Loan disbursement through the channel is propping up rural economy
Banks’ loan disbursement through their agent banking window quadrupled in 2020, in a big boost to the country’s financial inclusion agenda.
At the end of last year, loans amounting to about Tk 1,546.3 crore was disbursed through the platform, up from Tk 1,087 crore in September, up from Tk 319.5 crore a year earlier, according to data from the Bangladesh Bank.
With the view to taking banking services to the remotest corners of the country, the BB in 2013 issued the agent banking guidelines.
Agent banking offers limited banking and financial services to the underserved population by engaging representatives under a valid agency agreement.
It is the owner of an outlet who conducts banking transactions on behalf of a bank.
Agents provide services such as cash deposits, withdrawals, remittance disbursement, small-value loan disbursement and recovery of loans, and cash payments under the government's social safety net programmes.
In 2016, lenders kickstarted their operations with just deposit mobilisation and gradually they added on more services.
Now, 26 banks are in agent banking operations. Of them, nine lend through the channel, providing an alternative to loan sharks for rural people to get credit.
Loan disbursement through the channels is explicitly beneficial for rural clients since access to finance is one of the barriers to financial inclusion in developing countries, said BB Spokesperson Md. Serajul Islam.
“This is why agent banking has got momentum.”
Loan disbursement through the channels is promising as it is showing positive growth and the pace of loan disbursement will increase more once the economy recovers from the pandemic, said Islam, also an executive director of the BB.
“Within one year we became the top lender through the agent banking channel,” said Selim FR Hussain, managing director of Brac Bank, whose agent banking window has disbursed the largest volume of loans.
Brac Bank got its agent banking licence in November 2018 and now it has 427 agents and 481 outlets across the country. Through them, it has lent a total of Tk 1,058 crore.
The agent outlets are playing a vital role in reaching the small and medium enterprises (SMEs), the bank’s main target group, for lending, Hussain added.
Bank Asia is in the second position in case of lending through the channels. The bank disbursed Tk 517 crore through 4,257 agents and 4,381 outlets.
“We are emphasising on lending through this channel,” said Md Arfan Ali, MD of Bank Asia.
City Bank disbursed Tk 265 crore through 1,386 agents and 1,411 outlets across the country.
“Our agents and outlets made it easier to disburse SME loans including government-announced stimulus packages to areas where there are no bank branches,” said Kamrul Mehdi, City Bank’s head of SME.
Dutch Bangla bank disbursed Tk 26 crore through its 873 agents and 4,414 outlets.
“We are trying to increase our lending through the agent banking window to boost the rural economy,” said Abul Kashem Md Shirin, MD of Dutch-Bangla Bank.
The lender has trained its agents on the banking terms and rules so that they can disburse loans.
“A well-trained agent can reduce default loans by boosting recovery as he is a well-known person in the area he got appointed as an agent,” Shirin added.
Besides, Al-Arafa Islami bank disbursed at Tk 9 crore; Mutual Trust Bank at Tk 9 crore; Islami Bank at Tk 5 crore; NRB Bank Tk 46 lakh and Modhumoti Bank at Tk 10 lakh through their agent banking channels.