Agent banking holds promise for faster economic recovery

The global economy may shrink by more than 5 per cent this year due to the impact of the ongoing recession brought on by the coronavirus pandemic and countries are using everything from fiscal measures to monetary policies to avoid contraction, create jobs and save lives.

The deepest global recession in eight decades has sent hundreds of millions into poverty, and the recovery appears to be far off, according to a World Bank paper released last month.

But the crisis has encouraged incentives for economic transformation and adoption of digital business models, including increased use of digital financial services across the globe, the report said.

The financial sector, and banks in particular, is expected to play a key role in absorbing the shock, by supplying much-needed funding.

And banking sector has taken initiatives for the expansion of digital financial services to spur the economic growth.

One of them is agent banking, which has gained momentum amid the ongoing recession.

If it is harnessed well, this digital banking channel — thanks to its reach to the remotest parts where banks have not yet set their foot in — can turn into an important cog in the wheels of the economic locomotive that would pull the country out of the ongoing crisis.

“Digital financial inclusion can help revive the economy faster,” said Md Arfan Ali, managing director of Bank Asia.

Agent banking, one of the major components of the digital financial inclusion arsenal, can reach many people with government subsidies under the social safety net programs and farm and small and medium-sized enterprises loans.

Besides, rural people now enjoy banking services at their doorsteps, which has encouraged them to park their liquid assets with the formal financial sector, Ali said.

The agent banking window has been providing excellent financial service to rural people exceeding that under traditional banking, he said.

Bank Asia, which has been a pioneer in popularizing the model, is thinking about extending its agent banking operations by increasing its lending operation through the banking window.

A good number of small businesses now maintain their cash management through the agent banking platform.

“The phenomenon will increase to a great extent in the days ahead,” Ali said.

Agents are also encouraged to expand their business as banks provide them with a hefty amount of commission for their services.

For lending, money transfers, payments and other services, agents are entitled to system commissions.

Customers can now open an account with an agent within 5 to 7 minutes by filling up an electronic know-your-client (KYC) form.

This has widely attracted people towards agent banking.

Customers can even carry out e-commerce by using applications and also purchase products from outlets of different brand using the QR (quick response) code.