Term Paper on

The Causes Of Low Growth Rate Of Credit

Card Usage In Bangladesh
For the course
Advanced Marketing Research (MKT-523)

Submitted by:
MD. ENAMUL HUQUE
ID: 41323002


Submitted to:
Dr. A. K. Fazlul Haque Shah
Professor,
Department of Marketing,
Dhaka University.

28 April 2014
Table of Contents
Sl. No. Description Page No.
1 Introduction 1
2 Problem definition
a) Background of the problem 1
b) Statement of the problem 1
3 Literature review 2
4 Research design
a) Type of research design 3
b) Information needed 3
c) Data collection from secondary sources 4
d) Data collection from primary sources 4
e) Scaling techniques 4
f) Questionnaire development and pretesting 4
g) Sampling techniques 4
h) Fieldwork 4
5 Data analysis and findings 5
6 Limitations 5
7 Recommendations 6
8 Appendices:
A) Questionnaire 7
B) Collected data 9
C) Analysis results from SPSS 40
D) References 50



Page 1


The Causes Of Low Growth Rate Of Credit Card Usage In Bangladesh

1) Introduction:
Bangladeshi consumers spend Tk. 10,000 crore a year in cash to make their everyday
purchases. Only one percent of the amount happens electronically. Consumers in India and Sri
Lanka spend 3 percent of their total annual purchases electronically while the global average is
16 percent. Consumers in countries such as South Korea, Canada and New Zealand make 50
percent of their purchases electronically. Electronic payments are not just convenient, they help
stimulate growth for economies as well. Electronic payments contributed to 0.8 percent increase
in gross domestic product (GDP) in emerging markets and 0.3 percent in developed markets,
according to a study by Moody's Analytics between 2008 and 2012 in 56 countries that make up
93 percent of the global GDP.
Usage of credit card is very limited in Bangladesh while debit card usage has got moderate
acceptability. At the same time, mobile money has got quick popularity and number of mobile
banking users are increasing rapidly.

2) Problem Definition:
a) Background of the problem:
Standard Chartered was the first bank to launch Credit Cards in Bangladesh
more than a decade ago. Subsequently other private banks started to offer
credit cards to their users. Now VISA, MasterCard, American Express and
Vanik are issuing credit cards. Few banks has started to offer international
credit cards as well. Some eCommerce websites have started to accept
payment through credit cards. But growth rate of credit card usage is still very
low in our country. On the other hand, mobile money transfer which was
introduced few years ago, has attained rapid growth and is threatening the
existence of credit card. Bangladesh has 700,000 credit card holders and
about three million debit card holders.
b) Statement of the Problem:
The growth rate of credit card usage in Bangladesh is very low.

Page 2



3) Literature Review:
The purpose of this research to find out the cause why people of Bangladesh has not
accepted credit card while they are welcoming mobile money transfer.
In July 2011, Bangladesh Bank has given permission to use International Credit Cards
(ICCs) for online payment through internet of fees such as membership fee of foreign
professional and scientific institutions and fees for application, registration, admission,
examination (TOEFL, SAT etc.) in connection with admission into foreign educational
institutions mentioned in paragraph 09, chapter 11, GFET. In addition, individuals not
holding ICCs in their names have been allowed to make such online payment through
internet using 'Virtual Card' for the required amount by an ICC issuing bank, for use
through its designated bank branch.
Bangladesh should adopt electronic banking and card payments as they reduce cost for
banks by up to 90 percent as per Uttam Nayak, Senior official of Visa Inc. Checking fraud
and money laundering is the beauty of electronic payments. Electronic payments are not
just convenient, they help stimulate growth for economies as well. Electronic payments
contributed to 0.8 percent increase in gross domestic product (GDP) in emerging
markets and 0.3 percent in developed markets, according to a study by Moody's
Analytics between 2008 and 2012 in 56 countries that make up 93 percent of the global
GDP. As of September 2013, the Visa's global network processed 87.5 billion
transactions, $6.9 trillion total volume and $4.3 trillion payments volume.
Credit card is the most misunderstood product. In Bangladesh, banks have been
extremely careful about giving credit cards to people who have repayment credibility.
That is why the card penetration is very low in Bangladesh. Some countries got carried
away with credit cards. Ten years ago South Korea faced problems, as it gave too many
credit cards and they had a crisis of non-payment. India also faced the same crisis
stemming from credit cards in 2009 when one out of four customers was not paying the
bills as they were over-leveraged. India had to slow down the business and close 10
million accounts and banks incurred huge losses.

