12:00 AM, July 19, 2018 / LAST MODIFIED: 12:00 AM, July 19, 2018

Agent banking bringing in deposits for banks: experts

Analysts take part in a roundtable on agent banking at The Daily Star Centre in Dhaka yesterday. Photo: Star

Agent banking is becoming a major source of deposits for banks thanks to its reach to remote population who are being encouraged to park their funds with formal institutions, analysts said yesterday.

Though the loan scams have caused serious deposit crisis at city bank branches, they have had no impact on agent banking as remote people are not aware of malpractices, they said at a roundtable.

Business Finance for the Poor in Bangladesh (BFP-B), a five-year programme of the UK's Department for International Development to promote micro and small enterprises, organised the event at The Daily Star Centre in Dhaka to discuss the impact of Dutch-Bangla Bank's agent banking arm.

Dutch-Bangla aims to roll out agent banking booths in 486 upazilas, with at least one in each upazila, with funding from BFP-B. Currently, Dutch-Bangla has 1,537 agents in 477 upazilas, according to project assessment report.

A lack of awareness and profitability is the main challenge for agent banking, said Md Abul Kashem Khan, chief technology officer of Dutch-Bangla Bank.

“Still people do not trust agent banking as they do not have a clear concept of the alternative banking channel.”

It takes at least two years for the agents to start ringing in profits, he said. 

As a result, it is difficult to find an agent with adequate investment.

However, most of the agents of Dutch-Bangla started logging in profits in less than two years as they were given commissions for account opening and deposit collection, according to Khan.

Agent banking is still in the investment stage and most of the banks are reluctant to invest in this channel due to doubts over long-term returns, he added. An impact analysis of the BFP-B project shows that 81 percent of the agent banking clients are saving money, 59 percent sending money and 46 percent receiving money through the Dutch-Bangla agent banking channel.

Mahbubur Rahman, deputy challenge fund manager of BFP-B, presented the impact analysis of the project at the event.

The co-investment by BFP-B and Dutch-Bangla has provided banking services to more than 8 lakh people, including 2.06 lakh small businesses, and created roughly 3,000 jobs, according to the presentation.

Previously, a customer had to travel 7 kilometres to avail banking services. Now, customers can find agent banking outlets within 2 kilometres of their homes.

The cost per transaction has come down to Tk 17 from Tk 51 previously.