Diversity of Global Agent Banking Models

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Diversity of Global Agent Banking

Models and Its Applicability in

Bangladesh

Diversity of Global Agent Banking

Models and Its Applicability in

Bangladesh

Presented in: International Conference on Business And Economics

Venue: University of Dhaka, Bangladesh Date: October 25 - 26, 2016

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Agent Banking

 _{Agent banking, one of the} _prominent

non-conventional banking windows, ofers fnancial services.

 _{Facilitates many} _{fnancial services} _including

banking transaction, cash deposit, cash withdrawal, fund transfer, bills pay, account balance quarry and many more.

 _{Getting popular as an}_{easy, less costly and rapid}

fnancial inclusion media across the globe.

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Grounds for Agent Banking

 _Removes_{the geographical barrier}_{of the locality}

and takes banking to the remote areas .

 _{Offers banking}_{through specifed channel}_outside

the bank branches.

 _{Makes it}_{cost effective for banks}_{in concentrating}

at low-value transactions .

 _{Eliminates the} _{large fx cost}_{of setting up a bank}

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OBJECTIVES OF THE STUDY

 _{To explore the}_{diversity and uniqueness}_{of agent}

banking models practicing across the globe.

 _{To understand the} _{diversity of the conceptual}

models of agent banking in practicing countries.

 _{To explore the} _{takeaways for Bangladesh} _from

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DATA AND METHOD

 _{Secondary Data}

 _{Published journals, articles, reports of development}

organizations

 _{Circulars and policies of the central and the commercial}

banks

 _{Online newspaper and blogs, and websites of banks}

 _{Content Analysis}

 _{Limitations: Analysis is heavily dependent on}

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LITERATURE REVIEW: BANGLADESH PERSPECTIVE

 _{Limited scale banking and fnancial services}

through engaged agents under a valid agency agreement, rather than a teller/ cashier

 _{12 banks got license for agent banking while only}

7 are in operation.

 _{About BDT 3.58 billion was transacted through}

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Theoretical Framework

Diffusion of Innovations Theory

 _{Rogers theory of difusion of innovations explains}

the adoption rates of various types of innovations.

 _{Earlier adopters play a major role as change}

agents to support the difusion process. Agency Theory

 Agency theory is concerned with resolving

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FINDINGS

Agent Banking Models

Bank-led Model

 A distinct alternative to conventional branch-based banking.

 Conducts fnancial transactions at a retail agents which is nominated by bank.

 Customer-account relationship rests with the bank.

Non-Bank-led Model

 Account management functions are conducted by a non-bank (e.g., telco).

 A bank has a limited role in the day-to-day account management.

 Its role in this model is limited to safe-keeping of funds.

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FINDINGS

Diversity in Agent Banking Policy

 _{In some countries, banks have successfully}

expanded their outreach by engaging local agents or correspondents to ofer their services.

 _{Brazilian regulation allowed} _{agents only in}

municipalities that did not have bank branches

 Indian regulators required agents to be located

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Diversity of Agent Banking

Components

Agent Types

 Many countries permit a wide range of individuals and legal entities to be agents for banks.

 _{For example,} _India_{permits a wide variety of eligible agents,}

such as certain nonprofts organization, post ofces, retired teachers, and for-proft companies, including mobile network operators (MNOs).

 Kenya takes a diferent approach, requiring agents to be for-proft actors and disallowing nonproft entities

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Diversity of Agent Banking

Components

Agent Location

 Some countries impose restrictions on the location of agents.

 Due to concerns that agents could threaten bank branches, Brazilian regulation originally allowed agents only in

municipalities that did not have bank branches.

 _This_{restriction was lifted in 2000}_{, enabling the expansion of}

agents in Brazil.

 Indian regulators initially required agents to be located within

15 and 5 km of appointed bank respectively in rural and urban

areas which regulators expanded it to 30 km later.

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 Most regulatory approaches leave the issue of agent revenue to free negotiation between the agent and the fnancial

institution.

 _In _India, _{agent regulation} _{initially denied} _{banks and agents}

have the ability to charge customers for using agents while permitted, later, to charge reasonable fees under policies approved by the bank’s board.

 Latin American countries, generally permit banks to charge

for agent transactions, although banks do not always apply

such charges due to competitive or affordability concerns.

 _In_Pakistan_{, agents}_{cannot alter the fee structure}_{set by the}

Diversity of Agent Banking

Components

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Diversity of Agent Banking

Components

Agent Exclusivity

 In areas facing a defcit of suitable agents, some regulators believe ‘no exclusivity’ provisions will increase the chances that multiple banks will penetrate into remote areas.

 _Kenya_{prohibits agent exclusivity}_{but do require each service}

provider to have a separate agreement with each agent for supervision and liability purposes.

 In Pakistan, the Branchless Banking Guidelines explicitly contemplate the adoption by banks of an ‘open architecture’

that would enable agents to serve multiple banks without

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Gender Dimension of Agent

Banking

 According to Helix Institute of Digital Finance, a woman as an Agent is another addition to the drive of agent banking in most of the developing countries.

 _{Women agents} _{enhance the communication and comfort}

level for women customers.

 Women agents can add snow-ball effect of relationship

network to agent banking and connect those who usually do not

come to bank.

 Agency business of woman agents is considered an auxiliary

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Challenges of Agent

Banking

 _{Physical security}_{can pose a challenge with regard to} security of cash and even the people managing and working with agents.

 _The _{specifc security} _{challenges are robbery, theft} and fraud.

 _Distance_{to the nearest bank branch may be a} challenge particularly in the rural areas.

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Applicability of Global Models in

Bangladesh

 As this study found, diversity and uniqueness of agent banking models used in different countries vary as per the necessity and goal of the program of country concerned.

 _{Incorporation and revision}_{of model should adopt}

trail and error approach.

 Customization, rather than direct replication, of successful models of similar socio-economic settings should be adopted.

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Applicability of Global Models in

Bangladesh

This study perceived some strategies that Bangladesh can follow:

 Introduce exclusively women agent banking model for remote rural areas, especially Muslim/Islamic minded areas.

 Local individual/indigenous agents for hill tracts of Chittagong

 _Incorporate _{micro-fnance staffs} _{in agents}

banking

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Conclusion

 _{There is} _{no one-size-fts-all regulatory solution}

for the provision of fnancial services through agents, and markets may experiment with a number of approaches before fnding one that works.

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