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Thursday | 16 January 2025 | Epaper

Rapid growth of agent banking service

Published : Saturday, 15 August, 2020 at 12:00 AM  Count : 1101
Md Zillur Rahaman
Md Zillur Rahaman

Md Zillur Rahaman

When the banking sector is in turmoil over the issue of dealing with the non-performing loans, then Agent Banking Service (ABS) has made significant contribution to rural economy over the past few years and it is becoming increasingly popular in the grassroot areas across the country. The reason behind the success story of this service is also providing the unbanked population of the country with quick and cost-effective banking services at their doorsteps.

People are getting remittances from abroad and they can now pay their utility bills through this channel uninterruptedly. Some youth are finding new opportunities of employment in agents. Agents also are deploying additional workforce for its day to day smooth operations. Availability of mobile phones and internet facilities in rural areas has made it easier for ABS. Banks in the country are now focusing on ABS for its popularity among people, especially in remote areas. Banking experts say agent banking offers several services such as inward remittance, money transfers, different deposit schemes, and payment of utility service bills.

Basically ABS is providing all sorts of banking services except encashment of cheque by the client and strictly dealing of foreign currency. However, recently some banks are providing Points of Sale (POS) machine in the ABS to withdraw the money instead of cheque. Biometric digital finger print is the key point of security of the ABS and it is very essential for withdrawal of money. ABS account holders can easily accept the ATM/VISA card to use in the ATM booth in convenient places and they can also use the same for various payments against purchasing goods and services where the POS is available.
Clients are allowed to have deposits and withdraw cash through the outlets operated by agents without visiting a bank branch. Nowadays, many services are available at rural level, whereas people had to go to towns, earlier, for these purposes. Needless to say that ABS service is a limited scale banking and financial service for those living in remote areas across the country through any person under a valid agency agreement, rather than a teller or cashier, according to BB agent banking guideline 2013. It is as like a dealership or distribution business and all maintenance cost will be incurred by the ABS, whereas branch banking is involved a huge cost and expenditures.  
An agent is a third party owner of an ABS who conducts banking transactions such as cash deposits, withdrawals, small value loan disbursement and recovery of loans, transfer of funds, paying of utility bills under the government's social safety net programs, and account inquiries on behalf of a bank.

According to the latest data of BB at the end of March 2020 on ABS, deposit collection through agent banking increased by 13.54 percent to Tk 8,535.04 crore at the end of March 2020 from Tk 7,517.16 crore three months ago and the number of accounts also jumped 23.33 percent i.e., 64.97 lac from 52.68 lac in the same period. The number of female accounts also increased by 28.65 per cent to 29.56 lac at the end of March 2020 from 22.98 lac comparing to three months ago.

In terms of deposit collection, Islami Bank Bangladesh lead the highest 25.3 per cent, Dutch Bangla Bank 20.53 per cent, Al Arafah Islami Bank 18.79 per cent, Bank Asia 17.99 per cent and Agrani Bank 3.51 percent market shares of the agent banking deposits. The report showed that the number of agent banking outlets increased by 4.9 per cent to 11,875 in March 2020 from 11,320--three months ago. The number of agent banking outlets also increased by 5.14 percent to 8,260 in March 2020 from 7,856 in December, 2019.
The remittance collection through ABS increased by 25.36 per cent to Tk 19,535.33 crore at the end of March 2020 from Tk 15,534.31 crore in December 2019. The purpose of introducing ABS is to provide a safe and secured alternative delivery channel for banking services to the under-privileged, under-served population, who generally live in a geographically remote location and beyond the reach of the traditional banking network.

As per the central bank's provisions, it is expected that the ABS will provide the maximum number of services to the clients. Therefore, they should not limit themselves only to facilitating account access to customers or transferring money. Within just four years of its formal inception in 2016, ABS has been able to attract a huge number of clients, forcing most commercial banks to take up this alternative form of financial service in addition to branch-based banking. Agent banking has been able to get such popularity mainly for its simplicity to the clients and cost-effectiveness for the banks.

According to a research paper titled, "Alternative delivery channel: Opportunities and challenges of the new banking environment" by Bangladesh Institute of Bank Management (BIBM), agent banking has become popular because of its benefits for both the banks and clients, while the country's economy is also being benefited through financial inclusion. According to the paper, the banks have been able to increase customer volume, improve financial appearance, lower operating costs, expansion of business, increase deposit collection, improve banks' branding and widen their spreads.

According to a study of BIBM, 3 per cent of the clients of agent banking are day labourers, 29 per cent clients are small businessmen, 7 per cent are farmers, and 18 per cent are housewives. The ABSs are now not only limited to services like cash deposits, cash withdrawal remittance payment only, the banks have started giving out small loans through the outlets. Loan disbursement through agent banking has increased by 51.1 per cent to Tk 673.91 crore at the end of March 2020 from Tk 446 crore comparing to three months ago.

ABS is considered much better than mobile banking services. Presently most of the unbanked peoples are confused about agent banking--some of them consider it NGO or multipurpose co-operative society working in grassroots level. ABS is a new concept in banking industry but have a big challenge and also a high potentiality. BB as well as the relevant functioning banks should have a plan to popularise the ABS through circulating lucrative and eye-catching advertisement in print, electronic and social media and take the chance of rapid growth of the services in the grassroot remote areas.

The writer is a banker and freelance contributor







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