prospects and challenges of agent banking in bangladesh

8/18/2019 PROSPECTS AND CHALLENGES OF AGENT BANKING IN BANGLADESH

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Chapter One

Introduction

The formal banking sector in the country has tried to expand its outreach and bring the

unbanked people in the society under its umbrella. As a part of financial inclusion and

offering limited banking services to both rural and urban unbanked people,

Bangladesh Bank (BB) initiated Agent Banking. In order to ensure the access of

unbanked people, Agent Banking and obile !inancial "ervices (!") have been

introduced in Bangladesh. Agent banking and obile !inancial "ervices (!") offer

an alternative to conventional branch#based banking to the customers through

appointed agents being facilitated by the obile $et%ork &perator ($&)'"olution

roviders instead of bank branches or through bank employees. It %ill also provide

banking services to the bank customers through the engaged agents under a valid

agency agreement, rather than a teller'cashier.

Agent banking has %orked %onders in several developing countries in different parts

of the %orld like Brail, *olumbia, eru, alaysia, +enya and so on. Agent banking

has been a revolutionary inclusion in the financial system of Brail as the agents there

deal %ith almost everything like bills and pension payments, cash deposits,

%ithdra%als and money transfer. The list is not limited to these only, because the

number of services provided by the agent bankers is increasing %ith the passage of

time. (llah - a/ue, 0123) Brail is often recognied as a global pioneer in this area

and over the years, it has developed a mature net%ork of agent banks covering more

than 44 percent of the country5s municipalities. In Asia, countries like India, akistan

and hilippines have also utilied the agent banking model to expand financial

services. (Banar6ee, 0123)

7lobally agent banking activities are being increasingly utilied as important

distribution channels for financial inclusion. Bangladesh Bank has also decided to

promote this complimentary channel to reach to the poor segment of the society as

%ell as existing bank customer %ith a range of financial services specially to

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geographically dispersed locations. 8ith a vie% to ensuring the safety, security and

soundness of the proposed delivery channel Agent Banking 7uidelines have been

framed by the Bangladesh Bank (BB) to permit banks to be engaged in agent banking.

To promote and establish the agent baking, BB provides regulatory frame%ork for

agent banking and ensures compliance %ith Anti‐oney 9aundering and *ombating

!inancing of Terrorism (A9'*!T) standards.

1.1 Rational of the study

There has been no comprehensive study on status of banks of the country in their

agent banking activities and their compliance of the BB:s Agent Banking 7uideline.

The study %ill assist to meet this particular gap and identify %here there are the scopes

of improvements.

The study is expected that it %ould help bank policy makers in identifying the key

challenges involved in agent banking operations and coming up %ith strategies that

%ill lead to improve the performance of banking activities in Bangladesh. "econdly,

the study %ill also be helpful to academicians %ho %ill use this study as a source of

reference. Thirdly, the findings of this study %ill assist to take strategy to perform

better in banking sector. !inally, the study %ill help the banks in identifying and

understanding the external environment and competitive strategy that can be applied to

ensure the superior performance of the banks in Bangladesh.

1.2 Objectives of the study

The ob6ective of the study is to identify the prospects of agent banking implemented in

Bangladesh and point out the challenges to operate the agent banking activities in an

efficient manner. In addition, this study helps to;

• Assess ho% agent banking activities are practiced by the banking financial

institutions in Bangladesh.

• Identify the prospects of agent banking in Bangladesh and

•!ind out the challenges that may be considered as opportunities or barriers to

operate the agent banking activities efficiently in Bangladesh.

• ut for%ards'raise out some suggestions'recommendations %ith a vie% to

ensure reliable agent banking services in B<.

1.3 Scope

2



Agent banking is no% a bu%ord in the banking industry. Agent banking is

comparatively a ne% idea that can help the formal banking sector as %ell as its

importance is immense in paving the %ay for financial inclusion. But, many of us,

including bankers, still do not have a clear perception of agent banking, its services,

risks and responsibilities and other regulatory issues.

Access to affordable financial services %ill lead to increase economic activities and

employment opportunities for rural households'nonprivileged segments of the

population, %ith a possible multiplier effect on the economy. Agent banking could

enable people to have a higher disposable income %hich in turn leads to greater

savings and a %ider deposit base for the banks and other financial institutions.

This is the area %here lot of researches could be conducted and immense value %ould be added to expand the banking services to the non privileged, underserved population

and the poor segment of the society, especially from geographically dispersed location.

1.4 Methodoloy

The key approach of this study is to measure the prospects and the challenges of agent

banking activities in Bangladesh. *ollecting of information from all customers is not

possible, %hereas, simple random sampling %as used in this study. As regards of the

selection of the respondents, both the bank officials and agents %ere selected. In

addition, customers of agent banking %ere also included in this study.

+eeping in the mind the background and the ob6ectives of the study both primary and

secondary data have been collected. The secondary information has been collected

from# articles in ne%spapers, Bangladesh Bank 7uidelines, presented paper of the

different conferences, related %ebsites and so on.

!ivisions"ercentae of aent outlets by

divisions#o. sa$ple has ta%en

<haka 1.=>120 00

*hittagong 1.0314?3 ?

+hulna 1.1>?23= 2

3



@a6shahi 1.2>0=> >

@angpur 1.1?1032 1

Total >0

rimary data have been collected on the basis of structured /uestionnaire. A total of

t%o banks out of nine have been selected as sample banks %hich get the license of

Agent Banking from Bangladesh Bank. T%o banks %ere selected on the basis of

operations of agent banking and rest of the banks %ere did not started its operations.

Thirty t%o agents %ere included %ho perform agent banking activities in Bangladesh

and thirty t%o customers %ere included in this study through /uestionnaire survey,

focus group discussions (!7<), teleconferencing.

1.& Orani'ation of the dissertation

The study is divided into seven chapters to make the study more fruitful to readers,

researchers, bankers and interested users. !irst chapter represents the introduction of

the study, ob6ective of the study, methodology of this study. "econd chapter comprises

of the literature revie% of this study. Third chapter consists of theoretical frame%ork

or concept of agent baking. *hapter four sho%s the regulatory instructions in operating

agent banking activities in Bangladesh. 7lobal scenario on agent banking gets the

upper hand in chapter five. *hapter six represents data analysis, presentation and

interpretations. *hapter seven includes findings, recommendations and conclusion.

1.( )i$itations of the study

i) The data %ere not available as re/uirement but the best effort %as given to

convert the collected data as per necessity.

ii) The respondents %ere some extant reluctant to give the ade/uate time for

filling up the /uestionnaire. o%ever, I had to convince them to gather the

necessary data.

4



Chapter *+o

)iterature revie+

The term, 5!inancial Inclusion5, has gained importance all over the %orld from the

beginning of this century. !inancial inclusion has direct relationship %ith access to finance.

Access to finance fundamentally depends on demand %hile financial inclusion on supply.

