Agent banking is the form of banking that includes limited scale of banking and financial service through persons or agents under a valid agency agreement across the country, especially in remote areas. An agent is a third-party owner of an outlet who 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.
Brazil is recognised as the pioneer of agent banking. Other developing countries like Columbia, Peru, Malaysia, Kenya, India, Pakistan and Philipines developed the system.
Full-fledged agent banking operation started in Bangladesh in 2016. It began with 10 banks. Now 17 commercial banks operate agent banking activities, while 20 commercial banks have taken licenses of agent banking from Bangladesh Bank. Agent banking is operated in the country according to agent banking guidelines, issued by Bangladesh Bank in 2013.
Agent banking became popular at the very beginning of operation of the business. Record shows that 5,44,536 accounts was opened with initial deposit of about Tk 3.81 billion (380.68 crore) at the first quarter of operation of business in October-December, 2016. The services of agent banks were welcomed by the people, particularly by those who earlier were unbanked. The number of accounts increased to 12,14,367 with deposits of about Tk 13.99 billion (1399.39 crore) at the end of December 2017. At the end of June 2018, the agent banking deposit stood at about Tk 20.12 billion (2012.77 crore) while the number of accounts increased to 17,77,400.
A large portion of the population of the country is still out of banking services. Agent banking will help bring them under banking system. It has facilitated customers by providing all banking services at their doorsteps in remote areas.
Agent banking is gaining popularity among the people. The clients find the system easy as well as cost-effective. It is promotes financial inclusion of unbanked and under-privileged sections of the population of the country.
Agent banking is a boon to migrant workers. They can send money to their families in remote villages in a hassle-free manner. Inward remittance of about Tk 26.74 billion (2,673.99 crore) was channelled through agent banking across the country up to March 31, 2018. The figure of foreign remittance increased to about Tk 35,14 billion (3514.22 crore) in June 30, 2018. Thus, foreign remittance increased 31 per cent from March quarter 2018 to June quarter 2018, while at the same period the number of accounts and amount of deposit increased by 21 per cent and 23 per cent respectively. Agent banking has apparently curbed 'hundi' business.
There are more than 87,000 villages in the country and the total number of bank branches of all 57 banks are 10,000, most of which are located at district and upazila level. Agent banking should be spread to all the villages.
About 86 per cent of total market share of agent banking is held by two banks, namely Bank Asia Limited and Dutch Bangla Bank Limited. If all the banks participated in agent banking proactively, banking system as such would have spread to grassroots people throughout the country. Bangladesh Bank should formulate specific policies in this regard.
Mir Mahmudul Haque Chowdhury is a banker.