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Agent Banking ABCs
by Hasibur Rahman
Mobile Commerce Services, Citycell
Starting its journey in 2011, Mobile banking, commonly referred to as
mobile financial services (MFS), has recorded phenomenal growth in
Bangladesh in terms of financial inclusion. But still half of the population
lack access to the formal financial service. To bring this large number of
people under the coverage of the formal financial sector Bangladesh Bank
introduced “Agent Banking” in late 2013.
It can help the formal banking sector reach out to the marginalized people
of the society through their agents, who will provide banking services to
the people on behalf of a bank and the nearest branch of the bank will
provide necessary logistic support.
Agent Banking bridges the gap between the bank and the unbanked
people, makes banking services accessible to rural people, offers cost-
effective banking services, minimizes the operating and establishment
costs for banks.
What is Agent Banking!!?
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.
Success Story (Brazil)
Agent banking has worked wonders in several developing countries in
different parts of the world like Brazil, Columbia, Peru, Malaysia, Kenya
etc. Agent banking has been a revolutionary inclusion in the financial
system of Brazil.
In the early 2,000s about a quarter of Brazil lacked access to formal
financial services which has been mitigated to a great extent after
introduction of this mechanism. As reported by the Banco Central do
Brasil, the central bank of Brazil, since the introduction of agent
banking, 12 million current accounts were opened across the agency
banking network within only three years and the total amount of
transactions reached 2.6 billion reflecting the necessity of such a
Success Story (Columbia and Peru)
Columbia and Peru also turned to the mechanism. Although in
Columbia the bank branches covered 73 per cent of the municipality,
the agent banking helped raise the coverage to nearly 100 per cent.
In 2009 the total numbers of transactions in Peru and Columbia were
67 million and 29 million respectively which were quite big compared
to the size of their respective economy.
Agent banking in all three countries has been most successful in easing
payments made by different households such as utility bills, taxes etc.
As data suggest, such payments account for more than 70 per cent of
the total transactions in remote areas.
Success Story (Malaysia & Kenya)
Malaysia implemented agent banking under the guidelines of the Bank
Negara Malaysia, in early 2012. By the end of 2012, 4,120 agents
deployed and it crossed 5,000 agents by 2014.
The rate of financial inclusion in the sub-district of Mukims in Malaysia
was less than 50 per cent before the introduction of agent banking,
but now this rate has increased up to 75 percent.
Agent banking was first implemented in Kenya in 2010, when 32
percent of their total population lacked access to financial services.
After launching agent banking, 10,000 agents have been licensed to
supplement the. Within 2011 the total transactions in terms of value
rose to US$ 24 million and the financial exclusion was reduced
Agent Banking in Bangladesh
There are more than 50 commercial banks including the government-
owned specialized banks and many other financial intermediaries
actively performing in the market. Yet a large number of poor people
do not have access to formal financial services as shown in a study
conducted by the Institute of Microfinance.
Keeping in mind the financial viability the formal commercial banks
mainly focus on large-scale loans which prevents them from rendering
services to a large number of people. Despite efforts of commercial
banks to promote SME (small and medium enterprises) banking, less
than 10 per cent of the population lack access to formal credit.
Agent Banking in Bangladesh (cont.)
700+ licensed microfinance institutions (MFIs) operating in different
regions of Bangladesh with a client base of up to 50 million. Most of
the big organizations like BRAC, Grameen Bank and ASA have their
outreach in almost all over the country.
They have targeted the poverty-stricken segment and provided small-
scale financial services to these marginalized people. But the services
provided by the MFIs have their limitations as well. They charge a high
rate of interest and the procedure of collecting overdue payments is
Therefore, agent banking has the potential to become an alternative
financial service channel for rural populations along with the unbanked
Agent Banking in Bangladesh (cont.)
In Bangladesh, 12 banks are licensed to provide agent banking,
although there are currently two market leaders actively engaged in
expansion: Bank Asia Limited and Dutch-Bangla Bank Limited (DBBL).
Between the two of them, they expect that they will have agent points
in every upazilla in Bangladesh by 2016. Right now, Bank Asia has over
300 agent points, while DBBL has more than 500 agent points across
Since agent banking is backed by the bank’s core banking platform,
banks offering agent banking can provide a full suite of banking
services on behalf of the bank. Loans offered by agent banking are
often at lower interest rates, ranging from 10%-15%, compared to 25%
- 30% for MFIs, depending on the repayment terms.
Agent Banking Services
The Bangladesh Bank has come up with some guidelines on agent
banking. According to the guidelines the following services can be
provided under agent banking:
Account opening and Balance inquiry
Small value cash deposits and withdrawals
Inward foreign remittance disbursement
Facilitating small loan disbursement and recovery of loans, instalments
Facilitating utility bill payment, fund transfer
Cash payment under social safety net programme of the government
Loan, credit and debit card application form collection and processing
Post-sanction monitoring of loans and advances and follow up loan
Receiving clearing cheques, collection of insurance premium etc.
