Lending leaping thru agent banking

Banks had initially focused on using agent banking platforms to mobilise deposits from rural areas, for which lending took a back seat.

But lenders have recently reshaped this service of theirs which takes banking to the unbanked, ramping up lending operations through the branchless banking model.

Loan disbursement through the agent banking channel stood at Tk 5,347 crore in 2021, up 182 per cent year-on-year, according to data from Bangladesh Bank.

Agent banking has helped the country's banking sector run operations smoothly at the height of the coronavirus pandemic doing away with the need for a brick-and-mortar presence, which consequently augmented loan disbursements through the window.

Bankers said lending through the window would surpass corresponding deposits mobilised by the lenders in the quickest possible time as this mode of service helped banks count lower operational costs compared to branches.

In addition, farmers and micro-scale business entrepreneurs, who can hardly manage finance from banks, are now benefitting for the easy access to loans enabled by agent banking.

At present, the lenders are disbursing loans ranging from Tk 20,000 to Tk 200,000 to borrowers at an interest rate of 9 per cent through the channel.

The central bank issued an agent banking guideline in 2013 but the licensees did not start full-fledged operations until 2016.

Some 29 banks are now providing financial services to clients through this alternative mode of banking.

Brac Bank has secured the top position in terms of lending among the banks. It accounted for 63 per cent of the loans disbursed by 29 lenders through the channel.

Selim RF Hussain, managing director of Brac Bank, said they had laid emphasis on agent banking to disburse loans among cottage, micro, small and medium enterprises.

The bank will ramp up its loan disbursements through the channel in the near future as it is an easy method to reach the underprivileged enterprises, he said.

Md Arfan Ali, managing director of Bank Asia, said loan disbursements through the platform would increase manifolds within a year or two.

The volume of loans will exceed the amount of deposits soon as banks are now keen to use the platform for loan disbursement, he said.

The deposit balance stood at Tk 24,294 crore last year, an increase of 52 per cent from that the year before.

Bank Asia, which accounted for 15 per cent of the outstanding loans in the agent banking platform, now concentrates on eight to 10 districts to disburse loans, Ali said.

"But, we have planned to disburse loans among farmers and microenterprises of 64 districts within this year, which means credit volume of the bank will sharply rise," he said.

Agent banking will gain more popularity soon as each outlet acts almost like a bank branch as they offer major banking services such as enabling making cash deposits and withdrawals and receiving remittance, alongside lending.

Agents are also enthusiastically embracing agent banking as lenders provide hefty commissions and profits for operating the financial services, Ali said.

For instance, Bank Asia now offers 0.5 per cent on the amount of loan disbursed by agents as commission.

Similarly, the agents now get 2 per cent of the deposits they mobilise as commission.

There were 13,086 agents across the country as of the end of December, whereas it was 11,925 a year ago.