of deposits from the areas, showed the BB report.
So far, banks received Tk 2,14,280 crore out of Tk 10,36,640 crore deposits from the rural areas whereas they disbursed Tk 86,310 crore out of Tk 8,47,020 crore advances in the rural areas.
‘The demand for finance of the small and cottage industries are mostly fulfilled by the microfinance institutions in the rural areas,’ Amin said.
The ratio of bank branches per 1,00,000 persons increased from 4.98 per cent in December, 2009, to 6.04 per cent in March, 2018.
Besides the BB’s move to ensuring access to finance for the rural areas through banks, agent banking, mobile finance services and microfinance institutions were also playing vital role in this respect.
From the customer end, lack of awareness, low income or assets, social exclusion, and financial illiteracy act as barriers to accessing financial services, it said.
From the structural point of view, distance from the bank branch, branch timing, cumbersome documentation and other procedures, unsuitable products, staff attitudes were common reasons for exclusion.
On the other hand, flexibility, availability, and other attractive features of informal credits make such credits popular and despite the fact that informal credit was costlier than other sources of credit, the report said.
To conduct the survey, BB interviewed 2,872 individuals of difference age, education and financial state.
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