What Is Agent Banking?

Agent Banking refers to providing financial services to the underserved population

through engaged agents who conduct banking transactions on behalf of the bank.
These agents or retailers, who are usually the owners of outlets, are increasingly
becoming an important distribution channel in reaching to the unbanked segment of the
society in addition to the existing customer with a wide array of financial services
especially to geographically dispersed locations.

Agent Banking:

 Bridges the gap between the bank and the unbanked people

 Makes banking services accessible to rural people

 Offers cost-effective banking services

 Minimizes the operating and establishment costs for banks

Necessities Agent Banking?

Over the years, Agent Banking has proved to be very effective for developing countries
which lack access to formal financial services. Agent Banking has been most successful
in easing payments made by different households particularly utility bills, taxes etc. In
some cases, it may not be financially feasible for a bank to open a full-fledged branch.
In such cases, the agent outlets can act as mirror bank branches. The agents will
provide banking services to the people on behalf of a bank and the nearest branch of
the bank will provide necessary logistic support.

As a result, the need for Agent Banking became more justified. If the vibrant banking
sector is properly guided by the Central Bank guidelines, Agent Banking can ensure the
access of the marginalized people to several financial services in remote areas. It can
work wonders in ensuring financial inclusion and materializing the dream of a poverty-
free Bangladesh.
By reducing the overhead required to set up a bank branch and through its use of
technology, agent banking allows financial institutions to reach underserved segments
of the population, particularly in rural and remote areas, in a more cost effective way.

Procedure of Providing Agent Banking Service

For the client, there is no difference in accessing his or her bank account at the agent or
in a branch or at an ATM. However, besides signing a contract with the financial
institution it will be working for, the banking agent also has to open a bank account at
the same. In addition, the store has to deposit a certain amount of cash into that
account which will serve as the banking agent’s “working capital.” In many cases, rather
than asking the agent to come up with the cash deposit, the financial institution will
extend the store a credit line. The size of the credit line is normally not standardized, but
adapted individually to each agent depending on its size, the expected volume of
transactions and how long the agent has already been working with the bank. This is
how the credit line will be used during each transaction:

 Client withdraws money (“cash-out” transaction): agent account is credited in

same amount.
 Client deposits money (“cash-in” transaction): agent account is debited in same
amount.

In case the agent’s credit line had reached its limits, and the agent’s bank account does
not have sufficient funds, to cover the received funds, the POS will block and can only
be de-blocked if the funds have been deposited in the next bank account.

The transaction process for banking services using a bank card is simple:

1. An existing bank client presents his card at the agent and requests a specific
transaction and the amount to be withdrawn, deposited, or transferred;
 2. The agent selects the type of transaction on the POS device or personal
computer, enters the amount, swipes the client’s card through the device, and
lets the client enter his PIN;

3. A General Packet Radio Service (GPRS), dial up, or satellite communication

connects with the bank’s server to authorize the transaction;

4. Once the transaction has been authorized, the device prints the client’s receipt.

Agent Banking Bank in Bangladesh?

Thirteen banks have so far received permission from the Bangladesh Bank to roll out
agent banking services. Of them, 11 banks have already made a foray into the
business. The number of agents is 1,646 and outlets 2,601, while the number of
accounts is 544,536.

The 13 banks are:

1. Dutch-Bangla Bank Limited

2. Bank Asia Limited

3. Al-Arafah Islami Bank Limited

4. Social Islami Bank Limited

5. Modhumoti Bank Limited

6. Mutual Trust Bank limited

7. NRB Commercial Bank Limited

8. Standard Chartered Bank Limited

 9. Agrani Bank Limited

10. Midland Bank Limited

11. First Security Islami Bank

12. Trust Bank Limited

13. South Bangla Agriculture and Commerce Bank 

Trust Bank and South Bangla Agriculture and Commerce Bank have got the licenses
but have not launched the services yet.

Requirements of Getting Agent Ship of an Agent Bank

Eligibility for an Entity to become an Agent:

An entity should fulfill the following conditions to be eligible for entering into contract
with banks:

 It should be a juristic person;

 Agent banking shall not be in ultra vires to the parent, statute, memorandum and
articles of association or other constitutive document or objects of the juristic
person;

 The agent, in the case of a proprietorship, or the agent’s directors, significant

shareholders, and/or senior officers, as the case may be, is fit and proper.

 Eligibility for Master Agent: In this structure banks may enter into contract with
an entity having multiple branch offices or outlets, either owned or otherwise
engaged legally by it, willing to operate agent banking services in the branch
offices or outlets as Master Agent.
Requirements are:

 It shall be an entity having multiple branch offices or outlets, either owned or

otherwise engaged legally by it.

 If the entity is a private sector organization, it shall possess a business license or

permit for any lawful business activity.

 The owner or manager of the entity or the juristic person shall possess at least 1
(one) year of experience in the related field.

 It shall be carrying out the business activity on ongoing basis.

 It shall possess managerial, financial and technical expertise for managing agent
banking outlets in addition to its regular operations.

 It shall have willingness and capacity to invest in managing liquidity, risk

management, security management and continuous capacity development of
agent banking outlets of a bank.

 The agent banking outlet must have at least 2 (two) persons (a manager and a
teller) with required managerial and financial expertise for this purpose and 1
(one) counter for cash transaction.

 In cases where the master agent provides agent banking services through third
party outlets, which are engaged legally, the outlets and outlet owners/managers
shall fulfill the eligibility criteria for unit agent.

 Eligibility for Unit Agent: Banks may enter into contract with eligible entity willing
to provide banking services exclusively in one outlet only.

Requirements are:
 It shall be an entity having valid business license or permit for any lawful
business.

 The owner or manager of the entity or the juristic person shall possess at least 1
(one) year of experience in the related field.

 It shall be carrying out the business activity on ongoing basis.

 It shall possess managerial, financial and technical expertise for managing agent
banking outlet of a bank in addition to its regular operations.

 It shall have willingness and capacity to invest in managing liquidity, risk

management, security management and continuous capacity development.

 The unit agent must have at least 2 (two) persons (a manager and a teller) for
this purpose and 1 (one) counter for cash transaction.