DHAKA, Bangladesh — Bangladesh is the world’s second-largest exporter of clothes. It’s an industry that employs more than 3.6 million people. A study conducted by the United Nations’ Better Than Cash Alliance showed that 750 hours were lost in production per month in terms of cash disbursement at each factory in 2017. The digitalization of wages for garment workers is one way to improve the inefficiency of cash payments. This not only creates a more secure payment method but also saves time, reduces costs and allows workers to access and track their own finances. Digital wages in Bangladesh are most helpful for women, giving them security, empowerment and greater opportunity for investment.
Women make up 80 percent of the textile industry. Female garment workers are a highly vulnerable sector of the workforce. They are generally young, unskilled and illiterate. A steady occupation would deter many women from marrying young and give them more say in the social sphere. However, when women receive wages in cash, they have less say over the allocation of their money. Digital wages in Bangladesh can empower women to become managers of their own resources.
Impact of Digital Wages
Implementing digital wages in Bangladesh provides workers greater transparency of their payroll. Oftentimes, employers and employees face the risk of theft when carrying cash to and from the workplace. Women are especially vulnerable to this, which is why digital wages are necessary. A digital wage system would ensure that the entire payment goes directly to their bank account and is secure. Having their money in a safe location gives women empowerment and the ability to save for potential emergencies.
Another problem with the cash disbursement system is the amount of time it takes to count and distribute payroll to employees. According to a study by the World Bank, each employee spends an average of 18 minutes out of the month to wait in line for their earnings and 13 minutes are wasted each month when employers count and sort the cash. This wastes not only the employers’ resources but also cuts into employees’ personal time.
The Bill and Melinda Gates Foundation partnered together with the HERfinance project to provide employers with a digital payroll system that allows employees to be paid seamlessly into a formal account. They also take it a step further by providing coaching to ensure their transition is successful when using digital wages in Bangladesh. The HERfinance method uses a few simple steps to ensure that employees are getting the most out of their wages.
HERfinance helps the employee through guidance and coaching on budgeting and saving, which builds confidence in women. The next step teaches the employers how to successfully onboard new employees by teaching them about finances as well as giving them resources. Through the adoption of HERfinance methods coupled with wage digitization, 5 factories in Bangladesh found a 93 percent decrease in payroll costs.
A 2019 World Bank study found that about one million garment workers are receiving digital wages, constituting about 200-250 factories. Businesses still pay 90 percent of the values of salaries in cash, leaving room for expansion of the digitalization of wages in more settings. However, the high cost of transition from cash wage to digital wages often deters a majority of factories from participating.
Although the benefits are numerous, many factories are hesitant to make the jump. By 2021, the government has pledged to have 90 percent of garment workers using digital wages in Bangladesh. As of 2020, 1.5 million readymade garment workers are using the cashless system, with 2.6 million expected to join.
Overall, digital wages in Bangladesh provide women with a sense of security, creating transparency that holds employers accountable. Investing in women is beneficial to both women and businesses, creating a better future together.
– Laurel Sonneby