Loan disbursement thru agent banking up 92% YoY

Infographic: TBS

Loan disbursement through agent banking surged 92.77% year-on-year to Tk10,307 crore in 2022, according to a report from the Bangladesh Bank.

The disbursement stood at Tk5,346 crore in 2021.

Deposits and remittance inflows also grew by 24% and 39.56%, respectively, compared to the previous year, according to the central bank report.

Sector insiders said that with the gradual expansion of agent banking, many people who were previously excluded from banking services at the rural level can now easily avail themselves of the services, which is the key reason behind the increased flow of such loans.

Emranul Huq, managing director of Dhaka Bank, told The Business Standard, "Customer service is easily available through agent banking, so its popularity is increasing day by day. Last year, there was a huge increase in loans as small consumer loans were disbursed by this segment."

He said that agent banking loans are generally for six months to one year, and the recovery rate is also very good. Apart from this, the inflation rate increased during the last year, due to which people with low incomes have to take out loans to meet their expenses.

Selim RF Hussain, managing director of Brac Bank, told TBS, "Brac Bank has increased its loan disbursements to a large extent in agent banking. Throughout 2022, Brac held the majority of outstanding loans in agent banking."

He stated that Brac Bank began agent banking in 2019, adding that at present, the SME loan has gradually moved to this new platform for disbursements.

According to data from the central bank, the total deposits through agent banking stood at Tk30,157 crore at the end of December 2022, up from Tk24,294 crore a year ago.

Deposits through agent banking outlets surged 24% to Tk5,863 crore in December 2022. However, loan growth was higher than 92% during this time period.

Regarding the low growth of deposits, Emranul Huq said the forex market of the country was unstable, a lot of money went out of the market while buying dollars from the central bank, and the growth of deposits is low due to inflation eating away people's savings.

On this issue, the central bank report stated that the volume of loan disbursements through agent banking is still not significant compared to the volume of deposits, with the loan-to-deposit ratio standing at 34.18%. This is due to the fact that most banks have yet to develop feasible infrastructures for loan disbursement and recovery through agent outlets.

Although banks can disburse Tk87 as loans out of Tk100 of their total deposits. Besides, Islamic banks can disburse Tk92 as a loan.

As such, the loan ratio is still very low in agent banking.

The Bangladesh Bank launched agent banking in 2013 with the goal of providing a safe alternate delivery channel for banking services to the underserved population, which typically lives in geographically remote areas that are beyond the reach of formal banking networks.