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“Fintech start-ups can provide a range of cost-effective digital financial services”

An interview with Dr Iftekhar Ahmed Robin, Joint Director at Bangladesh Bank

Started his career journey as a journalist in the Daily Ittefaq, Dr. Iftekhar Ahmed Robin showed his interest in reporting on the area of business, financial market and fintechs. Later in 2005, Dr. Robin joined the country’s Central Bank as an Asst. Director. In his 15 years of banking career he played a professional role in banking industry. The experienced banker Dr. Robin had his Ph.D in economics and finance from Curtin University, Australia in 2016.

Currently, Dr. Iftekhar Ahmed Robin is working as the Joint Director of Bangladesh Bank. In his recent interview with Fintech, he shared his vast knowledge on financial and technology industry. Here is the excerpt for the readers.

Start telling us about yourself. How did you start your career in financial sector?

After graduation from the Department of Economics, Jahangirnagar University in 1997, I started my career as a Journalist in the Daily Ittefaq, the most circulated national daily in Bangladesh at that time. As a reporter, I was mostly assigned for writing reports on the current developments in the area of business, financial market and financial technology. Apart from financial reporting, I covered many historic events, notably Bangabandhu Killing Special Trial and National Grand Reception of Professor Amarta Sen in Dhaka after winning the Nobel Prize in Economics (1998) as the first Bangalee Economist. Later, I joined in the Central Bank (Bangladesh Bank) as an Assistant Director in 2005 and I got the opportunity to contribute in policy making for the financial sector in Bangladesh. My experience in central banking (15+ years) includes a number of roles in the development and application of Fintech Solutions, Financial Analysis, Financial Stability, and macrofinancial developments.

You have Ph.D in economics and finance. Tell us a bit about your experience doing Ph.D and why did you choose this particular area of research?

Having academic background in Economics along with my experience in central banking, I wanted to be an expert in the field of banking and financial technology. Therefore, I went for higher education abroad to acquire advanced knowledge and skills on financial technology. In both Masters (Erasmus University Rotterdam, Netherlands) and PhD (Curtin University, Australia) theses, I chose banking and financial technology as my area of research because our country needs experts with advanced knowledge on financial technology to face the challenges of 4th industrial revolution which is a fusion of advances in artificial intelligence (AI), robotics, and other technologies. My doctoral research finds that the usage of Fintech plays a pivotal role in increasing efficiency and productivity of the financial sector in Bangladesh, especially on the face of deregulated policy environment.

As a Joint Director, how do you contribute in bringing changes in BB?

Financial sector is the backbone of an economy and we must keep pace with the rapid advancement of Fintech solutions. We as a team have been developing policy regulations and applications for digital financial market. Installation of the Bangladesh Automated Cheque Processing Systems (BACPS) and Bangladesh Electronic Fund Transfer (BEFT) replaces the paper-based payment methods with a paperless process to ensure secured, faster and cost-effective transactions and operational efficiency.

Introduction of National Payment Switch and Real Time Gross Settlement System facilitates the common electronic platforms for settlement of all types of transactions through electronic devices on ‘real time’; for example, inter-bank transactions, call money market transactions originating from any delivery channel, ATM, POS (Point of Sales) terminals, mobile devices and online payment gateways. At present, banks in collaboration with Fintech start-ups can provide a range of cost-effective digital financial services e.g., internet banking, mobile banking and digital wallet accounts through agent banking, automated teller machine (ATM) to the unbanked people in remote areas.

Currently, we are working on developing new business model for digital financial services where Fintech companies will act as payment system operators (PSO), called ‘White Level ATM and Merchant Acquirer (WLAMA)’. Fintech companies will install and manage ATMs even in the rural areas where there is no bank branch or bank ATM. The Fintech ATMs will accept bank cards as well. As Merchant Acquirer, Fintech companies will develop an electronic payment ecosystem where payment can be initiated and received using POS machines. This electronic payment mechanism will be available in rural areas as well.

What are the steps Bangladesh Bank has taken to boost money flow amid COVID19 outbreak?

Since COVID19 outbreak has slowed down the entire world economy, many people have lost their jobs. As a result, demand side of the economy has fallen sharply in Bangladesh as well. Therefore, the economy needs a big push in terms of money flow for productive investment so that people are employed again in the production system and, eventually the economy again returns to its equilibrium position. To bring back the economy to its normal pace, Bangladesh Bank has efficiently fine tuned its monetary policy instruments to ensure sufficient liquidity in the financial sector through reducing bank rate (from 5% to 4%) and the regulatory requirement for cash reserve of banks (from 5.5% to 3.5%), facilitating incentives to businesses, for instance, interest subsidy on bank loans, providing guarantee for disbursing loan to agriculture, small and medium enterprises and special fund for export oriented industries.

What are the implications of BB’s stance to reduce cash reserve requirement (CRR)?  

As a regulatory requirement of Bangladesh Bank, banks and financial institutions (FIs) are required to deposit a certain percentage of their total demand and time liabilities as cash in their current account with Bangladesh Bank. This is called Cash Reserve Ratio (CRR). This is a mandatory requirement and banks and FIs are being panelized by the central bank due to failure in maintaining the CRR. As a result, banks and FIs cannot invest the amount (kept as CRR) in businesses and they are not given any return for this deposit in the Central Bank. In order to increase the investment capacity of the banks and FIs, Bangladesh Bank reduces the CRR from 5.5% to 3.5% so that they have more liquidity especially during this economic downturn to utilize the fund for investment in prospective businesses.

How far you advance with digital platform since digital technology like MFS, DFS, agent banking, cashless transactions etc. are the common scenarios nowadays. How do you manage all those challenges as a Central Bank?

Since the demand for digital financial services has been increasing very fast, we are moving towards new business model. We will expand our digital platforms in addition to current bank-led mobile technology based and mobile operators’ dependent financial services [MFS, Agent banking etc.]. More Fintech solutions will be available soon across the country especially in rural areas. Fintech companies will be involved in establishing and managing ATMs where bank cards also will be accepted. Cashless transactions become popular and easy especially using BEFT software. All types of payments, person to person (P2P), person to business (P2B), business to person (B2P), and government to person (G2P), person to government (P2G) and business to business (B2B) are settled through BEFT and mobile apps.

What changes you want to see in banking industry in the next 5 years?

In the next five years time, banking industry in Bangladesh would adopt more advanced digital applications to deliver their services. Digital financial services will not be limited to payment or money transfer using mobile devices but it will include other banking activities such as lending. An individual can submit a loan application or an insurance proposal online with all the supporting documents digitally and the verification and approval process can be completed within minutes. Digital payment ecosystem (using POS machines, ATMs of Fintech companies) will reach to the doorstep of the rural unbanked people. Fintech-enabled payment processing will also reduce the amount of cash required for the printing and distribution of currency notes by the Central Bank. Like other developed countries, Australia for example, we may approve digital money, cryptocurrency etc. In order to develop skills on digital money market Bangladesh Bank has organized training courses for its officials with the Digital Frontiers Institute of the Fletcher School, Tufts University, USA on digital money market, Blockchain and cryptocurrency, Fintech and mobile money operations.

Thank you very much for your valuable time to Fintech.

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