City Bank-bKash launch ‘Pay-Later’ to facilitate instant purchasing with interest-free loans

For the first time ever, City Bank and bKash have jointly launched a special collateral-free digital nano loan service called "Pay-Later" that facilitates payments with interest-free loans through bKash app.

Now customers can buy any product or services and pay directly with this special loan if they don't have sufficient balance in their accounts. They don't have to pay any interest if the due amount is paid within seven days.

Mashrur Arefin, managing director and CEO of City Bank, and Kamal Quadir, CEO of bKash, inaugurated the service at the lender's head office on Monday. Senior officials of both organisations were also present in the launching ceremony.

Subject to eligibility, customers will be given a combined limit of Tk500 to Tk30,000 loans through which they can avail both Pay-Later and Digital Nano Loans instantly. 

This Pay-Later service has been launched with the aim of accelerating financial inclusion, increasing the ability of marginalised people to purchase essentials and daily necessities. Customers will get the opportunity to use the Pay-Later service by shopping with the bKash app at more than 600,000 merchant points across the country.

At the programme, City Bank CEO Mashrur Arefin said, "The best feature of Digital Nano Loan is that we can provide loans to more customers than we used to provide through conventional methods. More importantly, now we can provide our banking facilities to marginal customers in rural areas where we do not have any branches or agent points."

Kamal Quadir, bKash's CEO, said, "bKash has made bank loans accessible for the unbanked. This joint initiative has been taken to fulfil the emergency needs of this community, which will also help develop an effective ecosystem for cashless transactions. For instance, a farmer doesn't need to stop farming anymore due to lack of money for buying fertilisers, seeds etc. This service will help him to purchase raw materials, which will ensure continuous yield. This way, the 'Pay-Later' will further encourage and habituate customers as well as merchants in digital payment."

To avail this loan, an eligible customer needs to scan the merchant QR code or input the merchant number, input the transaction amount and select Pay-Later option. In the next step, the customer has to select between the following methods – interest free repayment within seven days or repayment in six months.

For the seven-day interest-free repayment option, if a customer fails to fully repay within seven days, then that Pay-Later will convert into a three-month loan with a 9% interest per annum.

In the six-month repayment option, customers need to make an upfront payment 20% of the total payment amount, the remaining 80% will be divided into equal instalments. The instalments will be paid automatically on the specified date of every month. In this case, a 9% interest per annum will be applicable. In both cases, a processing fee of 0.575% including VAT will be added.

Bangladesh has entered the era of digital loan through this joint initiative of bKash and City Bank. Since its inception in 2021, Tk7.5 billion has been disbursed to more than 250,000 bKash customers with a total loan count of around 800,000. Out of total digital nano loan customers, 27% are women borrowers while they constitute only 13% in conventional loans, according to City Bank. The participation of women borrowers in nano loans reflects how the programme is contributing to women empowerment, said a senior executive of the bank. 

The customer's loan eligibility and loan amount are determined through an automatic credit assessment system based on the customer's transaction in bKash account and City Bank's credit risk management policy. As per the central bank's directive, only the bKash customers who have completed e-KYC (Know Your Customer) through the biometric system and use the bKash app, are considered eligible for this loan from City Bank. Customers can complete e-KYC by updating their information through the bKash App.

The interest rate of the nano loan is determined on a daily basis with the help of technology. As a result, customers can repay the loan even before the maturity date without any early settlement fees. In that case, they would have to pay the interest for the days the loan is taken for. Borrowers are also notified through SMS prior to the loan repayment date