Agent banking loan-deposit ratio rising

The disbursement of loans through agent banking jumped to 150 per cent to Tk 3,863 crore in 2021 against Tk 1,546 crore in 2020, according to the Bangladesh Bank data.

On the other hand, deposit collection by the agent banking increased by 53 per cent to Tk 24,055 crore in 2021, which was Tk 15,687 crore at the same time a year ago.

Bankers said it is not right that there is less loan disbursement through agent banking; there are some procedural problems in this regard, and also lack of experience and skilled manpower – all of which banks are trying to overcome.

As a single month, in November and December last year, on average, more than Tk 500 crore was disbursed through agent banking.

The loan-deposit ratio stood at over 16 per cent in 2021. In other words, the agent banks gave a loan of only Tk 16 against the deposit of Tk 100 last year.

Md Arfan Ali, president and managing director, Bank Asia Ltd, told The Business Post actually banks did not have the experience of disbursing loans of this kind through agent banking.

“Due to some unknown factors, banks were apprehensive of lending in rural areas. So, credit disbursement went down there. Now with the experience gained, we are having a positive image,” said the seasoned banker.

Besides, with the easing of coronavirus situation demands for loans are increasing in rural areas, bankers said.

The vast rural economy is reshaping as the access to electricity by almost all village households is helping reboot rural economy, thanks to remittance and diversified agriculture crops, they maintained.

Both consumption and demand are on the rise from countrymen, making ways for both formal and informal financial organisations to invest in rural business establishments.

In regular banking activities, loan to deposit ratio (which is known as ADR-Advanced deposit ratio) was around 80 per cent last year.

The central bank set the ratio 87 per cent for conventional and 92 per cent for Islamic banks from 2020.

Arfan Ali hopes that in near future the agent banking loan-deposit ratio will be the same as that of the regular banking.

Agent banking services are mostly rendered in rural areas. The total agent banking accounts increased by 4 per cent to 1.40 crore last year when the number of rural accounts was 1.11 crore and only 0.29 crore was urban account.

Criticism had it that loans are being distributed among urban people by collecting deposits from villages.

According to a report by the central bank, the amount of agent banking deposit collection from villages was more than the disbursement of loans.

The quarterly report (July-September ’21) of the central bank on agent banking showed that about 77 per cent of deposits had been collected from rural areas as against 23 per cent in urban areas.

But 64 per cent of the loan was disbursed at the same period in rural areas while 36 per cent in urban areas.

In this context, Mamoon Mahmood Shah, managing director and CEO of NRB Bank, told The Business Post, “I think this is taking place intentionally. Banks disburse loans in different areas as per demand. Banks control this centrally and there is no discrimination.”

At present, 29 banks are providing agent banking services through 19,247 outlets and 13,951 agents across the country.

Dr Zahid Hussain, former lead economist of World Bank (Dhaka Office), told The Business Post that earlier banks were not interested in providing loans to marginal level as the bankers were not aware of the interested and potential clients.

On the other hand, potential borrowers would not want to go to the upazila level for bank loans. It means, there was a demand for loans but opportunities were not there. Agent banking services are now offering that opportunity, he added.

“We can say the agent banking service being a part of financial inclusion is contributing to the national economy”, Zahid said further.