Access to finance refers to the right of entry of individuals or enterprises to financial

services, including credit, deposit, payment, and other financial services. eople %ho have

no access to financial services are unbanked and those %ho have limited access are under#

banked. &ne of the ma6or goals of financial inclusion is the delivery of financial services to

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the disadvantaged and lo%#income segments of society at affordable costs. *ontrarily,

%here financial services are not available or affordable, it is financial exclusion. According

to 8orld Bank, an estimated 0.= billion %orking#age adults globally have no access to

formal financial services delivered by regulated financial institutions. The availability of

banking and payment services to the entire population %ithout discrimination is the prime

ob6ective of financial inclusion policy (a/ue, !inancial inclusion goals ; Barriers and

challenges, 012>).

An inclusion has no% come to mean much more than 6ust banking the unbanked. It no%

refers to the convergence of various bank and non#bank players to provide financial

services at lo%er cost, %ider reach and greater convenience to all end consumers of

financial services, unbanked or other%ise. o% does this agency banking#inspired thefinancial inclusion In one sentence; by opening up ne% opportunities. All banking

consumers are also consumers %rap up the financing deal once the purchase of other

products, %hich they procure from different channels. By partnering %ith an agent, banks

can participate in these transactions, %hich may be non#financial in nature but separately

the dealer is able to close the sale right a%ay and the financing partner has access to a

more or less captive market. This is 6ust one example of the linkage bet%een agency

banking and ne%#definition financial inclusion. Banks can enter into similar partnerships

%ith %hite goods dealers, large retail chains, and so on. They also have the option of

entering into different kinds of distribution alliances %ith a variety of agents, from

individuals to post offices to ne%s agents to grocers to regulators even, to serve the unmet

financial needs of unbanked as %ell as banked customers (Cayanti, 0120).

Branchless banking is the first step into financial inclusion and, therefore, should adhere to

the same government legislation of the banking sector at large, allo%ing the government to

have a unified policy. Agent banking can be %orked as a harbinger of branchless banking

in Bangladesh. Branchless banking is a fundamental driver of D#payments, %hich are not

necessarily limited to mobile. D#payments offer many benefits, from the improved

management of cash circulation to increased transparency and traceability and improved

oversight to help comply %ith regulations. Branchless banking allo%s governments to

distribute social %elfare and other government benefit programs safely, conveniently and

6



securely %hile reducing graft and ensuring the aid reaches the intended recipients.

(roueh, 0123).

In the last decade, there has been an explosion of different forms of remote access financial

services, i.e., beyond branches. These have been provided through a variety of different

channels, including mobile phones, automatic teller machines (ATs), and oint#&f#"ale

(&") devices and banking correspondents. In many countries, these branchless channels

have made an important contribution to enhancing financial inclusion by reaching people

that traditional, branch#based structures %ould have been unable to reach. &ne of the main

obstacles to financial inclusion is cost; both the cost to banks involved in servicing lo%#

value accounts and extending physical infrastructure to remote rural areas, and the cost (in

money and time) incurred by customers in remote areas to reach bank branches. Agent banking is rapidly evolving and its regulation plays a central role in enabling (or

sometimes limiting) its spread. (Dnhancing !inancial Innovation and Acess, &ctober 0122).

The advantages of agent banking are multifold. !irstly, the heavy cost of servicing lo%

value accounts and providing physical banking infrastructure to unbanked areas %as a

ma6or impediment to financial inclusion in the past. 8orse, this model %as heavy on the

pockets of poor customers, %ho had to spend time and money to travel long distances to

the nearest branch. Agency banking rationalied banks: operational expenditure, and

reduced the cost to customers, %hile enabling %ider reach. In time, agents also took up the

responsibility of on boarding, managing and servicing customers, making agency banking

a lucrative option for banking institutions.

"econdly, *hannel innovation has revolutionied the face of banking around the %orld.

*onsumers: adoption of multiple channels has fueled their expectation of true multi

channel banking, %hich allo%s them to transition seamlessly bet%een touch points as they

fulfill several, or even a single transaction. Agency banking, an important channel

innovation that has improved banking penetration in underserved areas in the past, can no%

help banks tap into other segments, by becoming an integrated component of multi channel

banking.

7



!urthermore, changing customer demographics, competition and a host of economic

factors have forced banks to take a relook at their distribution strategy. Agency banking

enables them to extend their reach not only into areas %ith poor branch penetration but also

up to the doorstep of those %ho are reluctant or other%ise unable, to make a trip to the

nearest branch. @egulators %ant to achieve financial inclusion through a profitable, lo%

cost delivery model that simultaneously protects consumers and the integrity of financial

services. There might be instances %hen banking agents fail to provide /uality service or

compromise customer data. This can affect the credibility of banks, a matter of concern to

both banking institutions and their regulators. ence, banks must take care to sign up the

right agents, and regularly monitor their performance. (Cayanti, 0120)

In a gro%ing number of countries, banks and other commercial financial service providersare finding ne% %ays to make money delivering financial services to unbanked people.

@ather than using bank branches and their o%n field officers, they offer banking and

payment services through postal and retail outlets, including grocery stores, pharmacies,

seed and fertilier retailers, and gas stations, among others. !or poor people, Ebranchless

bankingF through retail agents may be more convenient and efficient than going to a bank

branch. !or many poor customers, it %ill be the first time they have access to any formal

financial services and formal services are usually significantly safer and cheaper than

informal alternatives. Agent banking through retail agents appeals to policymakers and

regulators because it has the potential to extend financial services to unbanked and

marginalied communities. But it also challenges them to ask; 8hat are the risks of these

ne% approaches, and are they different from those of conventional branch#based banking

o% should %e respond to these risks, so as to permit branchless banking %ith retail

agents to operate safely and expand access to finance (Timothy @. 9yman, 011?).

8



Chapter *hree

Concept or,and *heoretical fra$e+or% of -ent an%in

Agent Banking means providing limited scale banking and financial services to the

underserved and unbanked population through engaged agents under a valid agency

agreement, rather than a teller' cashier. It is the o%ner of an outlet %ho conducts banking

transactions on behalf of a bank. 7lobally these retailers are being increasingly utilied as

important distribution channels for financial inclusion.

Target groups of customers of agent banking are those %ho are the nonprivileged,

underserved population and the poor segment of the society, especially from

geographically dispersed location. To include indigents, destitute, poor people under the

9



formal banking sector, *entral Bank of Bangladesh is also issued guidelines for the banks

to makes it:s ob6ectives successful.

