Being a pioneer of agent banking, Bank Asia has established the largest agent banking network, with over 3,200 outlets opened across the country in the last five years.
The bank now wants to expand its business using this huge network. It wants to shift from branch banking to agent-based banking in the next five years.
The mini-banking concept will help the bank minimise maintenance costs of traditional branches, and provide low-cost financial services to people in the remote areas.
"In the next five years, we want to expand our banking business based on the agent banking network," Md Arfan Ali, managing director of Bank Asia, told The Business Standard in an interview marking the bank's 20-year journey.
Bank Asia introduced agent banking in 2014, and has started making profits on a small scale since the beginning of this year.
"We have set a target to earn Tk5 crore in profits from agent banking this year," Arfan said, adding, "We explored the full potential of agent banking. It will not only be used for deposit collection but also for lending."
He said agent banking is a very effective, useful and low-cost banking service.
"The bank did its experiment with small-scale lending. Now we are planning to go for lending on a big scale through the agent banking network," said Arfan.
He said agent banking would be the main driving force to expand the rural banking business. "We are recruiting more people who have experience in micro-finance to shift to rural banking business from corporate banking."
Agent banking was introduced in Bangladesh in 2013 through a guideline issued by the Bangladesh Bank. The purpose of introducing agent banking was to provide a safe and secured alternative delivery channel for banking services to the under-privileged, under-served population who generally live in a geographically remote location and beyond the reach of the traditional banking network.
This has allowed the banks to expand their business and accelerate financial inclusion using intermediaries as agents. A limited number of banking services is provided to the customers through an agent of a bank and this method is gaining popularity as a cost-effective delivery channel to the bank as well as a convenient way of getting banking services to the customers.
A "Prudential Guidelines for Agent Banking Operation in Bangladesh" was issued by the Bangladesh Bank in September 2017, which is a comprehensive guideline for the stakeholders. All the activities related to agent banking are being governed according to this guideline.
Low-cost fund collection helped the bank remain comfortable with liquidity when the whole banking sector went through liquidity crunch in the recent times.
Arfan joined Bank Asia two months before it started journey on November 27, 1999.
Now after 20 years at the bank, he said he is not unhappy because he fulfilled all his dreams as a banker. He believes his main success lies in ensuring financial inclusion so that the poor and the deprived group can have access to banking services.
"The bank started with corporate banking, but now it is the bank for the mass people," he said.
A massive change has happened in the banking sector based on the theme of financial inclusion and all banks are now thinking of working for the masses.
"As a career banker, I feel good when I think about the development in this sector," said Arfan.
Inspired by Bank Asia's success, more banks are coming into the agent banking business. As of September this year, 22 banks took agent banking licences, up from 20 in the same period last year.
Currently, 19 banks are operating agent banking and the total deposit collected through this channel stood at Tk6,169 crore as of September 2019. Also, total loan disbursed through agent banking was Tk305 crore until the same period.
The central bank data show that Bank Asia accounted for 18 percent of the total deposit collected through agent banking, and 76 percent of the total loan disbursed.
At a time when the banking sector is facing various challenges, including loan corruption, high amounts of non-performing loans and a downward trend in the profitability indicators, Bank Asia is running smoothly and is also enjoying a stable growth.
Professionalism is the only thing that helped the bank establish good reputation, said Arfan.
"We tried to run the bank professionally and emphasised corporate governance. That is the top secret of our sustainable growth," he said.
"We do not engage in a business only for high returns. Rather, we see other aspects such as social responsibility and business risk," said Arfan.
He said managing non-performing loans is a big concern for all banks right now.
"Bank Asia is managing this type of loan by maintaining high provisioning. The dividend rate of the bank remained slow due to high provisioning, but the bank is in a stable position," explained Arfan.
"Even though profitability slowed down, high provisioning strengthened the bank's capital base," he added.
The non-performing loan rate of the bank stood at 6.78 in June when the industry average was 11.69 percent, the central bank data show.
"Conservatism is needed for the banking sector to keep the non-performing loan rate low. Liberal banking is risky and it will hurt a bank's health today or tomorrow," said Arfan.
He said running a bank is always challenging because there are lots of expectations from shareholders, directors, stakeholders and customers.
"The main challenge is the rising uncertainty in loan recovery. Payment behaviour has worsened radically. Even many good customers now make payments irregularly. Many customers are also breaching commitments to take various advantages," said Arfan.
He said this practice had deteriorated the bank-customer relationship which would eventually affect the country's economy.
"Customers made their own positions vulnerable to bankers by breaching commitments. When it happens, banks get reluctant to create new entrepreneurs," added Arfan.