VOL 20 NO 157 REGD NO DA 1589 | Dhaka, Thursday, March 28 2013
| Bangladesh Bank mulls agent banking for financial inclusionM S Siddiqui
Agent banking is a financial service offered to customers by a third party on behalf of a financial institution (FI). An agent is an entity that is engaged by an FI to provide specific financial services on its behalf using the agent's premises.
It is an additional delivery channel that can enhance the convenience, the outreach of quality and affordable financial services, particularly to the underserved, in a more cost-efficient manner. Such an arrangement is a cheaper way for FIs to reach out to the underserved population.
The use of the term 'agent' is not necessarily a reference to an agent in the traditional legal sense of a party authorised by a principal to act on the principal's behalf and for whom the principal is liable with respect to activities taken by the agent within the scope of its agency relationship or contract. An agent is any third party acting on behalf of a bank, whether pursuant to an agency agreement, service agreement, or other similar arrangement. In most countries, the principal banker is liable under a law for the actions of its agents, whether such actions are explicitly or implicitly authorised. Liability for the actions of a non-agent entity acting on behalf of the bank may be different and will often depend on the contractual agreement. However, a bank's liability (whether by law or contract) for third-party actors will likely impact the bank's policies and procedures, which will in turn impact the superviser's oversight of the bank.
The Bangladesh Bank has many recent projects for inclusive financial packages to reach out to non-bankable citizens. Achieving financial inclusion therefore requires innovative business models that dramatically reduce costs for everyone and thus pave the way for profitable extension of financial services to the poor citizens. A major obstacle to financial inclusion is the cost-not only the cost incurred by banks in servicing low value accounts and extending banking infrastructure to underserved, low-income areas, but also the cost incurred by poor customers, in terms of time and expense in reaching bank branches. The banking agent method emphasises greater efforts towards achieving the vision of an inclusive financial system that best serves all members of society, including the underserved, to have access and usage of quality and affordable essential financial services.
FIs can reach an additional client segment or a geographical area. Reaching 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. In such environments banking agents use their existing retail infrastructure. Lower set-up and running cost can play a vital role in offering many low income people their first time access to a range of financial services. Also, low income clients often feel more comfortable banking at their local store than walking into a marble branch. The clients benefit from the agents' banks with lower transaction cost and service, but closer to the client's home. Bankable persons visit stores anyway for groceries all the day, enjoy services with a smaller crowd than in branches.
Globally, retailers and post offices are increasingly utilised as important distribution channels for financial institutions. The points of service range from post offices in the outback of Australia where clients from all banks can conduct their transactions, to rural France where the bank Credit Agricole uses corner stores to provide financial services, to small lottery outlets in Brazil at which clients can receive their social payments and access their bank accounts. It has been used very well in Latin America and Asia. There are few African countries that...
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