Question (Q): Agent banking is now being considered as a cost-effective banking approach, particularly in the least developed areas. Could you please explain the journey of agent-based banking services of your bank?
Answer (A): Social Islami Bank PLC launched Agent Banking services on 25th October in 2015. At present, we are operating Agent Banking through 374 outlets all over the country. Through them, we have successfully opened more than 300 thousand accounts of different types, procured deposits worth more than BDT 8.0 billion (800 crore), paid inward remittance of around BDT 1.0 billion (100 crore) in 2024 and collected a significant amount of utility bills. We are constantly trying to make the agent banking business sustainable by providing continuous support and assistance in every avenue of the Agent Banking Outlets.
Q: Please share with us the difference between traditional and agent banking affairs?
A: We are used to making transaction in the Bank Branches located in prominent areas. Inside the branches are very spacious, organized and well-decorated office premises and well-dressed officers. Full-fledged banking services are available there. On the other hand, Agent Outlets are mainly located in rural areas where facilities are limited. The customers can withdraw their money through biometric system or POS Machine. They can't use cheque books in the outlets. They can enjoy Debit Card, Mobile Apps and all types of Deposit Products. There are some restrictions for Agent Outlets: any one cannot issue Payment Order from Outlets. They are not authorised to entertain Medium or Large Investment facility. Trade Finance operation is not available there.
Q. When did your bank start agent banking services and why?
A: The contribution of agent banking is considered a significant factor behind the rise in financial inclusion in Bangladesh. It has proved to be very effective in developing countries like Bangladesh, where full-fledged banking services are not robust. After the launch of Bangladesh's two leading MFS operators, 'Rocket' and 'bKash' in 2011, many people started to come under financial services. But a lot of people still remained unserved by formal banking services. To serve that unbanked population, the SIBPLC expressed its interest to start "Agent Banking" and got the approval on 25th October in 2015.
Q: How many agent-banking outlets does your bank have so far and what is their urban-rural ratio?
A: Right now we are operating 374 agent banking outlets all over the country. Currently the ratio of urban-rural outlets is 85:15.
Q. Do you really think agent banking services help expand commercial banks' service network among the unbanked people in a faster and low-cost way? Please answer with an example of your bank?
A: A large portion of the labour force is employed in different informal job sectors in Bangladesh. Most of them receive their wages in cash. They are out of the banking channels. Even they have no savings funds and bank cards. Agent banking still has a huge room to grow in that particular segment. Besides, although big businessmen transact through banks, a lot of small businessmen still transact big amounts in cash. Agent Banking would be very much effective to bring them under the umbrella of Financial Inclusion.
Q: Many people term agent banking as a key deposit-mobilisation platform in the banking sector. Could you please tell us about performance of your bank's agent banking outlets in terms of deposit collection and credit disbursement in recent years?
A: Agent banking ensures proximity of banking services in rural and hard-to-reach places where a branch cannot reach. Bangladesh's rural infrastructure often becomes an issue in expanding a branch of a bank. Agent banking is in a way more convenient for these areas. Bangladesh Bank's guidelines also encourage banks to appoint agents in areas where there is no bank branch or any other formal banking channel. That's why, nearness of agent outlets increased and people can have banking services in places where traditional banking services are pretty much unexpected. That's the real reason for growth in deposits in the Agent Banking Outlets. As at close of business on 31 Dec, 2024, the total deposits of Agent Banking stood at BDT 8.0 billion (800 crore).
Credit disbursement through agent banking is very insignificant in our country. According to Bangladesh Bank's latest report [July-September 2024], the volume of credit through Agent Banking has increased by 12.53% over the previous quarter. This is due to the fact that most of the banks are showing interest in developing feasible infrastructure for loan disbursement and recovery through agent outlets. We are also working on it. Despite that we have started Micro Finance Investment through Agent Outlets and already disbursed BDT32.25 crore.
Q. Please tell us about the growth in advances of your bank through agent banking and the account numbers of male users and female users?
A: One of the main reasons behind the extensive growth in agent banking in Bangladesh is Cost Effectiveness. Opening a branch of a bank is costly and time consuming. Besides, there are a lot of rules and regulations that need to be followed. Agent banking minimises the establishment and operational costs of the bank. The entrepreneurs are personally taking several initiatives to procure different types of accounts as well as deposits. In 2022 the number of accounts was 64,000 through our Agent Banking. In the following year it reached 86,000. But due to unavoidable circumstances the growth for the year 2024 was negative compared with the previous year. Currently, The male customers' number is 156,000 and women's 149,000.
Q: Tell us about the growth in deposits and advances in agent banking and their contributions to your bank's entire deposit and lending portfolios?
A: In the portfolio of our bank, Agent Banking deposits contribute 2.5 per cent of our entire deposits. But lending is very insignificant as we started it recently.
Q. What was your bank's plan regarding agent banking in the last two or three years?
A. We had a great plan to expand our network throughout the country. It has already covered 46 districts and we are planning to cover the rest within 2025.
Q. What are the major challenges that need to be overcome for smooth operation and expansion of agent banking across the country?
A: l People in rural areas are still unaware of the banking system. Some of them are less educated and not comfortable with the agent banks, when it comes to their monetary savings.
l Agents often carry cash on their own shrugging off the risks. Banks do that with proper security. But for agents, cash management is a risky job in both urban and rural areas. Because, it has to be done under his own arrangement and in most of the cases they are not taking the Insurance Coverage for that purpose.
l Agent banking mostly relies on IT-enabled devices. Conventional banks have specialised cyber security departments to ensure security. Agents do not have that expertise to ensure proper security in such a monetary transaction system. That's why there is a risk of heist or fraud through manipulation of the devices.
Q: Is lending through agent banking too risky as far as NPL(non-performing loan) is concerned?
A: As per our records, recovery rate is excellent in the rural areas. The NPL issue may not arise in expanding lending through Agent Banking in those areas. We need a positive move to make it successful.
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