Why is Agency Banking the Silver Bullet for Financial Inclusion?

Posted by Preety Paranjape on / April 9, 2018
Why is Agency Banking the Silver Bullet for Financial Inclusion?
 

According to a report by The World Bank, an estimated 2 billion adults worldwide don’t have a basic account.  Governments across the world are focusing on expediting financial inclusion to eradicate poverty and provide economic stability to all. However, 59% of unbanked adults cite unavailability of affordable banking services as the key reason for not having an account. Lack of banking services in rural areas or a tiresome documentation/onboarding processes are some other notable roadblocks.

 

Top 15 Countries Financial Inclusion

What is financial Inclusion?

Financial inclusion is an effort to bring all people regardless of their income level into a formal economy. It is important that no person; however poor, remains excluded from this ecosystem.

Why Financial Inclusion

In developed urban locales, banks reach the customers by opening multiple branches and ATMs. However, opening a bank branch in rural/emerging markets requires high CAPEX/OPEX – and the branch does not generate enough ROI. It is one of the prime reasons why banks are not reaching the rural customers. It is difficult for a customer from the rural vicinity to operate a banking application and gain access to banking services on a Mobile phone.

So What is the Alternative?

In such a scenario, an agent led model for banking can be a low-cost/effective vehicle to include a largely unbanked/underbanked rural population into the banking ecosystem.

Why Should Banks Adopt Agency Banking? The Benefits are:

  • To include unbanked/underserved segment into the ecosystem and expand customer base profitably
  • To provide banking to a larger customer base at low servicing costs – just as they want it
  • To simplify business processes and to enhance efficiency
  • To promote a cashless culture, and provide multiple products and payment facilities through a single agent
  • Banks can lower the time to market for any new projects/services to their customer base within a small geography
  • The agent network can be easily expanded to reach out to more people as and when required

How can banks create an efficient network of agents, ensure optimum banking security and make banking easy for the rural customer?

Banks can partner with technology innovation experts to launch an agent banking network and take their banking services to places where a bank branch cannot reach. Mobile Financial Solutions like MobiFin are instrumental in setting up a branchless bank within the reach of potential customers. There is no need for complex infrastructure or a team of tailors, branch managers, and executives. An agent looks after all the banking needs.

Setup Required?

A smart android device with biometric capturing capabilities and a robust technology led agency banking solution to power the processes.

Sameer Dashputre, Fintech expert at Panamax thinks that agency banking is the best way to catalyze financial inclusion by delivery of financial service profitability through a low transfer cost. He said “We have recently concluded a project in Africa. We placed a state-of-art POS machine at every agent site, making it easy for our client, to onboard customers and capture all information seamlessly. Once the KYC is done, the customer can transfer, deposit and withdraw cash from his/her account – hassle-free. For this he need not travel to a Bank branch in the city, he can just visit the agent in his town, and get all the banking facilities he needs.”

 “The World Bank Group in October 2013 postulated the global goal of universal access to basic transaction services as an important milestone toward full financial inclusion—a world where everyone has access and can use the financial services he or she needs to capture opportunities and reduce vulnerability (World Bank 2013b).”

Apart from bringing the bank branch near to the customer, the transaction fees are also nominal. With the help of an agent, a person who has never carried out any banking transactions can do so with ease.

This initiative is a great step to empower women and include them in the financial ecosystem too. In most of the developed countries, it is not possible for single mothers, pregnant ladies, and women who are senior citizens to walk down to a branch in some other city and carry out banking. What can be a better way to keep their money secure and allow them to be in charge of their own money than to provide them an agency banking facility next door?

As a majority of the unbanked/underbanked population takes up agency banking and gets included into the financial ecosystem, it will not only affect them on a personal level but also lead to the country’s economic and social development.

Are you a bank?

If you wish to ‘go branchless’ and take your banking services to the remotest corner at negligible CAPEX/OPEX – contact our Agency Banking expert.

 

 
Preety Paranjape

Preety Paranjape

Preety was a content developer and innovator at Panamax, with a decade of experience in business writing. A social media enthusiast with words at will, she worked towards improving corporate communication across all channels of social media, and other online platforms.