Wage digitization for RMG workers: Advancing financial inclusion in Bangladesh

Topics

1. Wage digitization for RMG workers: Advancing financial inclusion in Bangladesh 2. Mobile financial services in Bangladesh 3. Apon – Embedded insurance: meeting the healthcare needs of readymade garment workers 4. Digital Health Solutions – providing low-cost health insurance with bundled teleconsultation for Bangladeshi families

Wage digitization for RMG workers: Advancing financial inclusion in Bangladesh

The move from cash to digital payments in the ready-made garment industry in Bangladesh has opened new doors in the digital ecosystem for low-income earners. The digitization of wages creates a multitude of opportunities, from empowering women to have more financial autonomy to enhancing the overall quality of life of workers and their families. It also lays the foundation for advancing financial inclusion for low- and moderate-incomeworkersinBangladesh. Bangladesh is the world’s second-largest apparel maker and seller,backedbyarobustready-madegarmentindustry(RMG). Forseveralyears,manydevelopmentprogramshaveadvocated for the digitization of RMG workers’ wages to further the financial inclusion agenda and gain credibility in the international market. Thanks to the persistent interest of internationaldonors,buyers,andlocalDFSplayers,around1.5 millionworkersreceiveddigitalwagesatthebeginningof2020. This was still less than half of the total RMG workforce (4.1

million). The Access to Information (a2i) program of the ICT divisionandBetterthanCashAlliance(BTCA)hadpledgedthat by 2021, 90% of RMG workers will be receiving salaries digitally.28 The journey to digital has been fast-tracked by the COVID-19pandemicasBangladeshBankorderedallfactoriesto digitize wages in two weeks. By the end of April, 1.92 million new mobile financial services (MFS) wallets were created to receive factory wages. The move can be considered the most transformationaloneinBangladesh’sdigitalfinancialinclusion narrativesofar.

AllmajorMFSprovidersinBangladesh–namelybKash,29Rocket (DBBL),30 and Nagad31 – were gearing up to onboard workers ontotheirplatformswhenthegovernmentimposedmovement restrictionsduetotheCOVID-19pandemic.32 Additionally,they tookupthechallengeofensuringliquidityatagentpoints.The regulator then enacted special cash-out fees for RMG workers (0.4%,slasheddownfrom2%)sothataccessingthefundsdoes not become costly for them. Though banks are not part of this accelerated inclusion, some have already extended payroll servicesforRMGworkers.

What does this mean for Fintech for Health?

Having access to financial services ensures a regular inflow of funds (salaries) into accounts. Many individuals’ wages have beendigitizedduetothecentralbank’sorder.Sincethen,several healthcare organizations have reached out to collaborate with BangladeshGarment Manufacturers and Exporters Association (BGMEA),thetradebodythatgovernsfactories.Severalofthese healthcareplayersproactivelyseekpartnershipswiththeRMG industry including Praava Health, Common Health, Maya, and Inspectorio. In a country like Bangladesh, the importance of

fintech and healthcare working together to solve health financing challenges cannot be overstated, as the public policy doesnotyetprioritizetheagendaofUniversalHealthCoverage. Currently,on-sitemedicalservicesinmostBangladeshfactories areinadequate,limitedtobasicscreeningandfirstaid.Theyare not robust enough to prevent and treat occupational health injuries.Withsomanyoccupationalhazardsandsofewon-site services, workers fall victim to the health poverty trap, where poor health leads to poor productivity, leading the individual intoadescentintopoverty. Historically, buyers and labor rights advocates have made it mandatory for factory owners to adopt safe labor practices, since protecting the long-term health of workers benefits all involved. Last year, Pragati Life Insurance piloted a health insurance model and found that positive health-seeking behaviors of the workers increased when they enrolled in the program. In addition, factory owners’ return on investment in workers’healthhadapositiveimpactonworkplaceproductivity andefficiency. Improving financial inclusion for women is an important principle of Fintech for Health, as women are often the glue holdingfamiliestogether.EightypercentofRMGsectorworkers in Bangladesh are women. Daily, they bear the physical and emotional burden of the around-the-clock labor needed to support their families, maintain their households, and care for theirchildren.Ensuringaffordablehealthcareforthesewomen willbringaboutmanifoldbenefits–mostimportantly,economic stabilityfortheentirefamily.