Agent Banking and Financial Inclusion

Agent banking which aims to provide limited scale banking and financial services to the underserved population through engaged agents under a valid agency agreement, is contributing to the financial inclusion landscape in Bangladesh.

Although the central bank issued an agent banking guideline in 2013, the first banks started full fledged agent operations in 2016. 

Over the last five years, agent banking has come a long way but some hurdles need to be resolved to expedite its sustainable growth by creating more enabling regulatory environment while taking the stakeholder's views into account. 

Agent banking is the most useful channel when it comes to providing financial services to the extreme poor Development entities such as non-government organisations and micro-finance institutions (MFI) are working to link clients with agent banking to provide better financial services. The MFIs can work as agencies of banks in localities for greater financial inclusion. 

Bangladesh has made significant progress in financial inclusion over the past eight years, with at much as 48 per cent of the adult population now under the banking umbrella. In 2013, only 20 per cent of Bangladesh's adult population was under the umbrella of formal financial services. 

Financial inclusion or inclusive financing is the delivery of financial services at affordable costs to sections of disadvantaged and low-income segments of society, in contrast to financial exclusion where those services are not available or affordable. 

Mobile financial services (MFS) played a big role in the financial inclusion process. About Tk 10 billion is transacted daily through this platform on an average, a figure that surprises many bankers. Rural people can make deposits and borrow from the agents, a move that has expanded the banking services widely across the country. In fact, the central bank's nod to MFS and agent banking has remarkably changed the scenario of financial inclusion process in Bangladesh. 

In addition, the Bangladesh Bank has taken a number of moves, such as refinancing scheme for women and small and medium enterprise (SME) entrepreneurs and green funds for equitable and sustainable economic growth. 

Yet, there are many things to do as a large number of the people still remains out of any formal financial services. Rural market and people are still outside major banking services. Financial inclusion can be done in two ways opening of rural bank branches and the use of financial technologies. However, there is another way to deepen financial inclusion: agriculture financing through non-government organisations (NGOs) which are widely present throughout the country. 

The central bank can also relax its policies on agent banking to encourage more banks to launch the service. According to financial analysts, Bangladesh is on the right track towards financial inclusion and the next two to three years are likely to bring many new innovations. 

Although MFS and agent banking have built a strong financial connectivity, a small wrong move can derail such services from their benefits. For example, if the telecom regulator increases the charge for the Unstructured Supplementary Service Data that allows banking services from one's basic feature phone without the need for internet connection, it would cause a dent to the financial inclusion drive.