Let’s use agent banking to deliver more financial inclusion benefits

12Dec 2018
By Financial Times Reporter
Financial Times
Let’s use agent banking to deliver more financial inclusion benefits

Tanzania has set ambitious financial inclusion targets, which it seeks to attain through implementation of the Second National Financial Inclusion Framework (NFIF 2018-2022).

Under it, the government’s via the Bank of Tanzania (BoT) in conjunction with sectoral players and other stakeholders seeks to raise formal financial inclusion to 75 per cent in the next three to four years from 65 per cent in 2017.

The authorities have vowed to leave no stone unturned to achieve this goal, which is expected to catapult access to financial services to a higher level and leverage the accrued benefits for economic growth and overall national development.

A key aspect in the new national financial inclusion agenda will be increased investment in new technologies and embracing innovation to ensure the money sector benefits all segments of society and equitably support productive activities.

Banks like all other financial institutions are pivotal in making this noble undertaking a mission possible.

It is undisputable that the lenders have already proved their worth and clout in supporting the mission by playing a decisive role in the implementation of the First National Financial Inclusion Framework, which ended in 2016.

The initial financial inclusion blueprint was introduced in 2013 when banks in the country were also given the go ahead to undertake financial intermediation through agents.

It therefore goes without saying that the achievements of NFIF-1 had a lot to do with introduction of agent banking in the country, which BoT says is now booming.

In fact, agent banking was a strategic aspect of the blueprint, which principally focused on building the infrastructure to facilitate citizen’s access to financial services.

The goal was to reach 50 per cent of the population with formal financial services by 2016 through digital platforms, innovative banking solutions, financial infrastructure as well as consumer protection advancements.

According to BoT, the framework yielded impressive results, with the percentage of adults with access to formal financial services increasing from 58 per cent in 2013 to 65 per cent at the end of last year. The usage of informal financial services also reduced from 16 per cent to seven per cent in the same period.

Like we reported last week in our booming agent banking story, this delivery model has recorded significant growth since its inception. The now over 10,000 agents together with other banking delivery channels led by digital finance have tremendously helped to elevate Tanzania’s financial inclusion status in the world.

At the end of last year, agent banking in the country was being provided by 13 banks and financial institutions and available in 25 regions in Mainland Tanzania as well as in Pemba and Unguja in the isles.

According to Directorate of Banking Supervision (DBS), the value of deposits through agents increased by 146.3 per cent per cent to 4,638.55bn/- for the year ended December 2017 compared to 1,883.29bn/- reported in 2016.

The volume of withdrawals also increased by 159.02 per cent to 1,106.37bn/- in December 2017 from 427.13bn/- reported in December 2016.

Although the DBS report does not reveal the number of people served by the agents, the above numbers are enough evidence to help tell the success story of agent banking and its role in furthering the national financial inclusion agenda.

For this banking services model to deliver more benefits, banks should be accorded support to ensure many more outlets are established across the country.

A conducive regulatory and structural environment should also be put in place to allow this service to prosper and serve more people. Agent banking is not only a good service but also a new line of business for job creation and income generation especially at the household level.

To advance the business, BoT can review the agent banking guidelines it introduced five years ago that permit licensed banks and financial institutions to appoint retail agents as a delivery channel for their banking services.

The thinking in the industry is that for the agents to help deliver more benefits, they should be allowed to carry more activities than they are currently doing.

Currently an approved agent may carry out the following activities: taking cash deposits and withdrawals; facilitating cash disbursements and loan repayments; cash payment of utility bills, social security and retirement benefits; funds transfer; provide mini-bank statements; and collect customer documentation relating to account opening, loan and bank card applications.

Among other things, they are not permitted to accept, issue or otherwise deal in cheque transactions, or carry out a transaction where a transactional receipt or acknowledgement cannot be generated.

Also agents may only transact in shillings and are expressly prohibited from exercising any form of management function on behalf of their principal.

With the on-going financial technology advancements, we strongly believe the agent banking subsector can be further developed and innovatively enabled to offer more and new services.

The introduction of agent banking has not only provided a mechanism though which banks have extend their services to previously unbanked individuals but also greatly helped to unlock the potential of the lower income markets and facilitated the participation of a significant proportion of the population in the formal economy.

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