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Agent banking

Contribution on record amount remittance inflow

Published : Thursday, 10 December, 2020 at 12:00 AM  Count : 690
Md Zillur Rahaman
Md Zillur Rahaman

Md Zillur Rahaman

When the banking sector is facing turmoil situation over the issue of dealing with the non-performing loans and COVID-19 hit economic recession, Agent Banking Service (ABS) has made significant contribution to rural economy over the past few years. It is becoming increasingly popular in the grassroots 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 either in deposit collection or remittance inflow.

Despite the ongoing coronavirus epidemic, inward remittances hit new height in the country through ABS in 2020. ABS has made a significant record contribution to collect the foreign remittance and it has bagged Tk 116.85 billion from July to September of this year 2020 which was double than the pre COVID-19 period. ABS has bagged Tk 71.15 billion from April to June of this year 2020. According to the latest data of Bangladesh Bank, ABS has received Tk 155.34 billion foreign remittance up to December, 2019 whereas it has collected Tk 228.31 billion foreign remittance from January to September, 2020. Significantly, within nine months of this year the remittance growth of the ABS achieved 221 per cent.

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. As a result, customs are inflicted in ABS to collect remittance inflow quickly and hassle freeway. ABS of 24 banks is now engaged to collect the foreign remittance mostly located in the remote areas of the country. Out of those banks, Islami Bank Bangladesh Ltd (IBBL) made a significant role of the foreign remittance. The IBBL solely has collected 45 per cent of the whole ABS foreign remittance, DBBL secured the second position, Bank Asia, Al-Arafah Islami Bank and Agrani Bank bagged the following positions respectively.

The reason behind the success of IBBL was that they have a strong network in home and abroad for foreign remittance since long. They have a dominant position in remittance prone area especially in Middle East, Malaysia, Singapore. IBBL was also providing 1 per cent more cash incentive on the remittance of the ABS account holders in addition to the government declared 2 per cent cash incentive which helped them to make record in ABS remittance inflow.

According to the latest data of Bangladesh Bank, the expatriates in 12 days of November 2020 have sent $1.66 billion and within 25 days of November 2020, they have sent $2.00 billion which is an all-time high record in the country's remittance history. From July 1 to November 12, 2020 remittance inflow stood at $9.89 billion, up 43.42 percent from $6.89 billion year-on-year. It was $6.897 billion in the same period of the last fiscal year 2019-2020. Foreign currency reserve also made record of $40.82 billion at end of October 2020 and on November 26, 2020 it made further record of $41.30 billion.

Various measures, including a timely 2 per cent cash incentive by the government, have a significant impact on the continuation of this upward trend in expatriate income. The migrant workers also remitted $2.11 billion in October, 2020 which was way higher than $1.64 billion flown to the country in the same month a year ago.

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. As a result, ABS is becoming more reliable among rural people. Private banks are trying to make a foray into areas where no formal banking services are 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.

Although the Bangladesh Bank (BB) issued an ABS guideline in 2013, the first bank started its full-fledged agent operations in 2016. ABS service is becoming more popular day by day to the clients in remote area in terms of less costing way after its inception. Presently 14,016 outlets of 10,160 agents in 24 banks are deployed across the country to provide the services and they have collected remittances of Tk 338.35 billion up to September 2020 and of those agents, 90 per cent are located in remote rural areas.

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.

Central bank officials said that the deposit growth in the agent banking accounts was mainly because of expansion of the service in the grassroots rural areas where people are deprived of banking service. 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.

BB introduced ABS a few years ago to reach the banking services to the doorstep of the grassroots level. BB also introduced mobile banking services in 2013 but the transactions of the mobile banking service is limited and most of the banking services are not available there. 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. It also said, 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.

A recent statement of the World Bank refers that diversion of remittances from informal to formal channels due to the difficulty of carrying money under travel restrictions amid the pandemic and damages inflicted by the recent floods helped Bangladesh bring the remittance flow back to the positive territory in 2020.

ABS has facilitated customers by providing full-fledged banking services at their doorsteps in the remote area, and it has made convenient and easy way for channelling remittance. ABS is also playing a dominant role to prevent Hundi (illegal transfer of money) and it has a significant contribution in the economy.

ABS is much better than mobile banking services and it 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. Then it will more contribute in remittance, deposit as well as in national economy.
The writer is a banker and
freelance contributor









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