Agent banking accounts double as rural people show interest

Rural people's interest in banking services during the Covid-19 pandemic almost doubled the number of agent banking accounts last year compared to that in 2019, says a Bangladesh Bank report.

Despite the decline in their income amid the coronavirus period, these people have developed a habit of saving, said the report on the central bank's quarterly report on agent banking published by the central bank on Thursday.

Significantly, the interest in banking services among women in villages has increased tremendously. Besides, their tendency to borrow is also on the rise. This situation is playing a role in creating women entrepreneurs in rural areas, it said.

The lion's share (about 87%) of these accounts is in rural areas.

The amount of deposits in those accounts has more than doubled – Tk16,000 crore – within a span of one year. The amount of remittance has also tripled.

According to the report, the agent banking is thus becoming popular for inward remittance distribution since beneficiaries are getting doorstep services in a shortest possible time.

In line with the increase in deposits, the disbursement of loans through agent banking has increased a lot in the last one year. Two-thirds of the loan had been disbursed to rural areas. At the end of December last year, the outstanding loan amount stood at Tk1,235 crore. The remaining loans have been disbursed in urban areas.

The number of male borrowers is the highest in number while women borrowers account for 9% only.

At the end of December, the amount of loans taken by women stood at only Tk170 crore while male borrowers took a loan of about Tk1,500 crore.

Although women's borrowing is low, its positive role is growing, the report said, adding that the Bangladesh Bank is constantly encouraging other banks to facilitate cottage, micro, small and medium enterprise and women entrepreneurship loan through agent banking in rural areas.

Asked about it, Dhaka School of Economics Professor Mahbub Ali told The Business Standard that agent banking was playing a key role in bringing lazy savings in rural areas into the mainstream economy.

"However, the downside of this bank is that the deposits collected from the villages tend to be distributed in the cities as loans," he said.

Referring to this as a kind of capital embezzlement, he said most of the loans have to be disbursed to the villages, which will change the face of the rural economy.

Although the amount of women borrowing is small, they account for almost half the account holders, according to the report.

It says the gap between male and female account holders is narrowing down gradually, signifying the increased participation of females in the formal financial system.

The central bank report highlights the business opportunities and demand that have increased through the provision of this service.

It shows that the number of agents has increased as the demand for agent banking business has increased since the middle of the last year.

At the end of December last year, 26 banks had been providing banking services through 15,977 outlets with the help of 11,925 agents.

Dutch Bangla Bank, Bank Asia and Islami Bank are leading in outlets, number of accounts and collection of deposits.

On the other hand, Brac Bank, Bank Asia and City Bank are ahead in disbursing loans. And half of the remittance has come through the agent banking of Islami Bank.

The central bank's view on agent banking is that financial services through agents are truly reaching the underprivileged segments of the society even in the pandemic situation.

The main purpose of such banking is to provide a safe alternate delivery channel of banking services to the underprivileged, underserved population who generally live in geographically remote locations that are beyond the reach of the traditional banking networks.