Banking agents help financial institutions to divert existing customers from cro%ded

branches providing a complementary, often more convenient channel of accessing bank

services. !inancial institutions, in developing markets, reach an additional client segment

or geography. @eaching poor clients in rural areas is often prohibitively expensive for

financial institutions since transaction numbers and volumes do not cover the cost of a

branch. (+itaka, 0112) In such environments banking agents that piggy back on existing

retail infrastructure and lo%er set up and running cost can play a vital role in offering many

lo% income people their first time access to a range of financial services. Also, lo% income

clients often feel more comfortable banking at their local store than %alking into a marble branch. (Ignacio as, 011G)

The client benefit from the Agents banks %ith 9o%er transaction cost, service closer to

client s home client %ould visit store any%ay for groceries, 9onger opening hours, "horter

lines than in branches, ore accessible for illiterates and the very poor %ho might feel

intimidated in branches. Increased sales from additional foot traffic, <ifferentiation from

other businesses, @eputation from affiliation %ith %ell#kno%n financial institution,

Additional revenue from commissions and incentives, Increased customer base and market

share, Increased coverage %ith lo%#cost solution in areas %ith potentially less number and

volume of transactions, Increased revenue from additional investment, interest, and fee

income, Improved indirect branch productivity by reducing congestion. (*ohen, 0110).

In the most basic version of the bank#led theory of branchless banking, a licensed financial

institution (typically a bank) delivers financial services through a retail agent. That is, the

bank develops financial products and services, but distributes them through retail agents

%ho handle all or most customer interaction. (Timothy @. 9yman, 011?) "o, %e can say

that Agent baking is follo%ed the bank#led theory of branchless banking.

In $onbank#9ed theory, customers do not deal %ith a bank, nor do they maintain a bank

account. Instead, customers deal %ith a $on#Bank firm#either a mobile net%ork operator or

10



prepaid card issuer and retail agents serve as the point of customer contact such as# #

banking.

&ne of the primary impediments to providing financial services to the poor through

branches and other bank#based delivery channels is the high costs inherent in these

traditional banking methods. The amount of money expended by financial agent banks to

serve a poor customer %ith a small balance and conducting small transactions is simply too

great to make such accounts viable. In addition, %hen financial agent banks do not have

branches that are close to the customer, the customer is less likely to use and transact %ith

their service. o%ever, %ith the emergence of ne% delivery models as a %ay to drastically

change the economics of banking the poor, retail points such as agent banking can offer

saving services in a commercially viable %ay by reducing fixed costs and encouragingentrepreneurs to use the service more often.

3.1 !ifferences bet+een M/an%in and -ent an%in

In generally, it is seemed to be that there are no differences bet%een #Banking and Agent

Banking but the ma6or differences are;

*able10 !ifferences bet+een M/an%in and -ent an%in

Mobile an%in -ent an%in

-ccount

*ustomer account, termed

Eobile AccountF %ill rest %ith

the bank and %ill be accessible

through customers: mobile device.

*ustomer account %ill be termed

as EBank AccountF.

Cheuin

account

obile Account %ill be a non‐

che/uing limited purpose account.

*ustomer account %ill be treated

as a che/uing account.

Chares of

services

*ustomers are charged directly for

these products and services.

*ustomers should not be charged

directly by the agents for

providing services to them.

)in% up +ith

ban% account

obile account may be linked %it

h customer5s bank account

It is already a customer:s bank

account.

I* #banking considers Its infrastructure able to support

11



Infrastructur

e

*onfidentiality, Integrity,

Authoriation and $on#

repudiation.

real time processing, provide a

secured net%ork including end to

end encryption.

*ransactions

li$it

at maximum Tk. 21,111 daily and

a total of Tk. 0=,111 on monthly

basis.

At maximum t%o (10)

transactions (deposit and

%ithdra%al) per client per day.

8ithdra%al limit per transaction

of each client %ill be restricted to

Tk. =1,111.11

Source0 uidelines on -ent an%in for the ban%s

3.2 !ifferences bet+een ranch ba%in and -ent ban%in

Although agent banking performs under a branch, some extent agent banking is different

from branch banking. *entral bank clearly defines the services %hich are not permissible

by agents. !ollo%ing services are made the difference more clear.

Agents are not allo%ed to provide the follo%ing services on behalf of the banks;

i. 7iving final approval of opening of bank accounts and issuance of bank

cards'che/ues

ii. <ealing %ith loan' financial appraisaliii. Dncashment of che/ues and

iv. <ealing in !oreign currency

In addition, An Agent must provide, as a minimum, cash deposit and cash %ithdra%al

services. The agent5s activities %ould be %ithin normal course of banking business of the

scheduled banks but conducted at places other than bank premises' AT booths. Agent

must provide services in the designated business premises.

3.3 o+ does -ent ban%in +or%

3.3.1 Cash deposit

Steps of Cash in for$ aent outlets

Step 10 *ustomer comes to "ub#Agent'Teller oint for deposit inform his account

number'sho% account card and and over the cash to "ub#Agent'Teller

Step 20 "ub#Agent'Teller 9og#in to ortal' e#&"' m#&" terminal by using

12



ass%ord'I$

Step 30 "ystem %ill verify device A* I< and %ill allo% login

Step 40 "ub#Agent'Teller initiates deposit transaction

Step &0 Input account number

Step (0 Input amount

Step 50 Input "ub#Agent'Teller !Step 60 "ystem %ill debit sub#agent account and credit customer account

Step 70 "ub#Agent'Teller %ill inform customer and provide customer copy of deposit

slip

Step 180 *ustomer %ill be notified through "", if mobile number is linked

3.3.2 Cash +ithdra+

Steps of Cash out for$ aent outlets

Step 10 *ustomer comes to "ub#Agent'Teller oint for %ithdra%al, inform account

number'sho% account card and amountStep 20 "ub#Agent'Teller 9og#in to ortal' e#&"'m#&" terminal by using

ass%ord'I$ "ystem %ill verify device A* I< and %ill allo% login

Step 30 "ub#Agent'Teller initiates 8ithdra%al transaction

Step 40 Input account number

Step &0 Input amount

Step (0 *ustomer %ill verify the account number and amount and then Input *ustomer

!

Step 50 "ystem %ill debit customer account and credit "ub#Agent account

Step 60 "ub#Agent'Teller %ill hand over cash to customer

Step 70 *ustomer %ill be notified through "", if mobile number is linked

3.3.3 alance inuiry

Steps of balance inuiry for$ aent outlets

Step 10 *ustomer comes to "ub#Agent oint 'Teller oint '!T &fficer'@&s for balance

checks and tells account number 'sho% account card.

Step 20 "ub#Agent'Teller'!T &fficer'@&s 9og#in to ortal' e#&"'m#&" terminal by

using ass%ord'I$.


Step 40 Initiates Balance in/uiry transactionStep &0 Input account number

Step (0 *ustomer %ill verify the account number and then Input *ustomer !