Page 3

Bangladesh has 700,000 credit card holders and about three million debit card holders.
The sales volume stood at about $1 billion per year.

4) Research design
a) Type of research design:
The research conducted is quantitative in nature. To get insights about the
variables related to it, descriptive research is done. Single cross-sectional
research design is used in this study. Data will be collected through
surveying from different people of Dhaka city selected randomly. After
col l ecti ng data some quanti tati ve techni ques e.g. ANOVA, regressi on
anal ysi s and discriminate anal ysi s wi l l be done by usi ng SPSS to
measure the relationship among the variables.
b) Information needed:
Information needed in this research includes perceptions of people regarding
various aspects of credit card usage. Information needed for this study can be
classified into two categories: Dependent Variable and Independent Variables.
i) Dependent Variable:
Attitude towards credit card usage
ii) Independent Variables:
Following seven main independent variables have been identified through
literature review, consultation with industry experts and preliminary
investigation into the problem:
1. Number of POS
2. Misunderstanding
3. Fear of budget overrun
4. Security of credit card
5. Interest rate of credit card
6. Hidden fees and costs
7. Hassles getting a credit card
Page 4


c) Data collection from secondary sources:
Secondary data is collected through different sources like annual Reports of the
different banks, company websites & internet and newspaper reports etc.
d) Data collection from primary sources:
Primary data will be collected through face to face interview & conversation.
Samples are selected randomly from different parts of Dhaka city.
e) Scaling techniques:
In this study, the nature of the data is metric in nature. To conduct survey for
data collection 09 (nine-point) Likert scale is used.
f) Questionnaire development and pretesting:
A questionnaire is used to indicate the degree of agreement or disagreement
with each of the research questions. The questionnaire is constructed based on
nine points Likert scale. Since there are 8 variables (01 dependent & 07
independent), 8 structured questions have been included in the questionnaire.
And 2 (two) unstructured questions: age & profession have been included.
g) Sampling techniques:
In this research, target population is the residents of Dhaka city. Sample size
is 30 respondents. They are selected randomly. In this study, simple random
sampling technique is used.
h) Fieldwork:
A pre-written questionnaire is used for collecting data. The language of the
questionnaire is in Bangla along with English. The survey is conducted by the
researcher himself. Majority of the study is based on primary data. However some
secondary data sources will be used for background study and for literature
review.



Page 5

5) Data analysis and findings
The analysis is done with quantitative procedure. SPSS software is used for quantitative
analysis of collected data. Statistical analysis results from SPSS analysis is attached in
Appendix-C. Age has been converted to nominal scale of two categories: below 40 yrs
group and 40 yrs & above group. Similarly interest rate has been categorized as:
acceptable, high and very high. Willingness to get a credit card has been converted to
three categories: low, medium and high.
Major findings from SPSS statistical analysis are following:
Less than 10% people are willing to get a credit card. More than 50% are strongly
unwilling to get a credit card.
More than 60% people think that interest rate of credit card is very high.
Interest rate has the highest impact on making a decision whether to use credit
card or not. It has a significance level 0.001. The next important variable is fear of
budget overrun which has a significance level of 0.015. Number of POS seems
not affecting the decision significantly since it has significance level of 0.788



6) Limitations
Following are some limitations of this research:
Only 30 samples were selected which may not represent the huge population.
The study is conducted only in Dhaka city which may not represent the whole
Bangladesh.
Samples do not represent all age group properly.
Samples do not represent all professional groups properly.
Only seven variables have been considered. There are numerous other variables
which affect the decision making regarding usage of a credit card.
Page 6


7) Recommendations
Following measures should be taken to popularize credit cards in Bangladesh:
More POS should be installed in the shopping malls.
Increasing security measures to gain confidence of the users. Debit card of Dutch
Bangla Bank needs to enter a PIN code on each transaction (even for a purchase
using a POS) which is widely appreciated by the users. Credit cards can also use
similar measure. Also photograph should be embodied in the card.
Interest rate should be reduced. This is the biggest concern of people who are
willing to get credit card.
All relevant costs of holding a credit card should be clearly stated to the users to
avoid misunderstandings and dissatisfaction.
The procedure of issuing credit card should be simplified and relaxed.

