Bangladesh Bank Study Urges Making Formalisation Easier Than Cash Economy

By the Editorial Team · Tuesday, October 27, 2026

Bangladesh Bank's study found that cash transactions in 2023 cost the Bangladeshi economy about Tk 1.70 trillion, or 3.24% of GDP, with cash-related expenses being nearly 28 times higher than digital payment costs. The findings highlight the urgent need for coordinated efforts to expand digital payment adoption and formalise the large informal sector, which accounts for over a quarter of GDP and results in significant tax revenue losses.

A recent study by Bangladesh Bank highlights the significant economic costs associated with the country’s reliance on cash transactions, underscoring the challenges in formalising a large informal economy. The policy paper, titled “The Cost of Cash Study in Bangladesh: A Comparative Analysis of Cash and Digital Payment,” was published in May 2026 and brought to public attention last week. It estimates that in 2023, the economic cost of cash usage reached approximately Tk 1.70 trillion, equivalent to 3.24 percent of the country’s GDP. In contrast, the digital payments ecosystem’s total cost stood at Tk 59.64 billion, or 0.11 percent of GDP, indicating that cash-related expenses were roughly 28 times higher than those associated with digital payments.

A significant portion of the cash-related cost — about Tk 933 billion — reflects government revenue lost due to transactions conducted outside the tax system, corresponding to an estimated shadow economy accounting for 27.2 percent of GDP. This forgone revenue figure highlights the scale of economic activity remaining informal and hidden from tax authorities. However, Bangladesh Bank cautions that this estimate represents potential tax revenue and may not be fully recoverable even with expanded digital payment adoption.

Excluding the revenue shortfall, the direct costs of handling cash—covering printing, transportation, security, and operational burdens—amount to roughly Tk 770 billion annually, or 1.47 percent of GDP. These costs fall mainly on banks, households, small businesses, and microfinance institutions. Within this, Bangladesh Bank incurs around Tk 4 billion, commercial banks bear Tk 368 billion, consumers Tk 280 billion, micro-merchants Tk 62 billion, and microfinance institutions Tk 56 billion.

To address these issues, Bangladesh Bank introduced the Bangla QR system on July 1, aiming to streamline digital payments by replacing numerous proprietary codes with a single interoperable standard for merchants. The initiative has already shown promising growth: average daily transaction values increased from approximately Tk 28 crore in June to over Tk 143 crore by September, a more than fivefold jump. Additional measures include eliminating the interchange fee on QR transactions from October 1, mandating instant settlements for merchants, creating a Tk 100 crore incentive fund, and planning to launch person-to-person QR transfers in November.

Despite progress, challenges remain in encouraging widespread adoption of digital payments. Approximately 75 percent of retail transactions continue to be conducted in cash, partly due to suppliers and wholesalers still demanding payment in notes. Additionally, financial literacy rates in Bangladesh remain low, with only 28 percent of adults financially literate and nearly half of mobile money users requiring assistance. Many small traders also fear that using digital payments may expose them to tax enforcement, further deterring usage.

The Economic Census 2024 revealed that only 3.3 million out of 11.7 million economic units were registered, indicating that 65 percent operate informally. Much of this informality reflects subsistence or small-scale activities rather than deliberate tax evasion, emphasizing the need for policies that distinguish between different segments of the informal economy.

Experts argue that to accelerate formalisation, several key steps are necessary: eliminating fees on small-value QR payments for micro-merchants, assuring that digital receipts will not trigger retroactive taxes, digitising upstream supply chains and public sector payments, enforcing instant settlements and transparency, implementing strong data protection laws, and focusing enforcement on significant tax evaders through integrated data systems.

Bangladesh Bank’s study points to an urgent need for a coordinated approach by the central bank, the National Board of Revenue, and the finance ministry to make digital payments more attractive and to improve tax compliance. While cash usage is unlikely to disappear entirely, reducing informal economic activity will require making digital transactions simpler, more affordable, and less intimidating for small-scale operators. The study suggests that bridging this divide is not merely a technical challenge but a governance decision critical to expanding the country’s tax base and improving public service delivery.

This article was reported by synthesizing coverage from multiple independent news outlets to present a balanced, unbiased account. Read about our editorial standards. Spotted an error? Let us know.