Fast-growing agent banking squeezes after regulatory compliance order

Booming agent banking by Bangladesh's banks pooled rural deposits worth over a trillion taka and remittance much higher than the sum until last June, but their operations began decelerating under a regulatory compliance order.

Official statistics show the amount of deposits raised by the commercial banks through the agent-banking outlets across the country, as of June 2025, amounted to Tk 1.239 trillion and the netting of remittance was Tk 1.838 trillion.

Against this aggregate receipt, Tk 290.085 billion was disbursed to their grassroots-level clients that transmitted finances into the flourishing rural economy.

In the downturn, the number of agents fell 4.0 per cent from a year earlier and 3.0 per cent from the previous quarter (January-March 2025), with 618 agents exiting year on year and 465 quarter on quarter.

Outlets declined in sync, dropping by 916 on an annual basis and 466 from March, leaving the total at end-June at multi-quarter lows.

People familiar with the matter have said the contraction follows a new central-bank rule requiring that at least half of new agent-banking entrepreneurs be women -- a move aimed at boosting female participation but which they say has deterred some existing operators and slowed expansion.

Bangladesh Bank governor Dr Ahsan H. Mansur first announced in March that at least 50 per cent of agent-banking representatives have to be women.

Later in May, the central bank issued a circular to this effect.

Agent banking, which allows customers in remote areas to access banking services through third-party operators, has been one of the country's fastest-growing financial channels, serving millions outside the formal banking grid.

A sustained decline, analysts warn, could "undercut progress in bringing unbanked populations into the formal economy through deposit and business-financing transactions".

They say the growth actually began to retard after the announcement as it is hard to find women entrepreneurs in the rural areas.

"This is a technology-driven business, and most rural women have yet to acquire the necessary skills to do the business," a senior executive of a private commercial bank engaged in agent banking told the FE Friday over the phone.

He also said many male entrepreneurs try to obtain licences in their wives' names, but the highly technology-based nature of the work often does not suit them.

"Our main operations are in rural areas, where the female entrepreneurs are hardly found," says another senior executive working on the segment of the banking.

He, however, says there is a large pool of young people in rural areas who could drive the future growth of agent banking.

On the other hand, the number of accounts under the agent-banking network has also declined.

The central bank report says accounts opened through agent banking fell over 1.0 per cent in the last quarter.

"This sudden negative growth rate is the result of the closure of operational activities at agent outlets run by Agrani Bank PLC," the report mentions as another cause.

The state-owned bank suspended its agent-banking operations on June 21, 2025.

The banking regulator introduced agent banking in 2013 with a view to providing a safe alternate delivery channel of banking services.

The main objective is to serve the underserved populations who generally live in geographically remote locations and hard for them to reach branches of the conventional banks.

Agent-bank customers can avail various banking services, including deposits, loans, overseas and local remittances, payment services (such as utility bills, taxes), and receiving government social safety-net benefits through these banking outlets.

This model thus gained popularity as a cost-effective and convenient delivery channel to the mass people who would otherwise have remained beyond the reach of conventional banking services.

As of June 2025, the number of agents stood at 15373 while outlets at 20,557.

jaismharoon@yahoo.com