Step 50 "ystem sho%s customer balance

Step 60 "ub#Agent'Teller'!T &fficer'@&s inform customer'rovide slip

13



3.3.4 ill pay$ent

Steps of ill pay$ent for$ aent outlets

Step 10 *ustomer comes to "ub#Agent'Teller oint for bill payment, tells his biller I<,

bill number, account number and amount.Step 20 "ub#Agent'Teller 9og#in to ortal'e#&"'m#&" terminal by using

ass%ord'I$


Step 40 "ub#Agent'Teller Initiates Bill ay transaction

Step &0 Input biller I<, bill number, account number and amount

Step (0 *ustomer %ill verify account number, utility company I<' code, bill number

and amount and then input the !.

Step 50 "ystem %ill debit customer account and credit biller account

Step 60 *ustomer %ill be notified, if mobile number is linked and provided %ith a slip

3.3.& "erson to person transfer

Steps of "erson to person fund transfer for$ aent outlets

Step 10 *ustomer comes to "ub#Agent'Teller oint for fund transfer inform customer

account number, destination account number and amount.

Step 20 "ub#Agent'Teller 9og#in to ortal'e#&" 'm#&" terminal by using

ass%ord'I$

Step 30 "ystem %ill verify device A* I< and %ill allo% logi"ub#Agent'Teller

Step 40 Input source account (customer) number

Step &0 Input destination account number Step (0 Input amount

Step 50 *ustomer %ill verify the destination account number and amount and then

Step 60 Input *ustomer !

Step 70 "ystem %ill debit customer account and credit destination account

Step 180 *ustomer (sender'receiver) %ill be notified' rinted slip %ill be provided

3.4 Syste$ reuire$ent for -ent an%in

It is a big challenge to make the payment convenient, safe, and efficient for the rural under

privileged people. To ensure the safety, efficiency, reliability of agent banking transaction,the system re/uirement is divided into three phases.

!irst phases consists of IT infrastructure %hich includes real time processing means a

processing method that is used %hen it is essential that the input re/uest is dealt %ith

/uickly enough so as to be able to control an output properly. It also includes end to end

14



encryption. Dnd to end encryption refers to a digital communications paradigm of

uninterrupted protection of data traveling bet%een t%o communicating parties %ithout

being intercepted or read by other parties except for the originating party encrypting data to

be readable only by the intended recipient, and the receiving party decrypting it, %ith no

involvement in said encryption by third parties.

*able 20 Syste$ reurie$ent of -ent an%in

Able to

support real

time

processing

Able to provide a

secured net%ork

including end to

end encryption

"hould be robust in

managing

infrastructure capacity

to support agent

banking services

At the end point,

devices should not

store the sensitive

customer information

e.g. in' ass%ord'

Biometrics

"ource; 7uidelines on Agent Banking for Banks

"econd phase of system re/uirement of Agent Banking it ayment Acceptance <evices

(A<). ayment Acceptance <evices (A<) must be able to support minimum T%o !actor

Authentication (T!A)'T%o#step verification for agent and customer registration. T%o

!actor Authentication (T!A) means providing unambiguous identification of users by

means of the combination of t%o different components. These components may be

something that the user kno%s, something that the user possesses or something that is

inseparable from the user. A good example from everyday life is the %ithdra%ing of moneyfrom a cash machine. &nly the correct combination of a bank card (something that the user

possesses) and a I$ (personal identification number, i.e. something that the user kno%s)

allo% the transaction to be carried out.

A< must be able to support the re/uirement of end#to#end encryption based on industry

standards algorithm (from end#point devices i.e. A< to host system) and A< must not

store any sensitive customer information like I$'ass%ord at the end#point devices like

A<.

Third phase of Agent Banking is Agent Banking Application'"oft%are must be able to

support host validation for I$'ass%ord authentication, be able to provide device

authentication during session activation and transaction processing at host level, be capable

15



to have limit management feature for agents, customer, transaction and other limit

re/uirements, include transaction and system audit trail.

Chapter 9our

Reulatory Instructions on -ent an%in

Agent banking is comparatively a ne% idea that can help the formal banking sector reach

out to the marginalied people of the society through their agents, %ho %ill provide several

banking services to the people locally. Agents %ill provide banking services to the people

on behalf of a bank and the nearest branch of the bank %ill provide necessary logistic

support. In short, agent outlets %ill be mirror bank branches. The challenges for banks %ill

be to devise a business model that %ill generate ade/uate revenue to compensate all parties

in the value chain as %ell as shape up the agent net%ork and tackle the operational

challenges to selecting, training and managing agents.

8ith a vie% to ensuring the safety, security and soundness of the proposed delivery

channel Agent Banking 7uidelines have been framed by the Bangladesh Bank to permit

banks to be engaged in agent banking.

Banks %ill give much emphasis on the rural area to cover lion share of the target group but

at the same time %ill not ignore the rest of the target group by concentrating on the urban

area in a limited scope. The ratio of the number of sub#agents'outlets of a bank %ill be 0;2

for rural and urban area. That means, a bank must have at least 0 rural agent banking outlet

to have 2 urban agent banking outlet. Banks %ill provide priority to rural area for their

operation of agent banking.

Banks have to ensure the compliance %ith the minimum re/uirements to establishingsound systems and vigorous infrastructure to support agent banking. IT infrastructure must

be able to support real#time processing, provide a secured net%ork including end#to#end

encryption, and robust in managing structural capacity to support agent banking services.

16



An Agent must provide, as a minimum, cash deposit and cash %ithdra%al services. The

agent5s activities %ould be %ithin normal course of banking business of the scheduled

banks but conducted at places other than bank premises' AT booths. Agent must provide

services in the designated business premises.

4.1 Services of aent ban%in directed by Central an%

The Bangladesh Bank has come up %ith some guidelines on agent banking. According to

the guidelines the follo%ing services can be provided under agent banking;

2. *ollection of small value cash deposits and cash %ithdra%als (ceiling should be

determined by the BB from time to time),

0. In%ard foreign remittance disbursement,>. !acilitating small loan disbursement and recovery of loans, instalments,

3. !acilitating utility bill payment,

=. *ash payment under social safety net programme of the government,

?. !acilitating fund transfer (ceiling should be determined by the BB from time to

time),

H. Balance in/uiry,G. *ollection and processing of forms and documents in relation to account opening,

loan application, credit and debit card application from public,

4. ost#sanction monitoring of loans and advances and follo% up loan recovery,

21. @eceiving clearing che/ues, and22. &ther functions like collection of insurance premium including micro insurance etc.

4.2 :liible entities or persons to beco$e aent

According to the guideline of the Agent Banking, banks may engage the follo%ing

persons' entities as their Agent;

2. $7&‐!I:s regulated by icro credit @egulatory Authority of Bangladesh

0. &ther registered $7&s>. *ooperative "ocieties formed and controlled' supervised under *ooperative "ociety

Act,0112

3. ost &ffices=. *ourier and ailing "ervice *ompanies registered under inistry of osts

-Telecommunications

?. *ompanies registered under The *ompanies Act, 2443

17



H. Agents of obile $et%ork &perators

G. &ffices of rural and urban local 7overnment institutions

4. nion Information and "ervice *entre (I"*)21. Dducated Individuals capable to handle IT based financial services, agents of

insurance companies, o%ners of pharmacies, chain shops and petrol pumps' gas

stations

8ithout having approval from Bangladesh Bank no bank shall be allo%ed to undertake

agent banking business. In addition, Banks %illing to launch Agent Banking Business shall

seek prior approval from Bangladesh Bank, %ith full details of the services including

tentative implementation schedule. "pecially, Transaction currency %ill be taka only.