----------------------
Page 7

Appendices
Appendix A: Questionnaire
Name: Profession: . Age:
Listed below are different possible causes why people like or do not like to use credit
card. Please rate how strongly you agree to disagree with each of the following
statements by placing a tick mark.
NB: The following questions are intended only for credit card not for debit card.
Question 1:
POS (Many merchants have a POS to accept credit card)
Extremely
Agree
Strongly
Agree
Agree Somewhat
Agree
Neither Agree
Nor Disagree
Somewhat
Disagree
Disagree Strongly
Disagree
Extremely
Disagree
1 2 3 4 5 6 7 8 9

Question 2:
(I dont understand how
credit cards actually work)
Extremely
Agree
Strongly
Agree
Agree Somewhat
Agree
Neither Agree
Nor Disagree
Somewhat
Disagree
Disagree Strongly
Disagree
Extremely
Disagree
9 8 7 6 5 4 3 2 1

Question 3:
(There is high risk of budget overrun when
using credit card)
Extremely
Agree
Strongly
Agree
Agree Somewhat
Agree
Neither Agree
Nor Disagree
Somewhat
Disagree
Disagree Strongly
Disagree
Extremely
Disagree
9 8 7 6 5 4 3 2 1

Question 4:
(Security of credit card is not enough)
Extremely
Agree
Strongly
Agree
Agree Somewhat
Agree
Neither Agree
Nor Disagree
Somewhat
Disagree
Disagree Strongly
Disagree
Extremely
Disagree
9 8 7 6 5 4 3 2 1


Page 8

Question 5:
(Interest rate of credit card is reasonable)
Extremely
Agree
Strongly
Agree
Agree Somewhat
Agree
Neither Agree
Nor Disagree
Somewhat
Disagree
Disagree Strongly
Disagree
Extremely
Disagree
1 2 3 4 5 6 7 8 9

Question 6:
(There are many hidden fees and
costs associated with credit cards)
Extremely
Agree
Strongly
Agree
Agree Somewhat
Agree
Neither Agree
Nor Disagree
Somewhat
Disagree
Disagree Strongly
Disagree
Extremely
Disagree
9 8 7 6 5 4 3 2 1

Question 7:
(There are too many hassles to get a
credit card)
Extremely
Agree
Strongly
Agree
Agree Somewhat
Agree
Neither Agree
Nor Disagree
Somewhat
Disagree
Disagree Strongly
Disagree
Extremely
Disagree
9 8 7 6 5 4 3 2 1

Question 8:
(I want to get a credit card)
Extremely
Agree
Strongly
Agree
Agree Somewhat
Agree
Neither Agree
Nor Disagree
Somewhat
Disagree
Disagree Strongly
Disagree
Extremely
Disagree
1 2 3 4 5 6 7 8 9



THANK YOU




Page 9




Appendix B: Collected data
Page 10




Appendix C: Analysis results from SPSS
Page 11


Appendix D: References

References:
1. http://www.thedailystar.net/exclusive/mobile-banking-key-to-financial-
inclusion-14002
2. https://www.sc.com/bd/personal-banking/cards/credit-card/en/
3. http://www.thecitybank.com.bd/Credit-Card.php
4. http://www.bracbank.com/Universal-Card.php
5. https://www.hsbc.com.bd/1/2/retail-banking/services/credit-card
6. http://www.ebl.com.bd/home/EBL_Credit_Card
7. http://www.dutchbanglabank.com/electronic_banking/credit_cards.htm
l
8. https://www.americanexpress.com/bangladesh/homepage.shtml
9. http://bd.visa.com/travel/atmsoverseas.shtml
10. http://www.bangladesh-bank.org/pub/special/14062012.pdf