Cashless transactions quietly rise in informal sector – New Age BD

Report on Digital Financial Inclusion and its Impact on Sustainable Development Goals in Bangladesh

Introduction: The Role of Mobile Financial Services (MFS) in National Development

A significant national trend in Bangladesh indicates a rapid expansion of the cashless ecosystem, driven by Mobile Financial Services (MFS). This technological adoption is fundamentally altering financial transactions at the grassroots level, particularly among populations traditionally excluded from the formal banking system. This report analyses the impact of this digital transformation through the lens of the United Nations Sustainable Development Goals (SDGs), highlighting both progress and persistent challenges.

• According to Bangladesh Bank data from October, MFS transactions reached Tk 1,51,123.6 crore in August 2025.
• This represents a 14.89 per cent increase (Tk 38,847.30 crore) compared to the same period in the previous year.
• This growth is a critical enabler for achieving multiple SDGs by fostering financial inclusion for informal workers and small enterprises.

Contribution to Essential Services and Sustainable Communities

Enhancing Access to Clean Water (SDG 6) and Building Sustainable Cities (SDG 11)

A primary example of MFS contributing to sustainable development is the Dhaka Water Supply and Sewerage Authority (WASA) water ATM initiative. These automated water points, established since 2016, demonstrate how digital finance can improve access to essential services.

• The system allows residents, including unbanked youth like 17-year-old Rakib, to purchase safe drinking water using digital payment cards recharged via MFS platforms like bKash.
• This innovation directly supports SDG 6 (Clean Water and Sanitation) by providing a reliable and accessible method for obtaining clean water in urban areas.
• By streamlining payments and reducing disputes over cash transactions, the initiative contributes to SDG 11 (Sustainable Cities and Communities), making urban service delivery more efficient and inclusive for all residents, including women, students, and domestic workers.

Driving Inclusive Economic Growth and Reducing Inequalities

Alleviating Poverty (SDG 1) and Promoting Decent Work (SDG 8)

The expansion of MFS is a crucial tool for economic empowerment within Bangladesh’s large informal sector. It provides a secure and efficient financial lifeline that supports livelihoods and fosters economic participation.

• Informal workers, such as rickshaw-puller Azgar Ali Sheikh, utilize MFS agent networks to send remittances to their families, a vital service that supports household economies and contributes to poverty reduction (SDG 1).
• Small and micro-enterprises, from market stalls to street food vendors, are increasingly accepting digital payments. This integration into the digital economy enhances their business operations, supports decent work, and promotes inclusive economic growth (SDG 8).
• Business owners report using digital funds for immediate needs such as family support, business purchases, and utility payments, demonstrating the liquidity MFS provides.

Reducing Financial Inequalities (SDG 10) and Promoting Gender Equality (SDG 5)

Digital financial services are instrumental in bridging the gap for populations historically excluded from formal banking, thereby directly addressing SDG 10.

• Individuals without traditional bank accounts are now active participants in the digital economy, using MFS for daily transactions like purchasing water or receiving payments.
• The presence of female pump operators like Koli and the widespread use of the service by women highlight how digital finance can enhance financial autonomy and control, contributing to SDG 5 (Gender Equality).

Challenges and Barriers to Universal Digital Adoption

Obstacles to Achieving Comprehensive Financial Inclusion

Despite significant progress, the transition to a fully cashless economy faces several structural and societal barriers that hinder the achievement of related SDG targets.

1. Low Financial and Digital Literacy: A considerable portion of the population lacks the necessary skills and confidence to fully engage with digital systems, leading to reliance on MFS agents.
2. Dominance of the Informal Economy: Economist Mashrur Reaz notes that less than 10 per cent of transactions in Bangladesh are cashless, largely due to the prevalence of informal employment and enterprises.
3. Lack of Interoperability: Users and merchants express a need for a universal payment system that functions seamlessly across all platforms, from corporate retailers to local tea stalls. Initiatives like ‘Bangla QR’ have yet to achieve widespread popularity.
4. System Complexity and Mistrust: Small business owners cite complex and cumbersome processes for obtaining official merchant accounts and a general fear of taxation as deterrents to formal adoption.
5. Persistence of Cash for Small Transactions: For low-value purchases, cash remains the preferred payment method due to habit and perceived convenience.

Strategic Outlook and Partnerships for the Goals (SDG 17)

Recommendations for Accelerating the Cashless Transition

Achieving a comprehensive digital financial ecosystem requires a multi-stakeholder approach, aligning with the principles of SDG 17 (Partnerships for the Goals). The collaboration between MFS providers, banks, government bodies, and NGOs is essential.

• Government-led Awareness: Bangladesh Bank is actively promoting digital literacy through community-based programs and school initiatives to build trust and capability.
• Incentive Structures: Experts recommend creating incentives to encourage informal workers and small enterprises to formally join and transact within the digital ecosystem.
• Public-Private Partnerships: The success of MFS is built on partnerships between entities like bKash and banks, telecom operators, and utility services. Strengthening these collaborations is vital for future growth.
• System Simplification and Promotion: Coordinated efforts are needed to simplify merchant onboarding processes and aggressively promote universal payment solutions to enhance user adoption and create a truly unified network.

