Expanding agent banking in BD

Now-a-days the banking process is becoming faster, easier and wider throughout the world. Agent banking service is an outcome of the process. The main purpose of agent banking is to bring and introduce banking services to the rural and unbanked people through agents where the physical structure of a bank is not established.

Being a unique service it has already been introduced in the different areas of Bangladesh where traditional and structural banking and its products and services are not available. The volume of the transactions performed through agent banking is still not big, as some 68.0 per cent of population in Bangladesh resides in the rural areas and a chunk of it is quite remote.

In fact, agent banking is a limited scale banking and financial service for persons under a valid agency agreement, rather than a teller or cashier, according to Bangladesh Bank agent banking guideline 2013. An agent, who is a third-party owner of an outlet, conducts banking transactions, such as cash deposit, cash withdrawal, account opening, account inquiries, small-amount loan disbursement, loan recovery, fund transfer and paying bills under the government safety net programmes on behalf of a bank.

In a country where about 41.0 per cent of the total work force is involved in the agricultural sector and bulk of them resides in the rural areas, agent banking is certainly going to play a very important role in the financial inclusion. To go with that, one must not forget that a large number of population is not educated. So, reaching them through Mobile Financial Services (MFS) may be tricky. That is why agent banking concept will play a vital role in the upcoming days.

According to 'The Global Findex Database 2017', in Bangladesh the percentage of 15-plus people having an account is 50.0 per cent and only 35.0 per cent of them are woman.  So, a large portion of the country's population is still unbanked. To reach them, agent banking will play an important role.

Initially, banks have put focus on mobilising deposits. But it is time to extend the service by disbursing loans to clients living in the rural and remote parts of the country. It is a cost-effective channel for banks as it reduces the cost of collecting deposits. The cost of fund collected through agents is lower than those mobilised by branches as banks do not have to spend on infrastructure for outlets.

Banks should take this cost-effective service more seriously and need try to spread agents throughout the country as fast as possible. All non-government organisations (NGOs) may also disburse their funds through agent banking channels which will keep the economy running. The government should take initiative to make this service popular amongst the rural people using the government departments. More and more people will use this service because of the convenience it will provide to them in their daily life. Banks should have to be very vigilant employing those policies to make it the biggest triumph story.

It is evident that agent banking can serve as an important tool for inclusive growth for a country like Bangladesh. Evidence shows that the success of agent banking in different countries depended on their favourable and flexible policies regarding agent banking and continuous efforts by the central banks of those countries. Wholehearted contributions from commercial banks are a must. So, Bangladesh Bank needs to focus on that issue to encourage commercial banks to come forward enthusiastically.

Additionally, both agents and customers need to be motivated to make the agent banking concept successful. Using agents should be cost effective for banks and customers, and profitable for agents. Incentives can be given to the customers who are using agent banking for their transactions. Different events like seminars as well as conferences on agent  banking like school  banking  can  be  organised  on  a  regular  basis  to  promote  its  usefulness.  Even the government can  engage different  NGOs  to  develop and  create  financial literacy  and  knowledge  among the  customers  regarding  agent banking.

Finally, a holistic effort by the government, Bangladesh Bank, commercial banks, MFIs as well as mobile companies can create awareness among people in using agent for different financial services. It can work wonders in financial inclusion and enhancing financial activity. If the vibrant banking sector puts relentless efforts by following the proper guidance of the central bank, agent banking can prove an effective tool for enhancing financial inclusion and materialising the dream of a poverty-free Bangladesh.

Tapash Chandra Paul, PhD is Chief Financial Officer (CFO), Mercantile Bank Limited.

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