Agent banking has emerged as a transformative tool for financial inclusion, particularly in underserved areas of Bangladesh. This banking derivative cuts down costs of traditional banking operations, augments deposit mobilisation and facilitates enterprise growth in those far-flung areas, among other financial benefits.
A detailed SWOT (strengths, weaknesses, opportunities and threats) analysis will give additional insights into this innovative banking model.
Strengths: Agent banking serves large unbanked population of the country. The rural areas of Bangladesh have a significant number of unbanked individuals, providing a vast market for agent banking.
Educated youth workforce: Bangladesh has an abundance of young, educated individuals, who are trained to operate agent-banking outlets effectively both in rural and urban areas. As of June 2024, there were 15,991 agents across the country running 21,473 outlets.
Growing rural economy: Economic activities in rural areas, supported by remittances and agricultural production, have increased and created demand for banking services.
Savings-oriented womenfolk: Bangladesh's women, constituting half of the population, show strong saving tendencies, offering an untapped customer base. They tend to save to meet the future liabilities, for example, marriage of their daughters and sons.
Entrepreneurial spirit: A large number of entrepreneurs have grown in both rural and urban areas and they can benefit from agent-banking services for credit and deposit needs.
Expanding economy: Bangladesh's rapidly growing economy supports the demand for inclusive financial services.
Time and cost savings: Agent banking reduces the need for long-distance travel to formal banks, saving time and transportation costs. Previously, the rural people had to go to upazila headquarters to deposit and withdraw funds.
Policy support: Strong backing from the Bangladesh Bank, the central bank of the country, ensures regulatory support and trust in agent-banking operations.
Customizable services: Agent banking allows for tailored financial products to meet the unique needs of rural populations.
Weaknesses: High inflation poses one of the weaknesses in agent banking. Pressures of rising inflation on the economy over the past two years reduce disposable income of people, potentially affecting deposit volumes.
Trust deficit: Many people, especially in remote areas, remain hesitant about depositing funds in formal banking systems for a lack of awareness. Recent scams involving some banks accentuate this fear psychosis.
Security concerns: Issues like theft and fraud at agent-banking points can deter potential customers.
Limited awareness: Many rural customers are unfamiliar with agent-banking services and their benefits.
Opportunities: Rural economic vibrancy creates scope for money circulation. By providing access to banking, agent banking can energize the rural economy.
Deposit mobilisation: Agent banking can contribute significantly to the national deposit pool as the deposits ultimately come to the main banks.
SME lending: It creates opportunities to extend credits to rural and urban SMEs, boosting local entrepreneurship and giving a fund access to the small entrepreneurs.
Competitive rates: Offering attractive interest rates on deposits and loans can encourage more customers as the local NGOs charge abnormally high.
Increasing remittances: Simplified remittance services can attract more users, especially in rural areas.
Entrepreneurial support: Agent banking can facilitate small business growth by offering tailored financial products as many in the rural areas have adequate funds to establish an agent-banking outlet.
Women empowerment: Encouraging savings and access to credit for women can significantly enhance their economic participation.
Digital expansion: Integration with mobile -and digital-banking platforms can enhance financial accessibility.
Financial literacy campaigns: Educating rural populations can increase trust and usage of agent-banking services.
Threats: Cybersecurity risks hang overhead for the rising incidence of hacking, not only within but also without national boundaries. Vulnerabilities to cyber-attacks can undermine customer trust and disrupt operations.
Physical security: Theft and fraud remain concerns at agent outlets.
Low financial literacy: A lack of awareness and understanding of banking processes among rural populations limits adoption.
Mobile financial services (MFS): A rapid growth of MFS, fueled by increased smartphone penetration and internet access, poses a competitive threat.
Agent banking is an extended arrangement of traditional banking services aimed at reaching underserved populations in remote areas of Bangladesh. The central bank introduced agent-banking services in 2013. The first agent-banking initiative was launched by Bank Asia PLC through the Joyinshar outlet in Joyinshar Union, Serajdikhan, Munshiganj, in December 2013.
Agent banking offers a cost-effective alternative to the formal banking system, allowing customers to access a variety of banking services.
The Financial Express has constructed the SWOT analysis for the agent-banking services now being provided by 31 commercial banks out of 61 total scheduled banks in Bangladesh.
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