Agent Banking in South-east Asia (Bangladesh)
Agent banking operation in the country’s wide-ranging areas has turned out to be a money multiplier among unbanked population receiving money to need-based services, including small-scale investment facilities. The banks through agent banking outlets across the country achieved comprehensive deposits worth over Tk 6.51 billion (651.21 crore) up to June 30, 2017 last against over Tk 3.80 billion (380.68 crore) as of December, 2016, according to figures available with the Bangladesh Bank. The rural or unbanked people of the country are in a contest for account opening at the agent banking outlets mainly for having the experience of banking from remote areas. Especially remittance beneficiaries are feeling determined about opening such accounts to enjoy charge-free services.
On December 9, 2013 the Bangladesh Bank issued the agent banking guidelines, a landmark initiative mainly to bring the unbanked population under the umbrella of full-fledged banking services.
Advantages of Agent Banking
- To achieve growth and equity
- Get rid of poverty
- To attract global market players to our country
- To increase the employment and business opportunity
- Financial inclusion by agent banking is a win- win situation for the financially excluded, corporates, the govt. and the Banks. • Bankers can support by financing the agri products including their preservation and sales.
Agent Banking in India
In emerging markets and rural areas, traditional banks have a hard time reaching customers. Opening and operating traditional bank branches are often not cost-effective. Operating a bank branch entails having at least one teller at the front desk, a bank manager and bank employees specialising in areas such as mortgages and loans, and security. It is one of the reasons why banks are closing rural branches. Rural customers also have to travel extensively to visit their respective bank branches. For instance, an average rural customer of the State Bank of India has to travel around 8-20 km to the closest branch, according to statistics by Reserve Bank of India.
In such a scenario, agent banking, comprising a network of banking agents who act as physical bank branches, is the answer. Banking agents can be telcos, e-wallet providers, retailers and so on. It is extremely convenient as the travel distance to, say a telco agent, is less than 2 km for that same SBI bank customer.
It’s a win-win-win for all
The three stakeholders in the agent banking constellation are the banks themselves, banking agents and (of course) the customers. All of them benefit from the agent banking network model.
The banks will be able to expand their customer base by onboarding new customers who were previously out of their reach. By having banking agents, instead of more physical bank branches, infrastructure and manpower costs are reduced while revenues are increased.
The banking agents benefit since they generate additional income, including sales from additional walk-ins. They can also differentiate themselves from competitors as they are now affiliated with well-known banks.
Last but not least, the previously unbanked and underbanked customers have now easy access to a financial institution near them. Apart from reduced travel time and expenses, the transaction fees are also lower.
It’s a global success
The agent banking model has proven to be successful in Latin America, Africa, India and the Far East. For example, the Kenyan Equity Bank was able to become profitable by reaching the mass market for deposits via its agent banking network. This success was enabled by the local government’s strategy to increase the number of banked Kenyans from 30 per cent in 2013 to about 70 per cent by 2030. To enable this, the government amended the Finance Act 2009, as per Kenya Gazette Supplement, allowing banks to use banking agents to offer services on their behalf.
If we look at Latin America, we see that the leading countries that allow (and benefit from) agent banking are Colombia, Brazil, Peru and Mexico. In Brazil, the Banco Central do Brasil reported that since the introduction of agent banking, 12 million current accounts were opened at the banking agents and the total amount of transactions reached 2.6 billion within the first three years.
In the Democratic Republic of Congo, the Foundation for International Community Assistance (FINCA) has introduced agent banking to keep customers safe. As they had to travel long distances to their respective bank branches, they were at risk of being robbed. They were also losing time and productivity due to those long journeys. The agent banking network consists of local merchants and shopkeepers who provide basic banking services. Due to the success in that country, FINCA has also introduced agent banking in Tanzania and Zambia.
In January 2017 Bank Asia announced it would add 2,000 agent banking outlets to its existing 1,200 in Bangladesh. The bank originally launched its agent banking network in 2014 when the central bank allowed agent banking in the rural areas where banks had no branches.
Agent banking has been introduced in the areas of Bangladesh where traditional banking has not yet reached.Two banks – Bank Asia and Dutch-Bangla Bank – started recruiting agents at the grassroots level from Jan 19 to offer banking services through them.
Another two banks – South Bangla Agriculture and Commerce Bank, and NRB Commercial Bank – are going to launch the service.
The central bank issued licenses to the four banks for running agent banking, under which financial services would be offered through agents instead of branches.
Bangladesh Bank officials said Bank Asia had already appointed 49 agents in 32 Upazilas under 17 districts while Dutch-Bangla recruited six agents.
The central bank had issued a circular on Dec 9, 2013 approving agent banking in the rural areas where banks have no branches.
In another circular on Jan 6 this year, the central banks endorsed agent banking also in the urban areas not covered by traditional banking system.
Dutch-Bangla Bank Deputy Managing Director Abul Kashem Md Shirin told bdnews24.com, “A large portion of the population is still out of banking services. Agent banking has been introduced to bring them under banking service.”
According to Bangladesh Bank, customers will not require to pay any charge for the services they will receive through the agents.
Small amounts of money can be deposited or withdrawn besides receiving remittance through agent banking.
The agents can disburse small credit and collect loan installments and utility bills.
The policy on agent banking stipulates that customers can receive government assistance from social safety programmes and deposit insurance premium through the agents.
They can also transfer money from one account to another and check account balance.
Anyone can collect information about opening of bank account from the agents and apply for loans, and credit or debit cards through them.
The agents, however, cannot make payment on any cheque, open any account, issue cheque books or bank cards, and transact foreign exchange.
An agent has to have the qualifications determined by the central bank and give a security deposit of Tk 100,000 for appointment.
They will get a certain commission on transactions.
The policy says NGOs, micro-credit agencies, cooperatives, post offices, companies, mobile-phone operators’ agents, union information service centres, local government institutions and any individual capable of offering financial services based on information technology can be appointed agents.