Digitisation of salary disbursement process has long been the focus of the Bangladesh readymade garment sector. For an industry that employs more than 4 million people, such a practice has a host of benefits, including ensuring financial inclusion of the poor and women, who are incidentally in the majority in Bangladesh’s workforce.
As per a study conducted in 2017 by the United Nations’ Better Than Cash Alliance, around 750 hours were lost in production per month in terms of cash disbursement at each factory, which suggested embracing the digitisation of wages for garment workers is one way to improve the inefficiency of cash payments. This not only creates a more secure payment method but also saves time, reduces costs and allows workers to access and track their own finances. Digital wages in Bangladesh are most helpful for women, giving them security, empowerment and greater opportunity for investment, the study further added.
There were some companies that understood the importance of going cashless and embrace digitisation. The Green Smart Shirt Limited (GSSL) is a case in point. “GSSL is one of those companies that have digitised the payment system of the workers and there is no cash handling. Each worker is handed over a debit card and salary gets transferred to their accounts on the first day of every month,” said FatehUl Islam, Managing Director and CEO of GSSL while speaking to Apparel Resources earlier.
With passage of time, more and more factories started digitising the wage disbursement process. A World Bank study in 2019 found that about one million garment workers were receiving digital wages, constituting about 200-250 factories with most businesses preferring to still pay 90 per cent of the value of salaries in cash, leaving room for expansion of the digitisation of wages in more settings. Despite the benefits, many factories were still reluctant to go digital when it came to salary disbursement of the garment workers.
In 2019, the BGMEA under the leadership of its new President Dr. Rubana Huq with an objective to give an impetus to the Government’s goal of ‘Cashless Bangladesh’ decided to digitise wage payment of the garment workers.“RMG workers will receive their wages under the digitised system. We’re going to sign a memorandum of understanding (MoU) with the ICT Ministry to introduce mobile banking ‘e-wallet for RMG workers’,” stated Dr. Rubana then.
The digital push, however, did not gather much steam up till 2020, feel many. The outbreak of COVID-19 globally and in Bangladesh changed the entire scenario almost overnight in 2020. With manufacturers shutting shops amidst the countrywide shutdown and mass-scale order cancellations from the buyers, stepped in the Government to help the industry in these trying times. It announced a coronavirus bailout package of Taka 50 billion to help all export-oriented sectors pay the workers’ wages and tasked the country’s central bank, the Bangladesh Bank, to handle the whole process, which made digital disbursement of wages mandatory if apparel exporters are to take advantage of the stimulus package announced by the Government.
“The central bank has asked the authorities concerned to open the Mobile Financial Services (MFS) accounts to provide salaries and allowances for the workers and employees from the stimulus package, announced by the Government,” underlined a circular issued by the Bangladesh Bank, instructing all export-oriented industries and garment factories to do the needful by 20 April to ensure smooth disbursal of salaries and allowances for the workers from the stimulus package.
Rest, as they say, is history. It was now time for apparel exporters to get on to the task of opening workers’ MFS accounts. “MFS is not a choice for us any longer,” underlined Dr. Rubana while underlining that MFS or bank accounts would further help the workers to avoid the hassle of collecting salary from his/her workplace.
However, there were stumbling blocks to address. As per a survey by the BGMEA, around 76 per cent garment factories pay wages through cash, while 11 per cent through multiple models. With only 9 per cent garment units reportedly paying the workers through MFS and 4 per cent through banks, digitisation of salary disbursement became a major issue. But where there is will, there is a way, and it was evident sooner than later after 19.20 lakh MFS accounts were created within the first couple of weeks of April itself.
Of these 19.20 MFS accounts, 4 lakh have been opened through Nagad, 9.70 lakh through bKash and 5.50 lakh through Rocket. bKash, Nagad and Rocket are three prominent MFS providers in Bangladesh.
That the MFS service providers extended a helping hand, helped the cause further. For instance, MFS service provided bKash started working jointly with the garment manufacturing companies and their associated banks to ensure the apparel workers’ accounts are opened. The service provider further ensured workers of hassle-free and free of cost account opening wherein it ensured workers that they need not to pay any charge.
It also opened several digital e-registration points to facilitate smooth registration process besides advertising on television channels on self-registration process with the service provider. Asked as to how such a huge number of workers would receive their payments through MFS tool, Chief External & Corporate Affairs Officer (CECAO) of bKash Maj. Gen. (Retd.) Sheikh Md. Monirul Islam said that bKash remains engaged in disbursement of bulk salary for long and carries out such disbursement as per an agreed and well-coordinated arrangement between the factory management and bKash.
“The process is very much transparent and accountable. For any reference needed at a later point in time, specific data can be retrieved from the digital record maintained in the system,” he said. At the time of filing of the report, bKash and Rocket, in a combined effort, had been disbursing the salaries of 1,000,000 plus factory workers and a monthly volume of Taka 7,000 million plus was disbursed through the MFS providers regulated by the Bangladesh Bank.
The disbursement of RMG workers’ wages as mandated by the rule to avail of the stimulus package, thus, not only gave MFS a big leap but also realised the long-standing goal of digitising the workers’ salary disbursement process.