The future of financing is here. In fact it is thanks to City Bank and bKash
City Lender and bKash are actually possibly to revolutionising the financing landscape in Bangladesh following the two yesterday announced rolling out digital financing on a good pilot basis.
A select band of bKash users will right now be capable of geting a loan as high as Tk 10,000 collateral-free on an instantaneous.
To have a loan, banking institutions require consumers to go to a branch, open an account first and start the cumbersome procedure for applying for the mortgage loan. And there is absolutely no surety that the bank loan would be sanctioned.
Quite often, applications get rejected for a glitch in the form or documents given, meaning the customer have to go back to the branch and proceed through the entire cycle all over again.
But the digital lending version that harnesses the energy of technology, loan seekers no longer need to under a totally physical approach to procure a loan. The whole process is presence-less and paperless and the assistance delivery cashless. And all of this is done in just a few minutes.
The lending model is immensely popular in neighbouring India, and the Bangladesh Lender has warmed to the idea since it stands to expedite the financial inclusion agenda in the country.
In Bangladesh, people tend to be compelled to take loans from informal sources at huge interest rates to meet emergency needs -- such as health crisis or personal loss due to natural disasters -- or even to engage in small trade.
In many cases, persons find it hard to fulfil the terms and conditions set for availing the loans.
Due to the high cost and onerous conditions and conditions, unbanked people find it hard to repay those loans and are subsequently overburdened with even bigger debt.
But this initiative by City and bKash will help clients sweep apart the roadblocks.
Upon successful completion of the pilot, the merchandise would be rolled from a wider scale.
"The journey of this digital loan starts with the idea of how exactly we can deliver money on an urgent basis to the proper people with an increase of convenience so that they are able to utilize it according with their needs," explained Mashrur Arefin, managing director of Town Bank.
Many people on the country, especially the small traders, often need to have money on a crisis basis.
"We hope that our experimental initiative will achieve success. We are always looking to get closer to the customers," he said, adding that a significant amount of African nations have previously introduced this element of the digital financial provider.
The credit ceiling could be increased if the ongoing pilot project is completed successfully, he said.
The digital mortgage loan project of City Lender exemplifies how banks can bring new and creative services to increase the lives of the normal people, said Kamal Quadir, ceo of bKash.
It broadens the scope of financial inclusion by using bKash's platform and leveraging its robust buyer base, he said.
"We believe the collateral-free, instant digital bank loan provides transformative impact among marginalised persons, micro business owners and students to meet their urgent personal or organization needs," Quadir added.
Under the project, customers must pay back the loan within 90 days by method of three equal regular instalments (EMI). The EMI will be deducted immediately from the user's bKash consideration on fixed payment dates.
The user may also be able to pay the EMI before their payment dates and save money as the lender will associate early repayment with lower interest costs.
Interest on the loan will be charged every day.
That means in case of early settlement, the fascination will be charged predicated on the quantity of days the mortgage has been taken for and not for the whole three months.
Furthermore, users will be notified through a text and app notifications before each deadline for EMI.
City Bank will closely monitor users' mortgage loan repayment behaviour to determine if they will qualify for loans later on.
To avail the mortgage beneath the pilot initiative, eligible users should click on the "Loan" icon on the bKash iphone app and enter the required loan amount, which has to be within a limit approved by City Bank.
Users must offer consent to sharing their KYC data they have already distributed around bKash with City Bank.
After successfully entering the bKash PIN, the loan amount will be instantly disbursed in to the user's bKash account.
Ant Group, Chinese e-commerce giant Alibaba's repayments arm, would be the technology partner undertaking credit assessment on probable borrowers for this project.
The company, that includes a 20 per cent stake in bKash, offers advanced AI-based credit assessment facilities for digital loans offered in different countries, including China, India and the Philippines.
An automated credit scoring system will give an instant decision on whether a consumer of bKash has qualified for the mortgage loan.
The system will browse the previous financial bKash transactions -- deposits, withdrawals, mobile recharge and so on -- completed by a user of the mobile financial service provider.
This implies City Bank will give loans to client predicated on their past financial background with bKash.
