Reliance on agent banking growing
People living in rural and remote parts of the country continue showing eagerness in becoming attached to agent banking as the model promises to be a low-cost, simplified option.
Commercial bankers say the periphery of agent banking, rolled out just two years ago, has been widening significantly almost every quarter for an initiative of banks to bring in an alternative to branch-based banking.
For instance, deposit collection through agent banking rose 239.53 percent year-on-year to Tk 1,633 crore in the January-March quarter this year. It reached Tk 1,399 crore in the previous quarter, according to Bangladesh Bank data.
The number of accounts with the 16 banks now offering agent banking services stood at 14.69 lakh as of March this year, up from 12.14 lakh three months earlier.
At the end of the first quarter of this year, the total number of agents rose to 3,216, up 24.79 percent from what was three months ago.
The central bank issued an agent banking guideline in 2013 but the licensees started full-fledged operations in 2016.
Agent banking offers limited banking and financial services to the underserved population by way of village variety stores.
The owner of an outlet conducts the banking transactions on behalf of a bank.
Agents provide services such as cash deposits, withdrawals, remittance disbursement, small value loan disbursement and recovery of loans, and cash payments under the government's social safety net programmes. Md Arfan Ali, managing director of Bank Asia, said his bank was now focusing on accelerating loan disbursement through agent banking.
“We have already disbursed a significant amount of loan through different products to the clients. The bank disbursed Tk 20 lakh to a single client under its home loan product,” he said.
Bank Asia, one of the pioneer banks popularising agent banking, disbursed Tk 117 crore in loans as of March this year using the channel and the figure accounted for 95.78 percent of the total loans disbursed by the 16 banks.
The agent banking service creates a win-win situation for the banks, agents and customers, since all of them are getting a good outcome from the business, he said.
“It is a cost-effective channel for banks as it reduces the cost of collecting deposits,” said Ali.
“We offer nearly 4 percent interest to depositors and 2 percent commission to the agents. But we set 10 percent interest on our major lending products, meaning that the bank enjoys a 4 percent interest margin between lending and deposit,” he said.
The cost of fund is relatively lower than the deposit collected through the branches as the banks are free from the establishment cost required to set up infrastructure for the agents' outlet, he said.
Clients with an outstanding balance of Tk 5,000 and below do not require paying any service charge for their account, Ali said.
The future of agent banking promises high potential as it enables banks to operate major businesses in remote areas without establishing any branch, said Abul Kashem Md Shirin, managing director of Dutch-Bangla Bank.
A level-playing field now prevails in the market, encouraging the banks to focus more on the service, he said.
Dutch-Bangla Bank, the biggest player in the field of agent banking in terms of the volume of deposits and agents, has taken initiatives to speed up loan disbursement through the channel, Shirin said.
Agent banking service has been playing an outstanding role in bringing the unbanked people of remote areas under the mainstream financial system, said Md Anwarul Islam, assistant spokesperson of Bangladesh Bank.
The near and dear ones of expatriate Bangladeshis are also getting remittance through agent banking and subsequently turning it into a tool for the prevention of “hundi”, he said.
“People living in remote areas earlier had to go to bank branches, which were in many cases located far away from their homes, to collect the remittance. But agent banking offers remittance at their doorsteps,” he said.
The other banks now running agent banking services include Al-Arafah Islami, Social Islami, Modhumoti, Mutual Trust, NRB Commercial, Standard, Agrani, Midland, City, Islami Bank Bangladesh and AB.