!urthermore, Banks shall have to submit copies of agreement(s)'&(s) signed bet%een

banks and their agents to Bangladesh Bank before launching the product.

4.3 Mitiation of ris%s and disputes

To mitigate the risk, Banks shall be responsible for mitigation of all kinds of risks such as

li/uidity, operational, fraud, cheating including money laundering and terrorist financing

risks. Technical risks should be covered by the solution provider. !urthermore, the banks

must bear all the liabilities that arise from any improper action on the part of their engaged

agents.

Banks should consider the follo%ing issues to select agents;

2. *ompetence to implement and support the proposed activities

0. !inancial soundness and cash handling capability>. Ability to meet commitments under adverse conditions

3. Business reputation

=. Ability to offer technology based financial services?. "ecurity and internal control, audit coverage, reporting and monitoring capacity

H. 9oan defaulter or the convicted person can not apply for agencyship.

The bank needs to ensure that ade/uate measures for customer protection, a%areness and

dispute resolution are in place. The bank must run a call centre to receive and process

disputes 03 hours a day via telephone, "", IJ@ and mail. Dach of the disputes received

by the centre must be resolved %ithin > %orking days. The bank should ensure that they

18



are sufficiently e/uipped to keep track'log of all disputes and revie% status of each

disputes and redressed of the same %ithin stipulated time.

Chapter 9ive

lobal Scenario of -ent an%in

In the last decade, there has been an explosion of different forms of remote access financial

services, i.e., beyond branches. These have been provided through a variety of different

channels, including mobile phones, Automatic Teller achines (ATs), oint#&f#"ale

19



(&") devices and banking correspondents. In many countries, these branchless channels

have made an important contribution to enhancing financial inclusion by reaching people

that traditional, branch#based structures %ould have been unable to reach. &ne of the main

obstacles to financial inclusion is cost; both the cost to banks involved in servicing lo%#

value accounts and extending physical infrastructure to remote rural areas, and the cost (in

money and time) incurred by customers in remote areas to reach bank branches. Agent

banking is rapidly evolving and its regulation plays a central role in enabling its spread.

Agent banking is /uickly becoming recognied as a viable strategy in many countries for

extending formal financial services into poor and rural areas. In recent years, agent

banking has been adopted and implemented %ith varying degrees of success by a number

of developing countries, particularly in 9atin America.

*able 30 *he adoption of -ent ban%in reulation by different countries

Countries Year Countries Year

*olumbia 011? exico 0114

Brail 0111 Dcuador 011G

eru 011= Jeneuela 0114

+enya 0114 Argentina 0121

India 011? Bolivia 011?

Bangladesh 012>

"ource; Alliance for !inancial Inclusion

Brail is often recognied as a global pioneer in this area since it %as an early adopter ofthe model and over the years has developed a mature net%ork of agent banks covering

more than 44K of the country:s municipalities. &ther countries in 9atin America have

follo%ed suit, including exico, eru, *olombia, Dcuador, Jeneuela, Argentina, and

Bolivia. &ther countries around the %orld have also utilied the agent banking model to

expand financial services, including akistan, hilippines, +enya, "outh Africa, ganda,

and India.

20



In recent years, no example of branchless banking has done more to stoke enthusiasm than

#D"A, the mobile payment service offered by "afaricom, +enya:s largest $&.

"inceits commercial launch in arch 011H, more than H million peopleLapproximately

one in four adult +enyansLhave signed up. 9argely (though not only) due to #D"A, the

proportion of +enyans considered to be formally financially included has almost doubled

to 32 percent in 6ust three years (!"< +enya 0114). #D"A sometimes overshado%s the

success of a different approach to branchless banking found in Brail that relies not on

mobile phones but on oint#&f#"ale (&") devices deployed at agents. !ollo%ing a ramp#

up of agents by state and private banks, Brail could claim by 011= that every municipality

in the country had a financial service point, changing the geography of financial inclusion.

Based on these and several other promising pioneers, donors are investing large sums into

branchless banking.

The regulation, design, and implementation of agent banking vary across countries. These

differences are evident in the variety of services offered by agents, the types of businesses

acting as agents, the types of financial institutions that %ork through agents and the

business structures employed to manage them.

*able 40 "er$issible aent an%in activities by different countries

Countrie

s

Cash

/in

Cash

/out

"rocessin

bill

pay$ents

Sendin,disbursin

do$estic $oney

transfers

Sendin,disbursin

forein $oney

transfers

Conductin

C!!

prior to

openin

ban%

account

"rocessin

account

applicatio

n

Openin

ban%

account

!isbursin

credit

-cceptin

loan

repay$ent

s

Colombi

a

Brazil

Peru

Kenya Unclear

Inia Uncle

ar Unclear

"ource; &xford olicy anagement

In exico in 0121, 20 financial institutions established more than 4,111 banking agents.

This is the e/uivalent of 6ust over one banking agent per every 21,111 adults in the country.

Although this placed exico %ell behind its neighbors, Brail, *olombia, and eru (as

seen in !igure ). *ompare to other countries, Bangladesh has less significant than the 9atin

21



American countries. It is expected that our country %ill embrace the maximum agent per

every ten thousand adults because more people are included in financial sector day by day.

9iure 10 #o. of an%in -ents per 18888 adults

0 2 4 6 8 10 12

10!45

4!31

3!81

3!08

1!17

0!01

No. of agents

Countries

"ource# $%&or Police 'ana(emen)

+enya, another country that implemented agent banking in 0121, already has almost 4,111

bank agents. 8ith a smaller adult population than exico, this amounts to nearly four

agents per every 21,111 adults in +enya.

9iure 20 *otal nu$ber of aents in different countries

0

50000

100000

150000

58351

16331 13296 9204 547483

Countries

No. of agents

22



"ource# $%&or Police 'ana(emen)

After 20 years of implementation, today Brail has 2?143> agents. eru, in its seventh

year, has 4013 agents. *olombia, in its fifth year, has 2>04? agents. India has =G>=2 agents

%ithin the nine years of adopting the regulation of agent banking. *ompare to othercountries, Bangladesh is novice in the ne% tools of financial inclusion.

*able &0 Si'e of aent net+or%; by year the $odel +as introduced

Mear of agent banking%as launched

Mear of agent banking

regulation %asintroduced

$umber of agentscurrently functioning

Brail2

0111 0111 2?143>

eru0 011G 011= 4013

*olumbia> 011H 011? 2>04?

