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Pandemic makes agent banking deliver on its great potential

  • Published at 01:03 am December 16th, 2020
Agent banking October 2020

In October, all statistics of the banking window hit an all-time high

Agent banking, an initiative of the central bank introduced in 2013 as part of its financial inclusion agenda, has never been popular as it is right now. And it has the global coronavirus pandemic to thank.

In October, all statistics of the banking window, including deposit mobilisation, loan disbursement, inward remittance distribution, the number and volume of transactions, hit an all-time high, shows data from the Bangladesh Bank unveiled on Monday. 

Under agent banking, it is the owner of an outlet who conducts banking transactions on behalf of a bank under a valid agency agreement rather than a teller/cashier.

In 2016, lenders kickstarted their operations with just deposit mobilisation and gradually they added on more services. Now, 24 banks run agent banking windows.

Of them, nine lend through the channel, providing an alternative to loan sharks for rural people to get credit. 

Now, agents provide services such as cash deposits, withdrawals, remittance disbursement, small-value loan disbursement and recovery of the loans, and cash payments under the government's social safety net programmes.

As of October, the total number of agent outlets stood at 14,414, which is the highest year. A year earlier, there were 9,703 agents.

The total number of agent banking accounts stood at 8.8 crore at the end of October, up a whooping 97 per cent year-on-year.

The ongoing pandemic is playing a vital role in giving momentum to this new banking model, which was introduced with the view to providing financial services to the underserved and poor segments of the population, especially those from the geographically dispersed locations, said Md Anwarul Islam, general manager of the BB’s financial inclusion department.

The rising trend of agent banking services amidst the pandemic signifies there is huge scope to bring the mass rural unbanked people under the umbrella of formal banking services, Islam said.

Banks’ deposit mobilisation through the channel stood at Tk 13,747 crore in October, up 111.30 per cent year-on-year.  

In October, loan disbursement through the channels was up a staggering 370 per cent; remittance distribution 302 per cent and utility bill payment 16.81 per cent from a year earlier. 

The use of agent banking has increased amid the pandemic, when public movement is discouraged to curb the spread of the pathogen, as customers can take banking services from near their homes without travelling far to visit a bank branch, said Md Arfan Ali, managing director of Bank Asia, who is the pioneer in agent banking. 

“We have been operating agent banking activities for six years, which inspired the other banks to jump in. It will get more popular in the coming days.”

Bank Asia lends out about 25 per cent of the deposit collected through the window and has plans to scale it up to 100 per cent by 2021.

In future, banks would disburse small- and medium-sized enterprises loans, agriculture loans and microcredit through the agent banking window, Ali added.

State-run Agrani Bank is among the top five banks in case of remittance distribution as the bank offered an additional 1 per cent cash incentive on top of the 2 per cent provided by the government for sending money in through the official channel, said Mohammad Shams-Ul Islam, its managing director. 

“We set up agent outlets in remittance centred areas, which is also another reason for the jump in remittance distribution through our agent banking channels,” he added. 

BRAC Bank, which got its agent bank licence in November 2018, has the leading position in case of loan disbursement through the window.

Agent banking has now spread to remote areas and rural people are now getting various banking services including remittance collection from agents at doorsteps, said Nazmur Rahim, head of alternate banking channels of BRAC Bank.

City Bank’s 1,200 agents made it easier to disburse SME loans including government-announced stimulus packages to areas where there are no bank branches, said Kamrul Mehdi, the bank’s head of SME.

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