Money you save is money you earn

Soon after Abid was born 18 years ago, his mother opened a savings scheme with a private commercial bank keeping in mind the expenses his studies will entail when he sets out for tertiary level education.

Anowara Begum, herself an extreme saver, did the same when she gave birth to a daughter three years later.

Even before they went to schools, she opened two more savings schemes, one with the postal department and one with another bank, so that she could use the savings during the wedding of her children or for any health emergency, if needed.

She went one step further when Abid, now an undergraduate student at a public university, landed a part-time job a year ago. She managed to persuade her son to open a savings account using his monthly income, in order to instill a savings habit in her son.

“There is no alternative to saving,” said Anowara Begum. “If we don’t save now, where will the money come from if we badly need it?”

She is not alone.

People in Bangladesh have to rely on private savings for a secure life, in the absence of a universal public pension scheme. The social security systems are also relatively weak.

And people look up to banks and non-bank financial institutions for saving and creating more value for their money to meet future needs.

To cater to the savers, banks are increasingly bringing innovations to their savings products to meet the needs of savers at every stage of their life.

This is a recent shift. The lenders were very traditional in offering savings instruments until economic growth of the country took off. Until then, almost all of them had only a handful of deposit schemes of similar kinds.

Now, they have introduced a range of tools that put more emphasis on additional features and better services instead of interest rates.

“We have introduced savings products for customers of all ages, economic background and professions. We cover the full lifecycle of an individual,” said Al-Mamun Ansar, head of retail deposit at Eastern Bank Ltd.

MA Mottaleb, executive vice-president and head of branches control and general banking division of Social Islami Bank Ltd, echoed what Ansar said.

“Banks have diversified products in order to meet the needs at the various stages of life as well as people from all walks of life. There has been a huge shift in how products are designed and the change is happening every day,” Mottaleb said.

People used to save in deposit pension schemes (DPS) but in small amounts. Now large sums are being kept in a DPS account.

People did not go for fixed deposits in the past, but they can afford it now. Products for millionaires were non-existent in the past, he said.

Mottaleb, who has been working with SIBL for 15 years, said parents can open a DPS account in the name of a newborn and operate it. Once the child gets enrolled in school, a student account can be opened and it will continue until the child turns 18.

After the child turns 18, the same account turns into a savings account and the student is then able to operate it.

He said SIBL has introduced a product that allows a saver to save to pay for denmohor when getting married.

The bank’s super saving account is giving special facilities to senior citizens and female customers, giving one percentage point more profit than other savings products.

There are Hajj and Zakat savings accounts, both aimed at reducing the burden when it comes to making payments for both occasions.

“We have privilege offers, particularly for senior citizens who are above the age of 60. We offer them preferential rates depending on the amount they want to deposit,” Nasimul Baten, SEVP & Head of Business, Delta Brac Housing Finance Corp. Ltd., shared.

Mati Ul Hasan, Additional Managing Director & CRO, Mercantile Bank, said, “We have recently introduced the Aparajita Monthly Benefit Scheme which caters to women who can benefit from their hard-earned and saved money and also to those women who have retirement benefits.” The scheme enables women to obtain hassle-free banking services and they can deposit money for 3-5 years.

Through this scheme, women get an alternative earning opportunity and non-resident Bangladeshi women also get investment opportunities, he adds.

 A senior banker of City Bank Ltd said because of the improved quality of life, the savings accounts, which deal with individual customers, have become transactional accounts.

There are 57 banks in Bangladesh, so if one bank wants to be very good at handling savings accounts, it would have to give the maximum transactional value to customers. The scope to play with interest rates is very small because competition is huge.

The banker said City Bank has developed need-based products as the requirement of a student is different from that of an elderly person or a female customer.

Its product for an elderly person includes an insurance whose premium is paid by the bank, not the customer. A health card is also given that allows the cardholder to get discounts at many big hospitals in the country.

The children of a senior citizen get a waiver while opening a student account before going abroad for higher studies.

The banker said if the number of savings accounts for a bank goes up, it will open up new avenues for businesses for the lender because they will be able to give a personal loan to the customer, an auto loan or home loan after five years, sell a credit card, and facilitate utility bill payments.

“If I can touch every need of the customer, the whole banking process of the customer will be carried out with us,” said the City Bank official.

Syed Javed Noor, general manager of IDLC Finance, a non-bank financial institution, said NBFIs can only accept term deposit which will not mature in less than three months as per the central bank regulation. Within the fixed deposit, IDLC Finance tries to bring innovation.

One of its products allows the saver to withdraw full-year’s interest after just keeping a deposit. Besides, senior citizens and women savers get Tk 0.10 more in interest than the quoted rates, Noor said.

Nasim from DBH stated, “Our minimum fixed deposit amount starts from as low as Tk 2,500 so that we can cater to customers from all backgrounds, regardless of their income status.” He added, “We also provide double money deposit schemes to those who want to make long-term deposits for a couple of years. However, long-term deposits are not as preferred in Bangladesh due to interest rate fluctuations.”

Ansar of EBL says opening a savings account lays the foundation for a long-term relationship between the bank and the customers.

“These customers are also important for us as they bring stable funds to the bank. There are customers who have been maintaining savings accounts with us for the last 22 years,” he said.

Talking about products, Ansar said the EBL Repeat, a term deposit scheme, offers monthly return on idle deposits over a certain period, not on an annual basis. The product is largely for the elderly and female customers.

EBL Earn First is another unique fixed deposit product, where one can get the whole year’s interest on the first day after subscribing to the product. Upon completing a year, the customers get the full principal amount.