+enya3 0121 0114 2?>>2

Bangladesh 0123 012> G>

"ource; Alliance for financial inclusion

1 *+ a) en o& ,ecember 2011




23



Brail is the pioneer in agent banking. In addition, it introduced the agent banking

approximately thirteen years ago. There are many areas in our country %here the economic

condition of the people is not good and profits from those areas are not that much that can

offset a branch5s fixed and operational expenditure. Banks may thrive by covering these

areas through engaging local agents as agents do not have to incur any significant amount

of cost for rendering the services. In Brail, Banco Bradesco partnered %ith their national

post office as agents to cover such ne% areas.

Dxperiences in India and abroad has sho%n that traditional Banks have struggled to reach

the poor %ith financial services. @ecogniing this fact, many countries such as Brail,

Indonesia, alaysia, exico etc. have allo%ed non#banks to offer payments, deposits and

cash#in'cash#out services. "imilarly, in India, enabling an inclusive competitive landscapeshould be a top priority. India has several strategic assets providing favourable initial

conditions for transformational change to%ards digital financial inclusion. A strong

banking net%ork (2,2=,111 branches) linked to e+uber (@BI5s *ore Banking "olution),

no% spreading into unbanked rural areas. A significant outreach of India ost (2,==,111

outlets), &" and AT terminals %hich can facilitate a vibrant cash#in'cash#out net%ork

across the country.

Chapter Si<

24



!ata -nalysis and Interpretation

@unning any bank branch in a remote area is not very cost#effective. "etting up a formal

banking branch involves a large amount of fixed cost and a high monthly variable cost for

maintaining it. But the number of transactions that take place in rural, remote or less

densely#populated areas is not enough to make up for those costs. Agent banking can

ensure the access of the marginalised people to several financial services, especially in

remote areas. It can %ork %onders in financial inclusion and enhancing financial activity in

remote areas.

(.1 "resent status of aent ban%in in anladesh

The central bank has already issued licences to the nine banks till Cune 012= for runningagent banking, under %hich financial services %ould be offered through agents instead of

branches. &ut of nine banks (Bank Asia 9imited, <utch Bangla Bank 9imited, Dxport

Import Bank 9imited, Al#Arafah Islami Bank 9imited, $@B *ommercial Bank 9imited,

odhumoti Bank 9imited, "tandard Bank 9imited, "ocial Islami Bank 9imited, "outh

Bangla Agriculture and *ommerce Bank 9imited) t%o are operating it:s agent banking

activities.

*able (0 #o. of aent ban%in license receivin ban%s

Serial

no.#a$e of the ban%s

)icense

approved

by

Operation started

2 Bank Asia 9imited ay 012> <ecember 012>

0 <BB9 Culy 0123 Canuary 012=

> $@B *ommercial Bank 9imited

ay 0123 Cune 012=

3 Alarafah Bank 9imited Cune 012= Cune 012=

= Dxim Bank 9imited Cune 012= &peration is under processed

? "AB* Bank 9imited Cune 012= &peration is under processed

25



H odhumoti Bank 9imited Cune 012= &peration is under processed

G "tandard Bank 9imited Cune 012= &peration is under processed

4 "ocial Islami Bank 9imited Cune 012= &peration is under processed

"ource; Bangladesh Bank'Author:s "urvey

Above table ? sho% the banks %hich get agent banking license from central bank. The

present situation of agent banking is sho%n at a glance in follo%ing table H. It sho%s the

agent banking activities are operated by banks, date of receiving license, year of

operations, instruments or terminals that are used in agent point or office, district coverage

of agent and customers.

*able 50 -ent ban%in in anladesh

#a$e

of the

ban%s

)icense

receive

d

Operation

started

*er$inals used in aent

office, point

#o. of district

coverae; aent

and custo$ers

Bank

Asia

ay,

012>

<ecember,

012>

• &" %ith Thumb @eader

• * to run bro%ser based

soft%are by agent

• &" %ith $!* card

reader

• <istricts; 01

• Agents; H>

• *ustomers;

2=111

<BB9Culy,

0123

Canuary,

012=

• D#&"

• <esktops Apps

• &"

• AT

• "mart phone (In future)

• <istricts; 22

•

Agents; 2= andsub agents; 2G

• *ustomers;

3>=G

26



$@B*

B

ay,

0123

Cune, 012=

• &" %ith thumb

impression (D#&")

• "mart phone apps %ith

/uick reference card

• !ive I"*

surrounding

<haka

• Agents; 1=

• *ustomers; =1

"ource; @evie% 8orkshop paper presented on Cune 012=, at BIB (npublished)

resently, eighty three agent outlets are operating agent banking activities through five

divisions such as# <haka, *hittagong, @a6shahi, +hulna, and @angpur. In <haka, there are

forty four outlets of agents are operating agent banking from t%elve districts. *hittagong,

@a6shahi, +hulna, @angpur has t%enty, three, eleven, and five agent outlets in different

districts respectively.

!urthermore, <haka division gets highest preference to open an agent outlet, ("ee figure >)

*hittagong is in the second position, @a6shahi, @angpur, +hulna are in follo%ing position

to open a agent outlets. ost of the industries are situated in <haka and *hittagong it may

be the reason that flo% funds are more in these districts than other districts so agent outlets

are gro%ing these areas rapidly.

9iure 30 "ercentae of aent outlets a$on the divisions

27



K-ulna .an(/ur .a+-a-i C-i))a(on( ,-aa0

10

20

3040

50

60

4 6

13

24

Divisions

Percentage

"ource; 8ebsites of different commercial banks

This chapter mainly deals %ith the reporting of data analysis and discusses the findings

from data. The data involved the /uestionnaires received from respondents. <ata analysis

%as done according to /uestionnaire and the findings %as then considered and discussed.

This research %as conducted %ith a vie% to assess ho% agent banking activities are

practiced by the banking financial institutions in Bangladesh, to identify the prospects of

agent banking in Bangladesh and find out the challenges that may be considered as

opportunities or barriers to operate the agent banking activities in Bangladesh. The

respondents: /uestionnaires %ere the main instrument of the study. The /uestionnaires

%ere given to the respondents %hich %ere duly completed and returned. The respondents

of the /uestionnaires %ere agents, customers and banks %hich are operating agent banking

activities in Bangladesh.

(.2 -e of aents

Banks select middle age people to give license of agent banking. !rom the respondents,

("ee figure 3) ?>K agent:s age is in >2 to 31 years. It is the group of people are energetic,

28



more trust%orthy than young people. This group of people may have some banking

experience, not so much volatile in changing career. Banks provide agency those people

considering the long term banking, operational activities, and customer services.

9iure 40 -e of aents

2030 3140 4150 *boe 500

1020

30

40

50

60

70

9

25

3

Age Group of Agents

Percent ageof Respondent

"ource; Author:s "urvey

(.3 :ducational bac%round of the aents

It is evident (in figure =) that most of the agents are graduates. It %as found out that there

are no uneducated people %ho have invested in agency business. It is good indication for

banking sector because educated people can promote, influence the uneducated people to

bring them under the banking umbrella by providing best services on behalf of banks.

