Agent banking has made tremendous progress in recent years. It included the rural marginal people to the mainstream banking activities who were previously deprived of such financial services. The term agent banking refers to the inclusion of rural unbanked people under the formal financial services through a registered banking agent rather than a teller/cashier.
A bank agent performs various functions such as- deposit collection, small value loan disbursement, remittance withdrawal, bill payments, disbursement of incentives, and government's social safety net, and so on.
According to statistics of the central bank, total transactions through agent banking have increased by 134 percent within just a year. Between August 2019 and August 2020, the transaction had grown up by Tk10,397.4 crore to Tk24,403.4 crore. The total number of agents across the country was 9,627 in August 2020. A year ago, the respective number was only 6,346.
The total number of agent outlets stood at 14,016 in September compared to 9,391 one year earlier. In the meantime, the number of agent banking accounts through bank agents soared up by 112 percent to 79,19,440 in August 2020 from 37,30,484 in August 2019.
Deposit collection soared up by 111 percent from Tk6,170 crore in September 2019 to Tk13,040 crore at the end of September 2020. Though there is a shortage of loan disbursement compared to the deposit collection, the value has made considerable progress in one year. Loan disbursement by agent banking is increased by 255 percent from Tk306 crore to Tk1,086 crore in the same period.
The agent banking also simplified the remittance inflow to the country, as the people in remote areas can now easily access these agents for getting remittances sent home from abroad. They do not have to go to the bank branches for such activities. The government of Bangladesh has also provided a 2 percent cash incentive to the remitter from July last year.
The initiative has encouraged them to send their hard-earned money to their family smoothly through the formal banking system, especially through the agent banking system.
According to the Bangladesh Bank, the inward remittance through the agent banking system bulged by 221 percent to Tk38,352 crore in September 2020 from Tk11,937 crore in September 2019. The country has seen its highest monthly remittance record $2.0 billion in July 2020 amidst the Covid-19 pandemic.
The people in the rural area are still deprived of the benefits of technological advancement. Most of the rural farmers, day labourers, fish farmers are illiterate and they do not even know how to use a mobile phone. In this context, agent banking has opened a new horizon for them to get the most needed financial services from banks.
They can now easily conduct their financial activities through banking agents such as deposition, loan collection, bill payments, withdrawal of remittance, etc. Thus, agent banking has not only provided them with financial services but also helped in the expansion of the rural economy.
Due to the coronavirus pandemic, agent banking has faced a number of obstacles. In April 2020, only about 30 percent of agents were operational. But this vibrant sector made a very fast come-back by early June when around 80 percent of bank agents went back to regular operations.
Since bank branches had limited operations at the beginning of the pandemic, transactions through agent banking were very low. The agents of banks faced many problems during the pandemic such as shortage of money for day-to-day operations, fewer transactions by people through agent banking outlets, lack of incentives or financial support for them to continue their business, lack of responsibility by the banks to address the risks aroused from the pandemic.
There are some problems that agents are facing from the beginning such as lack of trust and reliability by rural people, no fixed income for them, lack of proper training, limited services, etc.
As the income of agents reduced to a great extent during the pandemic, many of them switched to alternative sources of income. Banks have to mitigate the risks that can be raised from a further bad situation and banks have to ensure a healthy environment for agent banking.
As agent banking is an emerging sector and it is getting more and more attention from rural people for their financial needs, banks need to resolve those traditional, institutional, and other problems related to this sector.
The government of Bangladesh has announced a stimulus package of Tk103,117 crore for various sectors to address the devastating effects of Covid-19, which is 3.7 percent of GDP. But according to recent data supervised by the prime minister's office, only 26 percent of the massive stimulus package was distributed among the recipients by July this year.
The majority portion is not distributed due to many institutional obstacles and proper channels of distribution. In this context, agent banking can play a great role in delivering stimulus packages to SMEs and can also help to distribute social safety net support to the remotest corners of the country.
Economic inclusion of rural unprivileged people is essential for sustainable rural economic progress. Agent banking is doing the same job by bringing the underprivileged rural poor people into the mainstream of the economy by providing the most needed financial services to them. Therefore, the problems underlying the way of advancement of this banking model need to be resolved properly.
The agent banking system needs to be digitalised using various technological innovations. The system needs to be made interoperable. Strong collaboration between the agent banking and micro-merchants need to be established to ease the loan disbursement among rural people.
A strong partnership between MFS and agent banking service providers needs to be established. And the government should provide policy support and other forms of aid to make the agent banking system a game-changer for the rural economic landscape.
Md Mehefuzul Islam has completed his graduation and post-graduation from Bangladesh Agricultural University, Mymensingh
Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.