A DECLINE in the number of bank branches in rural areas against urban areas by 11.5 percentage points in 18 years comes with worries as this goes against the central bank’s initiatives to ensure access of rural people to formal financing. A Bangladesh Bank research, as New Age reported on Monday, shows that there were 6,119 bank branches in 2000, with 2,460 branches accounting for 40.2 per cent in urban areas and 3,659 branches accounting for 59.8 per cent in rural areas. But as of June 2018, when the number of branches increased by 65.3 per cent to 10,114, branches in urban areas increased to 51.7 per cent with 3,944 entities and branches in rural areas decreased to 48.3 per cent with 4,890 entities. The distribution of bank branches implies that banks are largely focused on urban areas, which harms the government’s efforts to afford people in rural areas access to formal banking. This also comes in conflict with the banks collecting 20 per cent of deposits from rural areas while they have disbursed 10 per cent of their advances to people in such areas — having so far received Tk 10366.4 billion from rural areas yet disbursing Tk 863.1 billion out of Tk 8470.2 billion advances.
The central bank report, however, explains the decline in bank branches in terms of percentage by way of the government’s upgrading some rural areas into urban areas that count the branches having already been there as urban entities. Although the explanation sounds a bit implausible as such upgrades do not take place quite often, banks are reported to be expanding more in urban areas in view of profitability in about a year while banks need to run branches in rural areas for about 3–5 years to become profitable. This largely explains the reason for the reluctance of the banks at opening branches in rural areas. Yet, agent banking seems to be doing job of banks in rural areas without opening any branches there. But agent banking is still costlier, slightly though, than proper banking. In the absence of access to formal banking, people in rural areas often borrow from moneylenders, who are the biggest sources, but at 24 per cent interest, as New Age reported in April. The second biggest sources of microcredit institutions and non-governmental organisations are also reported to be charging a 15 per cent interest. It was earlier reported that borrowers even had to sell or mortgage their assets and even reduce their food consumption to repay the loans taken from microcredit institutions and non-governmental organisations. The haplessness of people in rural areas, especially in disaster-prone, are said to have resulted from no access of these people to formal banking system.
It is not wise, and not ethical, to subject people in rural areas to costly financing. The government, under the circumstances, must afford people in rural areas access to financing in the formal sector. While the government needs to address the issue of awareness, social exclusion and financial illiteracy, which serve as barriers to formal financial services in rural areas, it must also look into issues of distance, bank timing, cumbersome procedures and other inconveniences for rural people while forcing banks to open more branches.
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