Those %ho have not completed primary education and those %ho have never been to

school or through any other form of learning have not ventured into the business since they

don:t have re/uired kno%ledge to do transactions on behalf of banks

29



9iure &0 :ducational bac%round of the aents

"ource; Author:s "urvey, (April N Cune, 021=)

(.4 usiness hours of aent outlets

Bank agents deliver convenience by providing more %orking hours than the conventional

banks hours of business and through close proximity to the customers than %ould the

banks. @esults indicated that agents %ere delivering additional hours and making services

available to bank customers beyond %hat the banks could deliver

9iure (0 "ercentae of aents= outlet=s business hours

6 )o 8 -our+ 419 )o 10 -our+ 41

*boe 10 -our+ 19

30



"ource; Author:s survey

.Dventually, agents %ere opening longer hours than banks during the %eekdays, holidays

("ee !igure ?). $ormally, agents %ere providing three to five hours more than the bank:s

branches.

(.& "ercentae of transactions throuh aent outlets in a day

There %ere ? to 21 transactions taken place through agent outlets in day. ("ee figure H)

There are some reasons behind that scenario. !irstly, rural people are more conventional to

accept ne% thing. "econdly, they are not used to doing banking because they think that

banking is upper class people. !urthermore, obile banking is getting more popular

among them. They do not %ant to think about other intermediaries to do banking. "o, lo%

transaction profile through agent outlet is a problem for agents because they can not reduce

their fixed costs. Income from transactions is related %ith the volume of transactions. If it

is not increased, agents %ill be frustrated.

9iure 50 "ercentae of transactions throuh aent outlets in a day

0 )o 5 6

6 )o10 53

11 )o 15 28

16 )o 20 6

*boe 20 6

"ource; Author:s "urvey

31



(.( 9actors that $otivated to be aents

It %as a matter of interest that %hat reasons that motivated people to be an agent are. There%ere lots of factor involve in this motivation. ost of the agents have grocery shops,

construction:s business, pharmacy, mobile phone shop or other business. They %ant to

associate %ith big brand for their reputation. It %as the evidence that out of total

respondents 3>K agents involved themselves %ith agent baking for attaching their name

%ith brand or banks. ("ee figure G) !urthermore, >2K and 00K agents %ere motivated to

take agency due to transaction base income and employment.

9iure 60 9actors that $otivated to be aents

ran+ac)ion &ee income 31

Brin(+ more /eo/le in)o my +)ore 4

or em/loymen) 22

I an) )o be a++ocia)e i)- a bi( bran 43


(.5 Challenes to operate aent outlets

Availability of net%ork as a challenge to agency banking in Bangladesh %as mentioned by

>0 (211K) of the respondents. ("ee figure 4) o%er failure and system failure %ere

respectively 3HK and >GK claimed by the respondents. o%er failure and system failure

32



includes &" machine does not perform, Biometric achine does not %ork, electricity

failure, electronic devices failure and so on. "ome respondents claimed that they lost

money in road %hile depositing the money in bank branches and they %ere the victim of

robberies. &thers includes operational tasks such as banks %ere reactive in events, mini

statements could not be provided due to lack paper, technological experts %ere not

available to put into affect the devices. 9i/uidity and capital %ere not considered as

challenges because the agent %ho got the agency from bank %as financially sound. ost of

them have either enterprise, shops, pharmacy and so on.

(.6 ender of custo$ers

@espondents (specially customers) %ere characteried basing on their gender and level of

education. ("ee figure 21) In terms of gender, >0 respondents %ho covered GGK of the

respondents %ere found to be males %hile 2>K %ere female

9iure 70 Challenes to operate aent outlets

i:uii)y

"ource+ o& &un+

$)-er+

.obbery or ;iacin(

"y+)em &ailure

Poer &ailure

Poor ne)or connec)ion

0 20 40 60 80 100

Percentage

Challenges


33



"ho%ing the different genders of respondents %as important since it sho%ed that both

genders %ere considered in this study and hence the sample %as representative and hence

not biased.

9iure 180 ender of custo$ers

'ale emale

020

40

60

80

100

88

13

Gender

Percentage


"ho%ing the different genders of respondents %as important since it sho%ed that both

genders %ere considered in this study and hence the sample %as representative and hence

not biased. It %as evident that more males have involved in agent banking than female this

is because males %ere more economically empo%ered than %omen. oreover, agent

outlets are situated in baaars, markets %hich are normally male dominated place. In the

rural area of our country, females do not go to markets or baaars in villages. "o, it is

difficult for them to do banking through agent outlets in those areas.

(.7 -e of custo$ers

iddle age people are more involved themselves in agent banking. !rom the respondents,

("ee figure 22), =1K agent:s age are in >2 to 31 years. It is the group of people are

energetic, future leader. eople open agent account considering the long term banking,

operational activities of banking through agent outlets behalf of branch. Above =1K

34



customers have completed higher secondary school education and 0G K have completed

secondary education level. ("ee figure 20) It indicates that educated people in rural areas

are coming under the banking umbrella.

9iure 110 -e of custo$ers

2030 31

3140 50

4150 19


Those %ho have completed primary education and those %ho have never been to school or

through any other form of learning have not involved themselves in agent banking since

they don:t have re/uired kno%ledge to do transactions in banks.

35



9iure 120 :ducational bac%round of the custo$ers

<eer been )o +c-ool

Primary

"econary

;i(-er +econary

=raua)e

0 10 20 30 40 50 60

0

3

28

53

16

Percentage

Levels of education

"

ource; Author:s survey

(.18 Co$$on services offered throuh aent outlets

BB introduced agent banking guidelines for all commercial banks aiming to provide

banking and financial services on a limited scale to the underserved population. BB alsoissues permissible agent banking activities in agent Banking 7uidelines. Although there are

lot of services permitted by BB, all services are not provided till today. *ash In, *ash &ut,

*ollection - preservation of A'* opening !orm - others receipts copy are almost offered

in all agent outlets. Balance in/uiry and fund transfers are also taken place in 4HK and

42K agent outlets respectively. ("ee figure 2>) H0K agents are providing issue of mini

statement and 2>K agent are providing foreign remittance services. Although our country

earn huge amount of remittances, agent outlets can not grab the opportunity due to poor

promotional activities, long term strategies of banks.