Future Projections

Stakeholders, including the Bangladesh Bank, project that the nation could become largely cashless within three to five years. However, this transformation is contingent on a collective mindset shift and the successful implementation of strategies aimed at overcoming existing barriers to digital and financial literacy. This transition is critical for unlocking the full potential of digital finance to accelerate progress across the Sustainable Development Goals.

Analysis of Sustainable Development Goals in the Article

1. Which SDGs are addressed or connected to the issues highlighted in the article?

The article on the adoption of digital payments in Bangladesh, particularly among the informal sector, connects to several Sustainable Development Goals (SDGs). These goals are relevant because the article discusses access to basic services like water, financial inclusion, economic growth through new technologies, and the development of resilient infrastructure.

• SDG 1: No Poverty: By providing easier and safer ways for people, especially informal workers, to send and receive money (remittances), digital financial services act as “lifelines” that contribute to financial stability and poverty reduction.
• SDG 6: Clean Water and Sanitation: The article opens with a clear example of how technology is facilitating access to a basic service, clean drinking water, through Dhaka WASA’s water ATMs, which use a digital payment system.
• SDG 8: Decent Work and Economic Growth: The core theme is financial inclusion, which is a key driver of economic growth. The article shows how mobile financial services (MFS) are integrating informal workers like rickshaw-pullers and street vendors into the formal financial ecosystem.
• SDG 9: Industry, Innovation, and Infrastructure: The entire discussion revolves around the development and adoption of a digital financial infrastructure (MFS, Bangla QR) that supports economic activity and makes services more accessible.
• SDG 10: Reduced Inequalities: The article emphasizes that MFS is reaching “people traditionally left outside the banking system,” thereby reducing the inequality of access to financial services for low-income individuals and those in the informal economy.
• SDG 17: Partnerships for the Goals: The article highlights the need for collaboration between the government, central bank, private companies (like bKash), and other stakeholders to overcome barriers and accelerate the transition to a cashless economy.

2. What specific targets under those SDGs can be identified based on the article’s content?

Based on the issues discussed, several specific SDG targets can be identified:

1. Target 1.4: “By 2030, ensure that all men and women, in particular the poor and the vulnerable, have equal rights to economic resources, as well as access to basic services… and financial services, including microfinance.” The article directly addresses this by showing how MFS provides financial services to the unbanked, like rickshaw-puller Azgar Ali Sheikh, who uses it to send money home.
2. Target 6.1: “By 2030, achieve universal and equitable access to safe and affordable drinking water for all.” The example of Rakib using a digital card to buy clean water from a Dhaka WASA water ATM illustrates a mechanism that facilitates affordable and equitable access to this essential resource.
3. Target 8.10: “Strengthen the capacity of domestic financial institutions to encourage and expand access to banking, insurance and financial services for all.” The rapid growth of MFS transactions and the expansion of services by providers like bKash and Rocket are direct examples of expanding access to financial services for previously excluded populations.
4. Target 9.1: “Develop quality, reliable, sustainable and resilient infrastructure… with a focus on affordable and equitable access for all.” The MFS ecosystem and the introduction of universal payment systems like ‘Bangla QR’ represent the development of a new digital financial infrastructure aimed at providing equitable access.
5. Target 10.2: “By 2030, empower and promote the social, economic and political inclusion of all…” The article’s focus on how digital payments are being adopted by “informal workers, people who often do not use traditional banks” is a clear example of promoting economic inclusion.
6. Target 17.17: “Encourage and promote effective public, public-private and civil society partnerships…” The conclusion of the article explicitly calls for “Coordinated action from all stakeholders, government awareness campaigns, and incentives,” and mentions bKash’s partnerships with banks, NBFIs, and telecom operators, reflecting this target.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

Yes, the article contains both explicit and implied indicators that can be used to measure progress:

• Volume and Growth of MFS Transactions: The article explicitly states, “MFS transactions reached Tk 1,51,123.6 crore in August 2025,” with a monthly increase of 1.72% and a year-on-year increase of 14.89%. This is a direct quantitative indicator for Target 8.10, measuring the expansion of financial services.
• Proportion of Cashless Transactions: The statement that “Less than 10 per cent of transactions in Bangladesh are cashless” serves as a baseline indicator for Targets 1.4 and 8.10. An increase in this percentage would signify progress.
• Number of Users of Specific Platforms: The article mentions there are “around 7,50,000 Bangla QR users.” This number serves as an indicator for the adoption of new, inclusive financial infrastructure (Target 9.1).
• Accessibility of Basic Services via Digital Payments: The existence and use of Dhaka WASA’s water ATMs with digital payment options is an implied qualitative indicator for Target 6.1. The number of such ATMs and the volume of water dispensed through them could be quantitative measures.
• Adoption by Informal Sector: While not quantified, the anecdotal evidence of street vendors, rickshaw-pullers, and small shop owners accepting digital payments is a strong qualitative indicator of financial inclusion among the unbanked (Targets 1.4 and 10.2).
• Implementation of Multi-Stakeholder Initiatives: The mention of “community-based digital literacy programmes and school initiatives” by the Bangladesh Bank is an indicator of actions being taken to foster partnerships and improve financial literacy, relevant to Target 17.17.

4. Table of SDGs, Targets, and Indicators

Source: newagebd.net