City Bank has launched a collateral-free Digital Loan scheme to expand access to finance to unbanked populations and contribute towards the journey of financial inclusion.
This is a pilot initiative targeting a limited group of selected bKash users, whereby users can request and receive loans of up to Tk 10,000 instantly through bKash, according to a press release.
Under the initiative, bKash users can request a loan from City Bank from the bKash App, receive the loan disbursement into their bKash accounts as well as repay the loan from their bKash accounts.
City Bank has launched this pilot initiative with the approval of Bangladesh Bank.
Upon successful completion of the project, City Bank will commercially launch the Digital Loan to eligible bKash users, subject to approval from Bangladesh Bank for commercial launch.
In Bangladesh, people are often compelled to take loans from informal sources at high interest rates and complex terms and conditions to meet emergency needs such as a medical crisis or financial loss caused by natural disasters or even engaging in a small trade.
In many cases, due to high cost and onerous terms and conditions, unbanked people find it difficult to repay those loans and are overburdened with even higher debt.
City Bank is addressing these problems by introducing a Digital Loan that is transparently priced based on Bangladesh Bank’s pricing guidelines and has simple repayment terms and conditions.
City Bank’s Digital Loan in the pilot phase has a three months term, and loan repayment involves three equal monthly instalments (EMI) auto-deducted from the user’s bKash account on fixed due dates.
The user will also be able to repay the EMI amount earlier than the due date and save money due to lower interest cost associated with early repayment.
Interest on the Digital Loan is charged on a daily basis, therefore in case of early settlement, users will repay interest based on the number of days for which the loan amount was outstanding.
Besides, users will be notified through SMS and in-app notification before every EMI due date.
City Bank will closely monitor users’ loan payment behavoiur and determine whether users will be eligible for loans in the future, along with fulfilling City Bank’s regulatory obligations to report any loan defaulters to the Bangladesh Bank.
To avail the loan under the pilot initiative, eligible users will need to click the ‘Loan’ icon on the bKash app and enter the desired loan amount within the loan limit approved by City Bank, as well as accept the loan terms and conditions.
Users will also have to give consent to share their KYC information, available with bKash, with City Bank before availing the Digital Loan.
After successfully entering the bKash PIN, the loan amount will be instantly disbursed into the user’s bKash account.
The interest rate and loan terms and conditions applied by City Bank are according to the guidelines of Bangladesh Bank.
Ant Group, the world’s leading financial services technology provider, will provide its loan and credit risk management technology to support the process of credit assessment on potential borrowers for this project. Ant Group is a related company of Alibaba Group.
Commenting on the pilot initiative, Mashrur Arefin, MD & CEO of City Bank, said, ‘We are always trying to get closer to the customers. Many people in our country, especially the small traders often need money for emergency purposes. The journey of this digital loan starts with the idea of how we can deliver money urgently to the right people with more convenience so that they can use it according to their needs. "
He hoped that their experimental initiative will be successful.
"Through the experience we will gain from this pilot initiative and with continuous improvement, we will be able to bring even better services for customers in the future.”
Kamal Quadir, CEO of bKash, said, “The Digital Loan project of City Bank exemplifies how banks can bring new and creative services to improve the lives of the common people. It broadens the scope of financial inclusion by using bKash’s platform and leveraging our robust customer base."
He believed that this collateral-free, instant digital loan will bring transformative impact on marginalized people, micro entrepreneurs, and students to meet their emergency personal or business needs.