Agent banking faring fine
Banks have started to reap benefit from agent banking just two years after the full-fledged rollout of the alternative financial service as it is increasingly getting popular among customers.
Deposit collection rose 42 percent year-on-year to Tk 922 crore in the July-September quarter last year and it reached Tk 651 crore in the previous quarter, according to Bangladesh Bank data.
Deposit collection totalled Tk 380.68 crore in the opening year of agent banking services in 2016.
"Banks are gaining from agent banking as the service point is a great source of low-cost deposit," said Humaira Azam, deputy managing director of Bank Asia, which runs one of the top agent banking operations in Bangladesh.
The central bank issued the agent banking guideline in 2013 but the licensees started full-fledged operations in 2016.
Agent banking aims to bring unbanked and underserved segments of the population under the formal financial system with a range of services.
Now the service also helps banks to cut the cost of collecting low-priced deposit.
Agent banking channel is cost-effective for banks as it reduces the cost of collecting deposits by 1-1.5 percent, said Abul Kashem Md Shirin, managing director of Dutch-Bangla Bank. For example, Dutch-Bangla gives 3 percent fixed commission to its agents whereas average operational cost of a branch is 4.5 percent, Shirin said.
"Agent points will be big source of low-cost deposit as people in rural areas mostly prefer savings accounts," he said.
Shirin also said the alternative banking channel would see massive growth in the near future as the sector will need more deposits to cater high credit demand. Agent banking accounts totalled 10.38 lakh as of September, of which 86 percent are savings accounts. Dutch-Bangla controls more than 66 percent of the total accounts, according to central bank data.
Bank Asia, which controls the second highest number of agent banking accounts, has profited from its agent banking business thanks to cheaper funds.
Some agents of Bank Asia in remote areas collected deposits ranging from Tk 3 crore to Tk 6 crore, Azam said.
She said the huge deposit collection made the agent banking outlets profitable.
Monthly commission of some agents went up to Tk 1 lakh, encouraging people to enter agent banking business, she said.
Bank Asia had 237,278 agent banking accounts as of September, accounting for 22.85 percent of the total accounts.
The total deposit of Bank Asia under its agent banking operations stood at Tk 185.49 crore in the third quarter of 2017. Of the deposits, 85 percent came from rural areas and the rest from urban areas, central bank data showed.
Agent banking offers limited banking and financial services to the underserved population by engaging representatives under a valid agency agreement. It is the owner of an outlet who conducts 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.
Thirteen banks are running agent banking services: Dutch-Bangla, Bank Asia, Al-Arafah Islami, Social Islami, Modhumoti, Mutual Trust, NRB Commercial, Standard, Agrani, Midland, The City, Islami Bank Bangladesh and First Security Islami Bank.
Shirin also said people in remote areas prefer agent banking to deposit money but they use mobile banking for transactions.
He said people are reluctant to deposit money through mobile accounts because they do not offer any return whereas agent banking accounts give interest against deposits.