Loan disbursements thru agent banking rise 70%

Infographic: TBS

Loan disbursement through agent banking surged 70.58% year-on-year to Tk13,041 crore in June 2023 on the back of improved access to finance for rural people, according to Bangladesh Bank.

At the end of June last year, the disbursement stood at Tk7,645 crore.

Deposits and remittance inflows also grew by 19% and 33.74%, respectively, compared to the previous year, according to data from the central bank.

Bankers 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 at Dhaka Bank, told The Business Standard, "The spread of agent banking is gradually increasing, due to which people at the rural level are being re-incorporated into banking services."

Additionally, many banks have started giving small loans to customers easily, due to which loans are increasing. Many are also providing loans through digital channels, which has driven up the growth, he added.

The senior banker said agent banking loans are usually for six months to a year, and the recovery rate is also very good. Apart from this, since the rate of inflation has increased for the last one and a half years, people with low incomes have to take out loans to meet their expenses.

The Bangladesh Bank report showed that the rising trend of agent banking indicates that there is remarkable potential to bring the rural unbanked under the umbrella of formal banking services.

"Agent banking is playing a pivotal role in providing adequate financial services, especially for rural women, small business entrepreneurs, and beneficiaries of remittances." Considering the fact of the loan deposit ratio and the portion of lending to women entrepreneurs," read the latest report.

The total deposits through agent banking stood at Tk33,462 crore at the end of June 2023, up from Tk28,085 crore a year ago.

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 36.87%.

This is due to the fact that most banks have yet to develop feasible infrastructures for loan disbursement and recovery through agent outlets, it adds.

Banks can disburse Tk87 as loans out of Tk100 of their total deposits. Besides, Sharia-based 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.