The agent banking guideline was released in February 2013, to guide the industry on the requirements and conditions for its operation. In August 2013, approval requirement for financial institution wishing to key into the business was also released. Where are we now? CHIJIOKE NELSON writes.
AGENT banking implies the introduction of another party in the conduct of banking business. The agency in question will receive, as well as make payments on behalf of bank(s). According to the Central Bank of Nigeria (CBN), it is a branchless banking, involved in the “provision of financial/banking services by an authorised third agent to customers through a single business unit or distributed networks of retail or postal outlets. Banking agents can be pharmacies, supermarkets, post offices, kiosks, among others. The best suited are however, businesses that have built good customer relations and gathered experience in handling cash floats.
This means that a measure of transparency, accurate feasibility study, encompassing policy framework and security, to mention a few, will be assured. But by its operational mode, agent banking would leverage on the availability and accessibility of Information Communications Technology infrastructure to drive its penetration and success. No doubt, this consideration would be a challenge to its take-off, stability and deepening, yet to the extent that the will to drive the scheme, level of awareness to ensure people identify and adopt it and operational efficiency can be enabled in the system. Notably, agent banking is operational in Kenya and the awareness and adoption is high.
Sometimes, administrative processes have been identified as obstacles to effective adoption and development of some policy frameworks. But to date, no objection has been presented to the extent that it can be attributed to the poor showing of the Agent banking in the country. The apex procedures to the establishing an agency included: “Applicants should write to the CBN requesting for a one-off approval to offer agent banking services. The application should be submitted to the respective departments of the CBN.
The CBN has only review and process applications from Deposit Money Banks (DMBs), Micro Finance Banks (MFBs) and Primary Mortgage Banks (PMBs). Agents are not required to apply directly to CBN for approval, but shall be appointed and monitored by their principals- DMBs, MFBs and PMBs, based on the requirements for agents’ recruitment as contained in the guideline. The principal shall be held responsible for the activities of the agents that they have appointed to offer services on their behalf. Licensed Mobile Money Operators need not seek any approval from the CBN to appoint agents. The regulatory framework under which they are licensed already permits them to appoint agents. And the list goes on.
Unlike the cash-less initiative, agent banking has not received equal awareness to give it facelift and spur adoption by intending agents and the teeming banks’ customers as well, who constantly seek easy way out of the normal banking tradition entrenched in the mind of average banked Nigerian.
In recent years, there has been a system re-ordering, which has also resulted to emergence of different forms of remote access to financial services outside the banking halls. These have been provided through a variety of channels, including mobile phones, Automatic Teller Machines, Point-of-Sale devices and the agent-banking model. To successful countries, branchless channels have made an important contribution in the lives of the citizenry, even enhancing cash-less economy and deepening financial inclusion.
In Nigeria, beside infrastructure, there are assessed high costs associated with this in our clime and these spring up one of the many challenges besetting agent banking in Nigeria. These costs involve banks’ servicing of low-value accounts and extending physical infrastructure to remote rural areas, but driving financial inclusion project will always make the banking model necessary. Leveraging mobile payments and agents’ banking networks will allow financial institutions to focus on product innovation and diversification. It provides that microfinance agent banking that could increase the linkage of rural cooperatives to microfinance banks like was done in Kenya
The system, structured to reduce costs, even though it may not be so at present, through the service offering channels, encourage customers to use financial services more often, as the locations are close by and in places the customers are familiar with. It is working elsewhere and it can work in Nigeria, even well. Given the rapid growth of mobile telephony, especially in the country, there is need to leverage on existing business network infrastructures as a practical and well thought out strategy for driving financial inclusion of the unbanked in Nigeria
In climes where agent banking and Mobile Payments are rooted, financial institutions have successfully expanded their outreach by engaging local agents to offer their services. Some of which include; cash in/cash out, electronic transfers, bill payments, pre-approved credit lines, accounts opening, international remittances, government and other micro credit payments and other banking transactions that may be permissible by the financial institution and CBN. The truth is that Nigeria is a mid-level player in the sub-Saharan financial sector and lags behind some of its peers in Africa with respect to financial inclusion.
The benefits come in form of ensuring cheapest means of accessing financial services with lower transaction cost; service closer to the immediate environment; longer opening hours; reduction in queue than in branches; more accessible for less educated, the very poor and less privileged who might feel intimidated in traditional bank branches; benefits of greater economic development to isolated communities; provides increased sales from additional foot-traffic to the agent and agent’s network provider; differentiation from other businesses the agent might normally operate; reputation from affiliation with well-known financial institution; and additional revenue from commissions and incentives.
From the financial institution and mobile payment operator’s perspective, it increases customer base and market share; coverage with low-cost solution in areas with potentially less number and volume of transactions; increases revenue from additional investment, interest and fee income; improves indirect branch productivity by reducing congestion; provides standards and guides for engaging agent network providers for the provision of mobile payment offerings; non-exclusivity of agent network provides a shared platform for customer take-up; and provides more geographic spread for the scheme.
Also from the government perspective, with inherent opportunities for the private sector, it provides a tool for government to utilize government-to-person and person-to-government payments- disbursements, micro-credits/repayments, subsidies, tax/levies; facilitation of domestic remittances, among other things. It also provides business windows for the private sector and individuals to invest in and drive uptake for agent banking and mobile payments by signing up as agents with the expectation of generating revenues from transaction charges and other benefits that the Financial Institution will provide. As has been with other similar jurisdictions and climes, innovations have been on the increase like m-Health, m-Agriculture, micro-insurance, micro-savings, and m-lottery, among others. These will have a positive impact on the economy. These innovations provide opportunities for businesses to customize their products offerings to suit the changing times. Indeed, this is economically healthy in all ramifications, but we need to get it right first by clearing the obstacles.
There are assessed confidence and fidelity issues, as over the years, economic trend like this has been marred by fraud and hacking, even compromise by some operators. It is worth emphasizing that the key success factors for branchless banking rest heavily with the agents at the customer frontline. These challenges emerge in the form of credibility (the agent has to be a trusted brand or member of the community), proximity (agent networks have to be easily accessible by the customer), ubiquity (offer similar customer experience regardless of location), security (as the main interface with the customer, agents have to ensure compliance not only with Know Your Customer principle as required by CBN, but with all fraud prevention processes). As such agents will be responsible to ensure that their counter staff have the appropriate levels of training, simplicity (agents are the main human interface–it is their responsibility to explain the service, guide the user and make the service simple and accessible; liquidity (customer experience is critical to the success of this venture…it is imperative that customers have immediate access to their cash. Agents will have to ensure liquidity levels are adequate to meet with demands). These issues may not have been far off from the initial challenges of agent banking in Nigeria.
However, the apex bank has conceded to the fact that with every new system, there are bound to be challenges, but added that in collaboration with various stakeholders, it is working towards surmounting them. Enlisting further challenges as epileptic power supply; poor telecommunications connectivity; lack of synergy between mobile payment operators and telecommunications firms; and need for enhanced customer awareness, it added that successful agent banking all over the world is dependent upon an effective agent network.
Despite the fact that it’s not a ‘one-size fits all’ approach, agent network development and structures have certain critical aspects in common, at least a clear and well understood selection and recruitment process, consistent agent monitoring and practical liquidity management procedures.
“As we begin this journey, it is worth noting that the aforementioned will be the drivers for the increase in agent activity in Nigeria. Growth in number of agents, increased activity of agents, increase in average number of transactions per agent and the requisite growth in financial inclusion and profit margins will follow this for the agents and their principals.
By Chijioke Nelson, Nigerian Guardian
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