Long wait for poor to get cash set to end with new fund transfer software

Inspired by the success of a homegrown digital fund transfer platform, the Bangladesh Bank is now working on a much bigger data processing software to better manage public transactions by making the process more cost-effective and less time consuming.

A nine-member team from the central bank is developing the software that is expected to have a capacity to settle 46 lakh electronic fund transfers (EFTs) every hour. The central bank has already conducted a successful trial run of the software, using a regular desktop computer, and is well on track to launch its full-fledged operation by September this year.

This is going to be the next game-changer for government expenditure management and core banking settlement – inter-bank cheque clearing, officials at the Bangladesh Bank say.

In manual fund transfers, the government had to spend 25% of the fund as operating cost for every disbursement as both the government and banks had to deploy many employees to process the transactions, the central bank officials said.

The number has now gone down significantly thanks to the digital system.

"We are always keen to go for more digital interventions. The implementation of the new platform will make disbursement of public funds possible within a very short time, drastically reducing the involvement of manpower. It will also make fund disbursement more cost-effective," Md Serajul Islam, executive director and spokesperson of the Bangladesh Bank, told The Business Standard.

Before this move, the same team initially got success in introducing another software-based fund processing platform – Government eTransaction Processing Hub (GeTPH). It can process 6 lakh transactions in an hour. Previously, the central bank was capable of settling only more than one lakh transactions a day using the core banking solution.

A central bank official, seeking anonymity, spoke highly of the move to develop the new electronic fund transfer platform. "This move is huge. We are already capable of settling six lakh transactions per hour through GeTPH. Now we are looking forward to settling more than 46 lakh per hour through Nikash. We are working hard to ensure better management of government expenditures."

The government aims to make all vendor payments of all its functionaries and other autonomous bodies such as public universities and payments related to all development projects, and disburse salaries of teachers and officials of all MPO-listed schools and colleges digitally and the new platform, once implemented, will greatly help this purpose.    

Currently, the government has a demand for over two crore EFT transactions per month, central bank officials told TBS, adding the Bangladesh Bank wants to enhance its capacity to complete five crore electronic fund transfers a month.   

A major success

In a bid to boost the government's financial inclusion efforts, the central bank in October 2019 introduced the software-based fund transfer platform GeTPH.

It helped settle almost all of the public payments made to individuals digitally in 2021 – salaries of government employees, cash support to the poor and the marginalised, and stipends to students.

Over Tk90,000 crore was disbursed to 2.67 crore beneficiaries through the platform last fiscal year, according to data obtained from the central bank.

The central bank started to transfer salaries to government employees in 2015 on a limited scale through the Bangladesh Electronic Fund Transfer Network (BEFTN), replacing the manual system that took three to five days.

In the first year, the central bank processed only 32,489 units of data involving public fund transfers, which stood at 13.39 crore last year, posting a 350% year-on-year growth, says the central bank.

The electronic system of fund transfer settles transactions through the EFTN.

It enables beneficiaries to receive funds within a day, which earlier took 3-6 months in the paper-based manual system, Bangladesh Bank officials said, adding it also made fund transfer cost-effective and helped eliminate corruption while distributing funds under social safety net programmes.

In the fiscal 2020-21, the government disbursed Tk13,126 crore under the 16 social safety net programmes such as allowances for the elderly, lactating mothers, freedom fighters, widows, adults, and persons with disability. If the government wanted to settle these transactions manually, 25% of the fund – around Tk3,282 crore – would have to be spent as operational costs.

The manual process was really time-consuming and required a big involvement of manpower as the process included different levels of officials from the ministry to the Union Parishad to disburse funds.

Now no cost is required for the transfer of funds as the payments are through banking channels. The government, however, counts Tk0.70% as an expense in case the transaction is made through a mobile financial service (MFS).

"This technological advancement saves more than 25% of the total fund, which was previously spent as operational costs. So, in terms of money and time, the software has a great impact in minimising the government expenses," Abdur Rauf Talukder, senior secretary of the ministry of finance, said at the grand launching ceremony of GeTPH in December last.

"Previously, the distribution of government allowances to individuals took three-six months before, but now it is a matter of a click only," he added. 

Besides there were wide-spread allegations that local-level public representatives manipulated the data of beneficiaries to embezzle funds. But the new platform transfers the money to the account-holders directly after the central bank receives the fund from the government, a central bank official said.

Every beneficiary now has to open accounts with either banks or mobile financial service (MFS) providers. The list of the accounts is preserved with the central bank's platform. And the new platform transfers the money to the account-holders directly after the central bank receives the fund from the government.

The transfer of the fund from the government end to the central bank's platform is highly secured as transaction-related data is sent following an encrypted model.

BFTN's renovation

The new software, proposed to be named Nikash, is being developed by renovating the Bangladesh Electronic Fund Transfer Network (BEFTN) software.

Seeing the huge success of GeTPH, the Bangladesh Bank was looking forward to renovating the BEFTN and turned to its supervisory firm. However, the company demanded $1.2 million as renovation fee, prompting the central bank to look for alternatives.

Then the engineers of the central bank took the challenges of the renovation as an opportunity and finally they are on the way to success.

Silver medal-winning team

A five-member team of the central bank, mostly working for the computer cell at the central bank's Motijheel office, developed GeTPH – who are also engaged in developing "Nikash" – were awarded the Bangladesh Bank employee award-2019 last month.

The team members are – Senior System Analyst Mohammad Rahat Uddin, Senior Programmer Abu Sadat Mohammad Yasin, programmers Md Masud Rana and Md Nurul Islam Molla, and Joint Director AKM Mukhlesur Rahman.