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Progress in our payroll digitalization

Salary disbursement through MFS creates a broader scope of financial inclusion, especially for women.  It enhances the transparency and accuracy of the factory which creates a better relationship between the authority and the workers.

Published : Wednesday, 27 December, 2023 at 12:00 AM  Count : 935
Faruk Ahmed
Payroll digitalization is now no longer a "nice to have" but a "must have" to deliver the best value to internal and external customers. The biggest players like Apple, Amazon, and Netflix stay on top of their game due to continuous digital transformation in their operations from production to their employees salary distribution. By eliminating workflow bottlenecks typically associated with traditional processes, digitalizing payroll systems can save organizations a lot of time and money. So, digitizing the payroll department is now an essential part of any growth strategy.

In this evolving digitalization transformation, Bangladesh is not far behind the race. Over one million workers in 1,100 factories are disbursing salaries and allowances to over a million workers, mostly women through bKashs digital payroll solution. Factory owners say this innovation has reduced the cost of their production while workers find ample scopes to earn more revenues. A large number of mobile financial service (MFS) operators are offering garment workers similar salary disbursement services, which has been lauded by many international experts, as a new revolution in the Bangladesh financial spectrum.

The journey from cash to electronic payments in Bangladeshs garment sector is gathering pace as garment production factories discover how digitizing wages can save time, reduce costs, increase transparency, and empower workers by improving their access to finance. In short, mobile payments have the potential to help companies improve their bottom line while making life better for workers, especially for women who represent 80%1 of the garment workforce in Bangladesh.

The 2016 Better Than Cash Alliance country diagnostic found that payments made by and to businesses constitute 83% of the total value of payments in Bangladesh, making businesses the driving force of payments. However, only 6%3 of the value of payments made or received by businesses is transferred digitally, demonstrating significant potential for further digitization in Bangladeshs private sector economy to help drive productivity growth and profitability.Wage payments constitute 27%4 of the total value of business payments in Bangladesh, representing US$40.4 billion and 1.3 billion5 transactions per year. However, 90%6 of the value of salaries are still paid in cash by businesses, demonstrating the significant potential for businesses to realize cost savings and increased efficiencies while helping to build an inclusive digital ecosystem for Bangladesh.


According to the report, digital salary disbursement increases awareness among the beneficiary workers and gives them a better orientation of technology. As a result, the workers become financially independent and empowered.This system creates opportunity for workers to plan better for the future.Salary disbursement through MFS creates a broader scope of financial inclusion, especially for women. It enhances the transparency and accuracy of the factory which creates a better relationship between the authority and the workers.

In the traditional way, a factory needs 18 minutes in a month to disburse the salary of a worker. That means, 750 working hours are wasted for salary disbursement in a factory that consists of 2500 workers. That poses a huge revenue loss.On the contrary, the salary disbursement authority needs 13 minutes in a month to distribute the money. That means it consumes 542 hours of production time for a factory in the traditional system.Factories also require extra safety arrangements to disburse salaries in cash.Salary disbursement through MFS creates a broader scope of financial inclusion, especially for women.

In 2022, around 54 per cent of the garment workers in Bangladesh were paid through mobile financial services in February and the rest through cash, research finds.For their work in December, female workers got an average salary of Tk 12,000 while it was Tk 12,500 for male workers, according to the report prepared by the South Asian Network on Economic Modeling (Sanem) in collaboration with USA-based non-profit organisation Microfinance Opportunities (MFO).

The Sanem and MFO collected data from 1,300 garment workers every week since April 2020 as part of research titled "Garment Worker Diaries" to understand their living standards.These workers are employed in factories spread across five main industrial areas of Bangladesh: Chittagong, Dhaka City, Gazipur, Narayanganj, and Savar. Three-quarters of the survey respondents are women, which roughly represents the composition of the labour force in the RMG sector as a whole.


The ready-made garment sector which contributes 13% to the GDPconstitutes a key engine of the Bangladesh economy, representing 45 % of the industrial workforce with 4.4 million workers and 80% of them are women. It is estimated that each worker spent on average 18 minutes per month off the production line to receive their wages in cash. This equates to 750 hours of lost revenue from production per month for a factory with 2,500 employees.Based on these elements, the survey estimated that the cost of wage payments in cash per worker is around US$0.44 per month.

Many economists and social scientists see this salary disbursement through MFS as a new revolution in the countrys financial spectrum against poverty. Study shows that the MFS revolution has reduced the poverty rate significantly in Bangladesh since its maiden journey in 2011 with the multifaceted impacts of financial inclusion. Because MFS allows individuals to conduct financial transactions and money transfers from the comfort of their homes. Its cost-effective nature has boosted disposable incomes and provided a secure means of storing cash, even for those engaged in the informal economy.

Poverty remains a formidable obstacle on Bangladeshs journey as the per capita income has fluctuated over the years, reaching an all-time high of $1684.43 USD in 2021. It depends largely on empowering individuals to manage their finances effectively. Bank accounts have emerged as a powerful tool in this regard. These accounts help people escape poverty and cope with unexpected expenses, providing financial stability. Many farmers in Bangladesh remain unbanked, relying solely on cash. Studies have shown that farmers increase their investments in harvests, earnings, and household consumption when their payments are deposited into savings accounts. Account-based digital payments represent an innovative approach to tackling poverty. Distributing social benefits through digital channels, rather than cash, has been shown to reduce corruption, increase efficiency, and enable recipients to build savings.In Nepal, savings accounts empower women to invest in education and nutritious food.

Meanwhile, national-level poverty has declined to 18.7%, according to the Household Income and Expenditure Survey 2022. Notably, this momentum gained traction after the advent of MFS operators like bKash, a mobile financial service provider that has become a game-changer for the poor and low-income people in Bangladesh since 2011.The impact of MFS on poverty reduction in Bangladesh has been profound. The President of the World Bank, Mr. Jim Kim, in 2016 during his Dhaka visit attributed this decline to the multifaceted impact of MFS, led by bKash, the largest MFS operator in the country with nearly 60 million subscribers, predominantly from rural and remote areas. He commended bKash for its "low fee-based business model" and its role in enabling millions of unbanked individuals to access financial services.

The writer is a senior journalist and the Chairman of the Bangladesh Journalists Foundation For Consumers & Investors (BJFCI)



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