City Bank unveils instant loan with bKash

“This is a pilot initiative targeting a limited group of selected bKash users. bKash users can apply for a loan from City Bank from the bKash app, receive the loan in their bKash accounts, and repay the loan from their bKash accounts,” bKash and City Bank said in a joint statement on Tuesday.

The initiative endorsed by Bangladesh Bank aims to expand the access of the unbanked population to finance, according to the statement.

Upon successful completion of the project, City Bank will commercially launch the digital loan to eligible bKash users, subject to Bangladesh Bank’s approval for commercial launch.

In Bangladesh, people often take out loans from informal sources at high interest rates and complicated terms to meet emergency needs such as a medical crisis or financial loss caused by natural disasters.

In many cases, due to the high cost and onerous terms, the unbanked find it difficult to repay these loans and are burdened with even higher debt.

“City Bank is addressing these issues by introducing a digital loan that is priced transparently, based on Bangladesh Bank’s pricing guidelines, and has simple repayment terms.”

The pilot-stage digital loan has a term of three months and repayment of the loan involves three equal monthly installments to be automatically 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 charges associated with early repayment. Interest on the digital loan is charged daily, meaning users willing to prepay will pay interest for the days the loan was unpaid. Additionally, users will be notified via SMS and in-app notification prior to each EMI due date.

City Bank will closely monitor users’ loan repayment behavior and determine whether users will be eligible for loans in the future, while complying with City Bank’s regulatory obligations, to report any defaults to Bangladesh Bank.

To avail the loan under the pilot initiative, eligible users will need to click on 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 terms and conditions of the loan.

Users will also need to provide 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 paid into the user’s bKash account.

Ant Group, the world’s leading provider of financial services technology, will provide its loan and credit risk management technology to support the credit assessment process of potential borrowers for this project. Ant Group is a company related to the Alibaba Group.

“The journey of this digital loan starts with the idea of ​​how we can get emergency money to the right people with more convenience so they can use it according to their needs. We hope that our experimental initiative will be successful,” Mashrur Arefin, managing director of City Bank, said in the statement.

Kamal Quadir, CEO of bKash, said, “City Bank’s digital lending project illustrates how banks can bring new and creative services to improve the lives of ordinary people. It expands the reach of financial inclusion by using bKash’s platform and leveraging our strong customer base. We believe this instant, collateral-free digital loan will have a transformative impact on marginalized people, micro-entrepreneurs and students to meet their emergency personal or professional needs.

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