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Agent banking began in Bangladesh back in 2014 with the goal to make banking services more accessible to the public, and provide them with easier loan facilities. But an analysis of the last five years’ data indicates that the banks are just focusing on collecting deposits instead.
Twenty-eight banks currently offer agent banking services in the country, and their deposits from this service stood at Tk 20,379 crore as of June 2021. But, these banks disbursed only Tk 3,186 crore as loans – a meager 15.63 per cent of the deposits, central bank reports say.
A key aim of this initiative is to offer banking and loan services to people in remote areas of Bangladesh. Though banks began collecting deposits from their customers right after the agent banking operations began in 2014, loan disbursement did not start until 2018.
According to Bangladesh Bank, deposits gained from agent banking reached Tk 651.21 crore by the end of June 2017.
By the end of June 2018, agent banking deposits reached Tk 2,012.77 crore. At the end of June 2019, deposits collected through agent banking services reached 5,284.46 crore – a staggering increase of Tk3,271.69 crore.
These banks had disbursed only Tk 237.35 crore in loans during that period.
By the end of June 2020, the total amount of deposits through agent banking reached Tk 10,220.21 crore, but loan disbursements stood at Tk720.54 crore.
At the end of June 2021, 28 banks were operating agent banking services across the country through 12,912 agents and 17,145 outlets, and their collected deposits had reached Tk 20,379 crore.
Loan disbursements through agent banking outlets stood at only Tk 3,186 crore during that period.
No loans disbursed by 18 banks
Latest central bank reports show that among the 28 banks involved with agent banking, 18 did not disburse any loans at all as of June 2021.
These banks include the Agrani Bank, NRB Commercial Bank, Social Islami Bank, Standard Bank, First Security Islami Bank, Midland Bank, and United Commercial Bank.
A number of bankers told The Business Post that it will take some time to bring people from remote areas under banking operations.
These banks are currently facing a multitude of issues, including a lack of information about the overall situation in remote areas, a lack of documents necessary for disbursing loans, and a lack of interest from these banks to provide small loans, they added.
Bankers, however, assured that the banks will boost loan disbursements through agent banking in the coming days.
On the issue, Agrani Bank Managing Director and CEO Mohammad Shams-Ul Islam said, “We have not yet begun disbursing loans. But the Bangladesh Bank has been asking us to start handing out loans for some time.
“Our board has recently discussed the possibility of disbursing loans through a few selected branches under a pilot project. We will begin the process in future.”
Mutual Trust Bank’s Managing Director and Association of Bankers, Bangladesh’s former chairman Syed Mahbubur Rahman said, “The main target of agent banking is to bring people living in remote areas under the banking operation.
“But a major issue for the banks is learning about the overall situation in areas where the loans will be disbursed. The banks are taking their time, and they are also not very interested in handing out small loans.”
“Through people in remote areas have been brought under banking services, most of them do not have the necessary documents to apply for loans. This is why loan disbursements are not increasing on the same level as deposits,” Rahman said.
Leading experts told The Business Post that though a handful of banks are showing improvement in various indicators, many others are using the agent banking facility as a new kind of business.
Commenting on the matter, Bangladesh Bank’s former governor Dr Salehuddin Ahmed said, “I had disagreed with the agent banking service issue right from the beginning. If we look at other countries, we will note that the facility is not very beneficial to the people or businesses.
“This is just another [business] strategy of the banks, nothing else.”
He continued, “Agent banking is not being used to provide financial services to remote or rural areas in the country, it is just a trick to move money out of the rural regions.
“The central bank should take steps in this regard as soon as possible.”
Bangladesh Bank’s former governor Dr Atiur Rahman said, “Agent banking services are focusing more on collecting deposits. But these people would not have such savings without a banking service at near them.”
He continued, “The central bank should pay more attention to whether the banks are focusing on disbursing agriculture and SME (small and medium enterprises) loans through their agent banking operations.
“These banks have to be motivated and provided with necessary directives in this regard.”
Dr Rahman added, “The Bangladesh Bank can take a few new refinancing schemes to further expand agent banking services. It can also think about allowing the distribution of a portion of start-up funds through these banks.
Addressing the issue, Bangladesh Bank’s Executive Director and spokesperson Serajul Islam said, “The central bank had taken up the agent banking initiative to provide banking services at the doorstep of people living in remote regions across Bangladesh.
“It is not true that the banks are using this service only to collect deposits. However, these banks should not just continue to collect deposits either.”
The regulator will take action against banks that are deviating from the main goals of agent banking services, he added.
