Assignment On

Agent Banking

Submitted To
Md. Alamgir Hossen
Assistant Professor
Course Instructor
Fin-303

Submitted By
Abdullah Al Mahdi
Batch 23
ID- 1795

Date of Submission
20 September, 2016

Institute Of Business Administration

Jahangirnagar University

Agent Banking
Agent Banking
Agent banking means providing limited scale banking and financial services to
the underserved population through engaged agents under a valid agency
agreement, rather
than a teller/ cashier. It is the owner of an outlet who conducts banking
transactions on
behalf of a bank. Globally these retailers are being increasingly utilized as
important
distribution channels for financial inclusion. Bangladesh Bank has also decided to
promote
this complimentary channel to reach to the poor segment of the society as well
as existing
bank customer with a range of financial services especially to geographically
dispersed
locations.

How It Works
The basic working procedure of agent banking is: Bank>> Agent>> Consumer.
The unbanked, un-served specifically rural people are going to be benefitted by
this. The consumers are directly involved agents, but will retain all the attributes
and privileges just like any other consumer who has opened account over the
counter and receives over the counter services.
Agent banking supports on condition that banking facilities to those bank
customers channel through the associated agents under a legal agency
agreement, compare to any standard means of teller/ cashier/ATM booth service.
The designated and lawfully associated agent of a government approved bank,
who is also the proprietor of an outlet, basically carries out all the banking
activities on behalf that bank. There are specific set of guidelines, rules and
regulations and agent selection criteria in order to open an agent banking outlet.
The categories of banking services may vary from country to country but there
are certain levels of services that agents are not allowed to perform. Only a
branch bank can authorize and perform those tasks. However, agents can collect
all the required information and hand them over to the bank for further official
process.

Benefits of Agent Banking

Benefits of Agent Banking to Agents
1. Increased income through commission
Bank agents are usually awarded commissions whenever they perform
transactions on behalf of the bank. These commissions are mainly awarded when
somebody deposits cash, withdraws cash, and when somebody opens a bank

account through the agent.

2. Increased customer traffic hence more business to the retail outlet
Bank agents usually conduct their normal businesses in addition to being bank
agents. For instance a hardware shop that acts as a bank agent will continue
conducting its main business (sale of hardware materials) in addition to being a
bank agent. The increased traffic brought about by customers performing
banking activities also translates to more people getting to know your business
hence more sales.

Benefits of agent banking to the customer

Agent banking has literally brought banks to the villages and this has come with
it many advantages to the customer. Some of these advantages are
1. Ease of access
With bank agents almost everywhere, people no longer need to travel long
distances to visit their bank. Their nearest retail shop could be operating as an
agent bank.
2. Flexible hours
Most banks close their doors by 4pm, but with bank agents, for as long as the
business premise remains open, transactions can be done. This has proven to be
very convenient especially for people who are busy during the day.
3. Cost-Effective
Transacting through bank agents has proven to be cost-effective especially to
people who live in rural areas that are far away from banks.

Benefits to the Banks

Local banks have recorded an increase in their profits and agent banking is one
of the main attributes to such huge profits. So, how does a bank benefit from its
agents?
1. Cutting Costs
Banks are finding it cheaper to set up agents as opposed to opening a branch
where they will incur extra costs of staffing, rent, electricity etc. With agent
banking, the agent incurs almost all the costs.
Increased Product penetration
Agent banking has made it possible for bank products and services to penetrate
areas that at first seemed impossible. With agent banking banks have reached
even the smallest of villages.
2. Wide customer base
Bank agents are paid commissions when they sign up new customers and this
has led to an increase in the number of customers for banks. Banks are finding it
effective to increase their customer numbers in this manner as opposed to using
sales people.

Why Did the Concept of Agent Banking Arose

The concept of agent banking arose to fulfill two purposes:

i.

Provide regulatory framework for Agent Banking which will create an

enabling environment for offering safe financial services to the new
target group.

ii.

Ensure compliance with AntiMoney Laundering and Combating

Financing of Terrorism (AML/CFT) standards set by AML/CFT rules,
regulations, guidelines and instructions issued by Bangladesh Bank.

Who Can Be An Agent

To qualify as an agent for specific banking operations, on behalf of deposit
financial institution or mobile money operator, it must be an entity that have
been in a legitimate commercial activities for at least one year before the date of
the application and that the business must be a going concern.
The following issues should be taken into consideration for selecting agents:
1. Competence to implement and support the proposed activities;
2. Financial soundness and cash handling capability;
3. Ability to meet commitments under adverse conditions;
4. Business reputation;
5. Ability to offer technology based financial services;
6. Security and internal control, audit coverage, reporting and monitoring
capacity.
7. Loan defaulter or the convicted person cannot apply for agency ship.

Present Condition of Agent Banking in Bangladesh

Agent banking is still quite an unexplored business area in Bangladeshi Banking
industry, compare to some other countries such as Brazil, India and Pakistan.
Specifically, Brazil is one of most successful in field of integrating the agent
banking module amongst the banks and to serve the wide population under
central banking. In Bangladesh, Bank Asia and Dutch Bangla Bank has already
obtained prior permission for operating the agent banking module in various
locations in Bangladesh. Another two banks South Bangla Agriculture and
Commerce Bank, and NRB Commercial Bank are going to launch the service.
The central bank issued licenses to the four banks for running agent banking,
under which financial services would be offered through agents instead of
branches. Bangladesh Bank stated that Bank Asia had already appointed 49
agents in 32 Upazilas under 17 districts while Dutch-Bangla recruited six agents.
According to Bangladesh Bank, customers will not require to pay any charge for
the services they will receive through the agents. Small amounts of money can
be deposited or withdrawn besides receiving remittance through agent banking.
The agents can disburse small credit and collect loan instalments and utility bills.

The policy on agent banking stipulates that customers can receive government
assistance from social safety programmes and deposit insurance premium
through the agents. They can also transfer money from one account to another
and check account balance. Anyone can collect information about opening of
bank account from the agents and apply for loans, and credit or debit cards
through them.
The agents, however, cannot make payment on any cheque, open any account,
issue cheque books or bank cards, and transact foreign exchange. An agent has
to have the qualifications determined by the central bank and give a security
deposit of Tk. 100,000 for appointment. They will get a certain commission on
transactions. The policy says NGOs, micro-credit agencies, cooperatives, post
offices, companies, mobile-phone operators agents, union information service
centres, local government institutions and any individual capable of offering
financial services based on information technology can be appointed agents.