City Bank unveils instant loan with bKash

City Bank has launched a collateral-free digital loan with bKash, allowing mobile wallet users to request and receive a credit of up to Tk 10,000 instantly through bKash, the largest mobile money company in Bangladesh.

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

The initiative approved by Bangladesh Bank aims to expand the unbanked population’s access 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 approval from Bangladesh Bank for commercial launch.

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

In many cases, due to high cost and onerous terms and conditions, unbanked people find it challenging 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.”

The digital loan in the pilot phase has a three-month term and loan repayment involves three equal monthly instalments to be 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 daily, which means users willing to make early repayment will pay the interest for the days for which the loan 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 behaviour and determine whether users will be eligible for loans in the future, along with fulfilling City bank’s regulatory obligations, to report any loan defaulter 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.

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.

“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.  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: “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. We believe 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.”