36



9iure 130 Co$$on services offered throuh aent outlets

Ca+- e/o+i) an ca+- i)-raal

Collec)ion > /re+era)ion o& &orm

un )ran+&er

Balance in:uiry

I++ue o& mini +)a)emen)

orei(n remi))ance /aymen)

Collec)ion o& bill+

o ec on /re+era on o e er+

0 20 40 60 80 100

100

100

97

91

72

136

Percentage

Services


(.11 )evel of custo$er=s satisfaction reardin aent ban%in

Those people %ho have agent banking account, =4K of them have very good experience,

("ee !igure 23) 0GK, ?K have good and excellent respectively experience %ith agent

banking activities because agents can help fill in account opening forms in their remote

areas. They may inform the people of the benefit of depositing money in a bank account

rather than keeping hard cash at home. eople in remote areas may hesitate to visit branch

premises or seek any information from customer care. But, they %ill feel homely %hen

they visit the local agents and the local agents also can help them accordingly.

37



9iure 140 )evel of custo$er=s satisfaction reardin aent ban%in

=oo ?ery (oo "a)i+&ac)ory @%cellen)0

10

20

30

40

50

60

28

6 6

Level of satisfactions

Percentage


(.12 Custo$er=s trust on aent ban%in

It can be observed that 43K of respondents sho%ed ("ee !igure 2=) that customers have

trust %hile dealing %ith agents and the company the agents represent, %hile ?K said some

customers lack trust on them as agents and by extension the company they %ork for. Trust

issues are very critical in banking industry, customer account details must be kept private

and confidential to be able to earn trust. "ome customers fear about the embelement of

fund because some "omobay "omiti, *o#operatives %ere made fraudulent activities %ith

them. &n the other hand, obile banking becomes more popularity among the general

people. eople associate the agent banking %ith mobile banking although those are

different from each other.

38



9iure 1&0 Custo$er=s trust on aent ban%in

<o 6

Ae+ 94

"urvey; Author:s survey

The customers %ho have an account in agent outlets %ant better services from agent

outlets. If customers get better services than other forms of banking specially in rural area,

they %ill include themselves in banking sector %hich is ultimate target of agent bankingdirected by central bank. igher the people includes in the formal banking sector, it %ill

make higher contribution of banking sector in our economy.

39



training to agents or agents5 employees as to ho% to handle IT#related issues and deal %ith

customers effectively and efficiently. &ther%ise, it hampers the reputation of banks as %ell

as reputational, operational risk %ill increase drastically.

eople in remote and semi!urban areas are usually reluctant to use technology. They are

not habituated to use any card or oint "f #ale $"#% device. Banks may develop any

effective promotional plan to reduce this reluctance. Banks may arrange demonstration of

"# use in the localities. Banks should educate the customers and people on how best and

easy way to use the instruments.

*hree, transactions through agent outlets are not satisfactory level. @ural people are more

familiar %ith mobile banking than the agent banking. They are not a%are about the benefits

of the agent banking. Agents can help fill in account opening forms in their remote areas.

They may inform the people of the benefit of depositing money in a bank account rather

than keeping hard cash at home.

The agent’s efforts are not only sufficient to promote agent banking to the rural people but

also commercial banks need to give more emphasis to bring the rural people under the

banking umbrella. &gents are locally!known community leaders and trusted. Their

reference and marketing can boost assets and liability of a bank. Their reference is moreeffective than a third party deployed for marketing.

9our, according to the survey, agents involve in agent baking to associate them %ith large

organisations or banks for their reputations. &n the employment point of vie%, it creates

more employment as %ell as brings unbaked people to the bank arena. It is also a matter of

consideration that each and every agent has their o%n business to do. "o, the agents may be

less attentive to banking services. istory of business, personal reputation and leadership

of the store o%ner concerned %ithin the community should be checked before selecting an

agent.

&gents should not offer limited services to customers such as access their bank accounts

and transfer money. They should allow a wider range of services which are necessary for

people living in the rural areas. 'n this regard, Banks should contact with agents regularly

41



to find out gaps between performance and expectations of services. 'f any gaps or

performance are not matched with expectation, immediate action must be taken by taken to

provide better services to satisfy the customers.

9ive, availability of net%ork, po%er failure, system failure, robbery, technical problem of

devices, lo%er promotional activities, fe% interest of people regarding agent banking are

the ma6or challenges faced by agents and banks. eople in remote and semi#urban areas are

usually reluctant to use technology. They are not habituated to use any card or point of sale

(&") device. Banks may dra% up any effective promotional plan to reduce this

reluctance. Banks may arrange demonstration of &" use in the localities. Banks need to

be proactive in facing any adverse incidents. Banks should inform the agents regarding the

net%ork problem prior to the occurrences.

Banks will have to set long term strategic plan and a short!term plan as well as establish

an agent banking network comprising 'T experts, (inancial analysts, )arketing people.

The bank should focus on proper training, development and motivation of agents.

Si<, agents in rural area are not %illing to provide all services %hich are pointed out in

agent banking guideline. They are not providing *ash payment under government social

safety net program, *he/ue receive for clearing, !acilitating small value loan disbursementand recovery of loan installments, passport fee collection and so on. Agents need to go

branch regularly as a result their communication costs, operational cost increase.

Therefore, they do not %ant to provide all services directed by central bank.

Banks should ensure that safety and soundness of the banking system especially &gent

Banking #ervices. These services are needed to provide banking services at a lower cost

and to foster financial inclusion. Banks must ensure the confidentiality and security of any

customer information in the agent*s possession.

Seven, the bank has less control over the customer experience at the agent than at its o%n

branch, for t%o reasons. !irst, the agent:s staff is not sub6ect to the same selection

standards and training as branch employees. "econd, in a retail store, the agent business is

sitting alongside a set of other retail products and propositions beyond the bank:s control.

42



+nder these circumstances, the bank should maintain a record of incidents reported at

each agent, with a view to identifying suspicious patterns and monitoring service quality.

Banks need to be cautious about agent activities because bank’s reputation is tied up with

the agent while approving agency. Banks needs to examine and consider the security of the

place prior to select an agent. Banks should also consider the rate of theft or robbery in an

area before selecting an agent. 'f needed, banks can also arrange an insurance coverage.

'n addition, banks may have written and pictorial instructions and those should be placed

at visible places inside any agent bank to make customers aware that no transaction is

completed without an automated printed receipt.

!inally, agent banking %ill be successful and it:s goal %ill be reachable if aforementioned

challenges can be faced efficiently and effectively by giving our hand. But, this is not thatmuch easy as it appears to be. If *hallenges can be handled in strong hand, agent banking

creates ne% era of financial inclusion in the banking sector of Bangladesh. Agent banking

can add motivation to financial inclusion if the BB along %ith commercial banks can

express the po%er of agent banking properly. To create long#term resilient and sustainable

economic, social and environmental values as %ell as strengthening the financial system of

the country, $ot only the BB should have a vision regarding this but also banks need to

have their vision, mission, goals and ob6ectives, %hich must fulfill the need and

re/uirement of their ne% customer. Agent banking can contribute in large scale by

including unbanked people into the banking arena if central bank and banks in Bangladesh

go hand in hand.

References

43



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prospects and challenges of agent banking in bangladesh

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