In a recent conversation at the Policy Research Institute, we asked a junior office assistant earning roughly USD 200 a month where he would turn for a loan to meet an urgent economic need. His response was stark. Formal retail banks were never an option; they do not exist in his economic reality. His choices were limited to high-interest borrowing from informal cooperatives or microfinance institutions; mechanisms that provide access, but often deepen vulnerability.
This is not an anecdote about individual exclusion. It is evidence of institutional failure and embedded financial exclusion. When a formally employed, salaried worker cannot access bank credit, the problem lies not in financial literacy or creditworthiness, but in the design of the financial system itself.
Almost as an afterthought, he showed his mobile phone. Based solely on transaction history, bKash had extended him a Tk 1,000 digital credit facility. The amount is small, but the signal is profound. A cashless platform, operating without branches, collateral, or paperwork, has recognised economic behaviour that traditional banks have ignored. The issue is no longer whether digital finance can reach the underserved, but whether cashless economic transformation can receive the necessary public policy support to emerge as a new lifeline for financial inclusion.
When formal banking fails the working poor
Globally, the shift toward cashless economies is no longer a distant aspiration; it is an active policy choice shaped by technology, demographics, and development priorities. India’s Unified Payments Interface (UPI) now accounts for nearly 49 per cent of all global real-time digital transactions, while mobile money platforms process over $4.6 billion in daily value worldwide. Brazil has pioneered branchless banking models through institutions like Nubank, which now serves over 80 million users, while Indonesia has leveraged digital platforms to scale nano-loans and expand access to credit for the underserved. Empirical evidence suggests such transitions not only enhance financial inclusion and reduce transaction costs but also contribute to economic formalisation. For Bangladesh, the imperative is clear: a well-sequenced cashless transformation must be viewed not merely as a technological upgrade, but as a strategic lever for inclusive development. Done right, a cashless transition can be transformative. Done poorly, it risks deepening existing inequalities.
Cashless systems as a tool for inclusion
Bangladesh has made notable progress in few avenues of the cashless economic space. Mobile financial services (MFS), introduced in 2011 under a central bank-led regulatory framework, have fundamentally changed how people transfer money. More specifically, if the current monthly trend prevails, MFS will process transactions of around $120 billion annually reflecting both its scale and growth with around 90 million active accounts. What began as a tool for simple person-to-person (P2P) payments has evolved into a broader ecosystem supporting wages, remittances, government transfers, and merchant payments. With a nationwide agent network reaching deep into rural areas, digital finance has proven cheaper, faster, and less constrained by geography than traditional banking.
Bangladesh’s uneven progress toward cashless finance
However, accomplishments on other notable avenues of the cashless space have been far limited. Bangladesh’s experience with QR-Code based transactions is far less impressive than countries such as Cambodia, Vietnam, India or China. Moreover, recent data underline both progress and enduring gaps. The 2024 Global Findex data for Bangladesh shows that only 43 per cent of adults (age 15+) have a financial account, whether through a bank, another financial institution, or mobile money, indicating that a majority of the population remains outside the formal financial system. While 21 per cent of adults hold a mobile money account and 23 per cent have a digitally enabled account, nearly half the adult population remains outside the formal financial system altogether. Card ownership is particularly low: just 8 per cent of adults have a debit card and only 2 per cent a credit card, limiting the growth of card-based payments. By comparison, China and India project a much more impressive performance, demonstrating what is possible when infrastructure, regulation, and consumer trust align.
Of late, Bangladesh is also entering the age of digital banks and has started disbursing nano loans through mobile financial service, but these new instruments are still in their nascent stage – and are in need for public policy support to effectively deliver.
Nonetheless, in spite of the notable attainments and visible weakness within the cashless economic space, the dynamism and prospects only in still hope. For Bangladesh, moving toward a cashless economy is not simply about replacing banknotes with apps or payment cards. It is about unlocking financial inclusion, lowering transaction costs and strengthening economic governance, without leaving anyone behind. This is especially pertinent when traditional banking system has experienced significant expansion without promoting real financial inclusion.
Structural bias in the financial system
For instance, our recent research for International Growth Centre (IGC) reveals that Bangladesh’s financial system remains highly unequal in its geographic reach and impact. Our findings uncover an uncomfortable truth: a mere 1.2 per cent of loan accounts command over 75 per cent of total lending in the country, reflecting an extreme concentration of credit access. Spatially, Dhaka and Chattogram dominate the system; holding approximately 65 per cent of all deposits and 78 per cent of total disbursed loans in 2024. These patterns are not merely the result of economic agglomeration; they point to a structurally skewed financial architecture that fails to intermediate capital effectively across Bangladesh’s geographic and economic peripheries.
In this specific context, microfinance has been traditionally seen as the fallback option to reach the unbanked or underbanked segment of the population, especially women. Yet, its existing operating model has not fully replaced informal markets, nor can it meet the diverse financial needs of a growing, urbanising economy.
Consequently, serious and carefully calibrated public policy commitment to the cashless economic transition agenda remains a critical tool for breaking free from the structural and traditional biases of the banking sector - ensuring that financial expansion coexists with real inclusion within the social and economic space. Yet, the risks of an uneven transition are real.
Regional Variation in Financial Account Ownership and Usage 2024 Global Findex
Large segments of the population, including older people, rural communities, informal workers, and women, face barriers ranging from limited internet access and high device costs to low digital and financial literacy. Gender gaps are particularly acute: many women lack access to mobile phones or control over digital accounts, resulting in lower usage even where services exist. There are also institutional risks. Information asymmetries between financial providers and first-time users can expose consumers to hidden fees, fraud, and data misuse. Weak grievance redress mechanisms and oversight gaps can quickly erode trust in digital systems. A prior PRI study for the Friedrich Naumann Foundation found that one in ten MFS users experiences financial fraud. If unaddressed, the shift toward cashless transactions risks reinforcing, rather than reducing, inequality.
Policy priorities for an inclusive cashless economy
A successful cashless transition, therefore, requires more than technological innovation. It demands coordinated public policy. Investment in nationwide digital infrastructure must be matched with efforts to ensure affordability, strengthen consumer protection, and expand financial literacy at scale. Regulation must strike a careful balance: encouraging competition and innovation while safeguarding stability and trust.
Most importantly, there must be a concentrated effort to ensure that the cashless financial ecosystem can harness Big Data from individuals, micro-entrepreneurs, small merchants, and low-income households to ensure that we move from traditional “physical collateral” to “information collateral” by creating a credible credit ratings ecosystem for the unbanked and underbanked population, so that digital banks and MFS can reach them effectively with their financial products.
On the whole, Bangladesh is at a pivotal moment in its financial evolution. While the infrastructure for digital finance is rapidly maturing, the trajectory of its cashless transition remains uncertain. A deliberate, inclusion-oriented approach is essential to ensure that digitalisation does not entrench existing inequalities. A cashless economy is not merely the digitisation of transactions: it is a reconfiguration of economic participation. If designed with equity at its core, it can democratize access to finance and enable shared prosperity. Without such intent, however, the shift risks becoming another uneven transformation that benefits the connected few and intensifying financial exclusion.
Dr Ashikur Rahman is a Principal Economist, Policy Research Institute (PRI)
Samah Majid is a Senior Research Associate, Policy Research Institute (PRI). The authors can be reached at [email protected] and [email protected].
