Deposits of extreme poor in Tk10 accounts fall

The deposits to Tk10 bank accounts, also called no-frill accounts, of the extreme poor fell by Tk104 crore in just a year as the account holders had to withdraw the money to survive the pandemic blues.

The central bank's Jan-Mar quarterly data show that the total number of no-frill accounts belonging to the extreme poor increased by 5 lakh, and reached 32 lakh at the end of March this year.

Compared to the Jan-Mar quarter last year, the deposits to the accounts dropped by 34% and reached Tk218 crore at the end of March this year.       

Contacted by The Business Standard, Nazneen Ahmed, senior research fellow at the Bangladesh Institute of Development Studies (BIDS), said, "Since the total number of accounts increased but deposits fell, it is clearly understood that people had to take recourse to the tiny savings they had to survive the pandemic."      

She said the pandemic-led income fall is the prime reason for people resorting to savings. On the Tk10 account rise, the researcher said since the poor need to have an official transaction channel to get government aid, the number of no-frill accounts could have spiked.   

Apart from the ultra-poor, farmers, freedom fighters, students, apparel workers and the beneficiaries of social safety net programmes use the no-frill bank accounts. One third of the accounts is with the state-owned Sonali Bank, while the bank has half of the total no-frill deposits.

The total no-frill deposits by farmers, apparel workers and other marginalised people amounted to Tk2,381 crore at the end of March this year – Tk4 crore less than the amount in the corresponding period last year.   

The latest central bank updates reveal that the farmers' balance to no-frill accounts is Tk422 crore, while freedom fighters have Tk560 crore, social safety net beneficiaries Tk687 crore and apparel workers have Tk175 crore in deposits.   

The government provided loans to farmers and small entrepreneurs from a Tk200 crore refinancing scheme in an effort to boost the rural economy. The loan disbursement in this segment through the Tk10 bank accounts dropped 37.84% in March compared to the corresponding period last year.

The Bangladesh Bank noted that the decline in loan disbursement over the year was potentially due to sluggish demand during the Covid-19 pandemic.

"As the January-March quarter shows an increasing trend than the previous one, an expansion of such loans is expected in the neo-normal conditions after the pandemic situation," added the central bank in Wednesday's report.

The Bangladesh Bank says no-frill accounts have been playing a significant role in maintaining the livelihoods of underprivileged people during the Covid-19 pandemic, especially in a disbursing of government aid to various segments of people.

"Despite severe constraints on economic activities, an annual increase of 9.98% in the number of no-frill accounts indicates visible progress in the financial inclusion of marginal people," it added.