Agent banking performance mixed in April

Agent banking, one of the key banking services in achieving financial inclusion, witnessed a moderate growth in April amid a nationwide shutdown to curb the coronavirus pandemic.

During the month, 82 agents signed up with the service and 99 outlets were opened afresh. This included the addition of around two-and-a-half lakh new agent banking accounts.

Till March this year, 26 banks obtained licences to operate agent banking, but of them 22 were able to do it, according to data from the Bangladesh Bank.

Arfan Ali, president and managing director of Bank Asia, a pioneer of agent banking in Bangladesh, told The Business Standard, "We observed that agent banking service was comparatively functioning better amid the pandemic, when people were afraid of coming out of their homes. Within a month, around two-and-a-half lakh new accounts were opened, which is a sign that people feel the necessity of the system."

In April, the deposit collection of banks through agent banking increased by over Tk201 crore from the amount in the preceding month of March.

However, the banks were effectively implementing the prime objective – financial inclusion of un-banked people through facilitating opportunities for them to deposit funds, pay bills and collect remittances by bringing them under the banking network, Arfan said.

Owing to increased agent banking accounts, remittance inflow through the banking wing went up by about Tk369 crore in April from that in March.

Bank officials said remittance inflow through agent banking increased amid the coronavirus owing to the 2-percent cash incentives offered against sending money back home by expatriates through the banking channel.

However, in the same month, transactions through this particular banking wing dropped by about Tk7,066 crore to over Tk11,472 crore due to the imposition of the countrywide shutdown, thus signifying lower economic activities.

Loan disbursement through agent banking in April also came down close to nil as the banks found loan distribution through this channel at nine percent lending rate insufficient to realise even their operating cost, including the cost of fund.

In April this year, the central bank capped the lending rate at nine percent.

As per Bangladesh Bank data, the banks disbursed just Tk30 lakh in loans in April through their agent banking wing against their disbursement of Tk57.5 crore in March, the immediate preceding month of the lending rate enforcement.

Responding to why loan disbursement through agent banking had almost come to a halt, Modhumoti Bank Head of Agent Banking Mohammad Shahadath Hossain said it happened because of the imposition of the lending rate ceiling at nine percent.

The collection of monthly loan instalments through agent banking channel is significant in rural areas compared to urban areas, he said.

"Under the existing circumstances, it is not viable for us to issue credit to farmers or small and medium entrepreneurs," Shahadath said, adding, "That is why we have shifted our focus to digital banking where operating costs would be less."