Agent Banking Service Limitations
Agents are not allowed to provide the following services on behalf of
Giving final approval of opening of bank accounts
Giving final approval of issuance of bank cards/ cheques
Dealing with loan/ financial appraisal
Encashment of cheques and
Dealing in Foreign currency.
Eligible Entities of Agent Banking
The Banks may engage the following persons/ entities as their Agent:
NGO‐MFI’s regulated by Micro credit Regulatory Authority of Bangladesh;
Other registered NGOs;
Cooperative Societies supervised by Cooperative Society Act,2001;
Courier & mailing Service Companies registered under Ministry of Posts
Companies registered under ‘The Companies Act, 1994’;
Agents of Mobile Network Operators;
Offices of rural and urban local Government institutions;
Union Information and Service Centre (UISC);
Individuals capable to handle IT based financial services, agents of
insurance companies, owners of pharmacies, chain shops and petrol
Agent Banking Model
An agent can act as agent of more than one bank but the sub agent of
an agent shall represent and offer banking services of a single bank.
The bank shall assign one of its branches/offices to be responsible for
the agent operating in the designated area of the branch.
The agents are equipped with point of sale (POS) devices, like-
biometric device, card reader, mobile phone, barcode scanner and PCs
connected with their bank's server.
Identification of customers shall be done through a PIN/ biometrics.
The transactions should be executed on real time basis. and customer
will get instant confirmation of their transaction through SMS and
debit/ credit slip.
Agent banking can provide all banking services on behalf of the bank.
The agent of the concerned bank should deposit a fixed amount of
money or should have a credit limit with the bank and upto that level
the agent can make transactions with the clients.
Regulatory Instructions of Agent Banking
Without having approval from Bangladesh Bank (BB) no bank shall
be allowed to undertake agent banking business.
Banks needs approval from Bangladesh Bank to launch Agent
Banking with full details of the services.
Transaction currency will be taka only.
Banks shall have to submit copies of agreement(s)/MOU(s) signed
between banks and their agents to Bangladesh Bank.
The list of the agents with details need to be submitted to
Bangladesh Bank and will be updated on monthly.
Regulatory Instructions of Agent Banking (Cont.)
Inward foreign remittance can be transfer through designated
agents will be used only for delivery in local currency.
The system should not be used for any cross border outward
remittance of funds.
Banks shall submit overall report on agent banking annually to its
Board as well as to Bangladesh Bank.
Bangladesh Bank may withhold, suspend or cancel approval for
providing agent banking services.
Bangladesh Bank can amend the guidelines as and when required.
Agent Banking SWOT Analysis
Support from Ministry
Interoperable between Banks
Supported by the core bank
All payments are traceable
Rural people are not techy
People have trust issue
System or power failure
New banks are involving
Source of funds
Agent Banking over Branch Banking
In the last decade, there has been an explosion of different forms of financial services,
i.e., beyond branches. These have been provided through a variety of different
channels, including mobiles, ATMs, POS devices and banking correspondents.
The heavy cost of servicing low value accounts and providing physical banking
infrastructure to unbanked areas was a major impediment to financial inclusion in the
past. Worse, this model was heavy on the pockets of poor customers, who had to
spend time and money to travel long distances to the nearest branch. Agent banking
rationalized banks: operational expenditure, and reduced the cost to customers, while
enabling wider reach.
Agent banking, an important channel innovation that has improved banking
penetration in underserved areas and also by becoming an integrated component of
multi channel banking.
Agent banking enables them to extend their reach not only into areas with poor
branch penetration but also up to the doorstep of those who are reluctant or
otherwise unable, to make a trip to the nearest branch.
The most important aspect of agent banking is financial inclusion. The
financial inclusion is a tool for inclusive economic growth and poverty
alleviation. The adoption of agent banking has brought new era in
financial inclusion of the banking sector of Bangladesh. The adoption
of agent banking may not work effectively because accepting of agent
banking is not free of challenges or cost.
On the other hand, successful implementation of the agent banking
may open a new chapter in our banking sector. Agent banking can
ensure the access of the marginalized people to several financial
services, especially in remote areas. 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 materializing the dream of a poverty-free Bangladesh.
Bangladesh Bank (https://www.bb.org.bd/)
The Financial Express BD (http://www.thefinancialexpress-bd.com/)
The Scribd (https://www.scribd.com/)
The Microlinks (https://www.microlinks.org/)
Bank Asia Limited (2013), “Agent Banking Manual”
Bangladesh Bank (2013), “Guidelines on Agent Banking for the