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Agent banking will play a greater role in implementing the stimulus packages unveiled by the government as the outlets have footprints in Bangladesh’s remotest parts where banks have barely set their foot in, bankers and experts said yesterday.
The model has already won the hearts of millions of people through secure and easy banking facility, they said at a virtual discussion titled “Agent banking solutions during Coronavirus pandemic” jointly organised by The Daily Star and Bank Asia.
“Agent banking will become a proper channel to implement the stimulus packages for the underprivileged people,” said Md Arfan Ali, president and managing director of Bank Asia.
Under the existing infrastructure of agent banking, funds can be transferred to 6 crore people, he added.
“The central bank should use agent banking properly for implementation of the stimulus packages as it will help give out loans to small and medium enterprises located in rural areas,” said Atiur Rahman, a former governor of the central bank.
The government has unveiled a total of 18 stimulus packages worth Tk 95,619 crore to help industries, businesses, farmers and people tackle the economic crisis stemming from the global coronavirus pandemic.
The number of agents of banks is higher than the number of branches of banks and this is a highly positive matter to tackle the ongoing crisis, said Md Abul Kalam Azad, a former principal secretary.
The central bank issued the agent banking guideline in 2013 but the licensees did not start full-fledged operations until 2016.
Agent banking offers limited banking and financial services to the underserved population by engaging representatives.
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, paying bills and cash payments under the government’s social safety net programmes.
As of December, loan disbursement through the agent banking platform was Tk 446 crore, which is more than double that from a year earlier. Deposit collection went up 142 per cent to Tk 7,517 crore, according to data from the central bank.
The government will take prompt measures to help owners of agent outlets so that they can run operations uninterruptedly during the lockdown, said Planning Minister MA Mannan.
“We should think about how to integrate microfinance institutions into agent banking. This could lead to greater success for our rural economy.”
Banks should lay emphasis on providing banking service to the marginalised people, who did not get the scope to make themselves educated, according to the minister.
“Agent banking will become an important tool to bring people under the banking system,” Mannan said, adding that the banking window is working to provide financial services to the rural women, which is highly praiseworthy.
Most of the agent outlets are facing losses, said Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh.
Loan disbursement under agent banking will not get a boost during the ongoing recession if the government does not share the risk for funds of the stimulus packages, he said.
“The government would consider taking measures to make the agents’ outlets profitable so that they can survive,” the planning minister said, adding that he was willing to write to the central bank about it.
As per the National Financial Inclusion Strategy, the government has set a target to open a bank account for every people by 2024 and agent banking will play a crucial role in materialising the plan, Ali said.
“We should take initiative to set up banks’ kiosk in each village within the period in order to make the rural economy vibrant,” he added.
The lender, which started agent banking on a pilot basis in 2013 before the central bank formally rolled out the financial window, now takes government funds to 8 lakh people under various social safety net programmes.
Bank Asia, which popularised agent banking in Bangladesh, has so far opened 26.60 lakh accounts under the system.
The central bank took a number of initiatives to expand financial inclusion in 2009 when the financial crisis rattled the globe, Rahman said.
The rural economy and the marginalised people were deprived of getting loans from the banking sector at the time. The measures of the financial inclusion later helped make the rural economy vibrant, the former central bank governor said.
The fund allocated for the social safety net schemes would have to be doubled in the next budget compared with the current one due to the ongoing recession.
“The funds can be distributed by using the agent banking channel,” he added.
There is no need to set up infrastructure as agents can provide banking service by going from door to door, said Mansur, also the chairman of Brac Bank.
The bank has 360 agents who are operating banking activities without setting up any infrastructure. “This is helping them provide the service in a cost-efficient manner,” he said.
There are 8,500 post offices in the country and they could be integrated with agent banking, Azad said.
If the integration can take place, the country’s financial inclusion drive will get a huge boost, he added.
“There have been many harsh questions about the country’s banking sector, but agent banking is an exception,” said Khondaker Golam Moazzem, research director of the Centre for Policy Dialogue.
The number of both agents and outlets is on the rise and they are mobilising a significant amount of deposits from the rural areas.
“But they have little interest in disbursing loans in the rural areas.”
The loan-deposit ratio under agent banking is only 6 per cent, much lower than the ratio of the overall banking sector.
“Many Bangladeshi expatriates have already returned home due to the financial meltdown and agent banking could play a positive role in disbursing loans to them. This will help them do business,” Moazzem added.
Transaction through agent banking has declined due to the ongoing movement control order, said Syed Mahbubur Rahman, managing director of Mutual Trust Bank.
“We should take measures to make agent banking interoperable. This will help customers of one bank deposit or withdraw funds from the agent outlets of another lender,” he said.
Two-thirds of agents of Dutch-Bangla Bank are now loss-making as they are unable to make a profit unless deposits amounting to Tk 50 lakh can be mobilised per month at the very least, said its managing director Abul Kashem Md Shirin.
The agents will become profitable if the government distributes the stimulus packages to the rural people through the channel.
Dutch-Bangla Bank has so far given approvals to 4,100 agents to run the financial tool, Shirin said.
Many banks don’t have the available branches in rural areas where agent banking is providing the service to the people, said Mashrur Arefin, managing director of City Bank.
Agents are now facing difficulty in transferring money due to the lockdown as the central bank has stopped the operation of the real-time gross settlement.
“People are afraid of using fingerprints to carry out banking through agent booths. So, we should take measures to disinfect the equipment,” he added.
Agent banking will help provide banking service to women, said Nazneen Ahmed, a senior research fellow of the Bangladesh Institute of Development Studies.
There are 5,000 union digital centres and some of them are equipped with agent banking.
“Women feel secure to perform banking transactions at digital centres. So, we should set up agent banking outlets in every digital centre,” she said.
Currently, 24 banks have agent banking licences. Of them, 21 are in operation and together they had 52.69 lakh accounts as of December.
Muhammad Zahidul Islam, a senior reporter of The Daily Star, moderated the discussion.
(TDS)
