Garments factories are reverting to cash to pay wages and salaries to workers just months after they embraced digital payments at the height of the coronavirus pandemic, according to a new study.
The digitalisation of wages got a leg up after the government enforced countrywide shutdown to slow the spread of the deadly pathogen in April. The upward trend in payments through electronic platforms continued until June.
Later, the ratio of digital payments began to decline despite higher benefits of digitalisation such as decreased payroll processing costs, lost worker production time, and enhanced security associated with digital payments, said a press release citing the study.
The Microfinance Opportunities in collaboration with the South Asian Network on Economic Modeling (Sanem) carried out the study under a project called Garment Worker Diaries.
The project aims at collecting data on the working conditions, income, expenditure, and financial tool usage by workers in the global apparel and textile supply chain.
Researchers collected data on factory wage digitalisation from 1,377 workers in the main industrial belts such as Chattogram, Dhaka City, Gazipur, Narayanganj and Savar from April to October.
Factories were divided into two categories: Brand-facing and Not Brand-facing.
A factory is considered as ‘brand-facing’ if it is on a brand’s list of suppliers or is listed as a supplier to a brand on the websites of the Mapped in Bangladesh (MiB) or the Open Apparel Registry (OAR).
The MiB is a digital map of the garment industry that provides a detailed database of export-oriented factories all over Bangladesh. The OAR is a source map to identify apparel factories and their affiliations.
In the press release, the Sanem said there was a massive shift towards paying workers digitally in May, followed by a slow decline in the share of digital payments in the subsequent months.
The companies that are listed as the supplier of brands began to cut digital payments from August when 76 per cent paid wages electronically, down from 87 per cent in July.
In September, 73 per cent of the factories paid wages digitally.
The digital payment made by the firms that are not listed as suppliers of brands slumped to 40 per cent in September from 60 per cent in June, the press release said.
“One possible explanation was that the benefits of the digitalisation were not readily apparent to the factories, particularly because they had not completely replaced cash payments with digital payments.”
For instance, some workers reported to have received their regular salaries digitally, but Eid bonus payments in cash, the press release said.
Another reason that may have caused the factories to return to cash payments is the unwillingness of workers to receive the money electronically, it added.
“Most workers are not comfortable with receiving payments digitally because of the high transaction costs associated with mobile banking and insufficient knowledge about mobile financial and banking services,” said the Sanem.
Sanem Executive Director Selim Raihan called the reverting to cash payments unfortunate to some extent.
“The cost for digital transactions, including through mobile phones, should be reduced as the charge is high from the perspective of the income of garment workers.”