Agent Banking in Bangladesh

what is agent banking in bangladesh

Agent Banking means providing limited scale banking and financial services to the underserved population through engaged agents under a valid agency agreement, rather than a teller/ cashier. It is the owner of an outlet who conducts banking transactions on behalf of a bank. Globally these retailers are being increasingly utilized as important distribution channels for financial inclusion. Bangladesh Bank has also decided to promote this complimentary channel to reach to the poor segment of the society as well as existing bank customer with a range of financial services specially to geographically dispersed locations. 

first agent banking in bangladesh

Bangladesh Bank is issuing this guidelines as per authority conferred to it by Article 7A(e) of Bangladesh Bank Order, 1972, Section 45 of Bank Company Act, 1991 and Section 4 of Bangladesh Payment and Settlement Systems Regulations, 2009.

 The following services will be covered under Agent Banking:

•  Collection of small value cash deposits and cash withdrawals (ceiling should be determined by BB from time to time ); 
•  Inward foreign remittance disbursement;
•  Facilitating small value loan disbursement and recovery of loans, installments. 
• Facilitating utility bill payment ;
•  Cash payment under social safety net programme of the Government ; 
• Facilitating fund transfer(ceiling should be determined by BB from time to time); 
• Balance inquiry; 
• Collection and processing of forms/documents in relation to account opening, loan application, credit and debit card application from public;, 
•  Post sanction monitoring of loans and advances and follow up of loan recovery. . Receiving of clearing cheque. 
• Other functions like collection of insurance premium including micro‐ insurance etc. 

Although the central bank issued an agent banking guideline in 2013, the first banks started full-fledged agent operations in 2016. The business took off almost immediately, with 544,536 accounts opened with deposits of Tk380.68 crore opened between October and December that year. By the end of March this year, the number of agent banking accounts stood at 1,468,797 with deposits of Tk1,634.36 crore, according to the latest estimate of Bangladesh Bank. banking was Tk 309.56 crore between October and December last year. Comparable quarterly figure for remittance sent through mobile banking was not available but migrant workers sent home Tk 8.12 crore in December using mobile banking. The total money transacted via agent banking stood at Tk 380.68 crore in December last year. It started off with 10 banks and now 16 commercial banks run agent operations - Dutch-Bangla Bank Limited (DBBL), Bank Asia, Al-Arafah Islami Bank, Social Islami Bank Limited, Modhumoti Bank Ltd, Mutual Trust Bank Limited, NRB Commercial Bank, Standard Bank

Ltd, Agrani Bank Ltd, Midland Bank, First Security Islami Bank, The City Bank, Islami Bank Bangladesh Ltd, The Premier Bank Ltd, United Commercial Bank Limited, and AB Bank Limited. Meanwhile, Trust Bank, South Bangla Agriculture and Commerce Bank, Brac Bank Ltd, and NRB Bank have secured licenses from the central bank to operate agent banking, but they are yet to launch the service. Secret behind the growth Agent banking has been able to get such popularity mainly for its simplicity to the clients and cost-effectiveness for the banks. 

According to a research paper titled, “Alternative delivery channel: Opportunities and challenges of the new banking environment” by Bangladesh Institute of Bank Management (BIBM), agent banking has become popular because of its benefits for both the banks and clients, while the country’s economy is also being benefited through financial inclusion. The banks have been able to increase customer volume, improve financial appearance, lower operating costs, expansion of business, increase deposit collection, improve banks’ branding and widen their spreads. Agent banking has facilitated customers by providing full-fledged banking services at their doorsteps in the remote area, and it has made convenient and easy for channeling remittance. The agent banking outlets are now not only limited to services like cash deposits, cash withdrawal remittance payment only, the banks have started giving out small loans through the outlets. As of March 31, this year, six banks have disbursed Tk122.25 crore in credit through their agent banking outlets. Challenges Though substantial progress has been made in the area of agent banking in terms of the number of agents, account-holders and deposits, there are a number of challenges confronting the growth of this new tool of banking. 

The BIBM research paper identified seven challenges for banks. The challenges are:  selection and monitoring of agents  cheque book issue and clearing cheque, limited transaction time,  power failure,  cash carrying or management risk,  physical and cyber security,and settlement of complaints. Another research paper by BIBM titled “Agent Banking: Effectiveness in Financial Inclusion,” says product lending is still absent in the agent banking outlets. Central bank data says agent banking is concentrated in two banks, with DBBL and Bank Asia covering more than 86% of agent banking accounts. By the end of March 2018, a total of 884,680 accounts were opened through DBBL and 380,936 accounts through Bank Asia.