Agent banking loan disbursements rose 41% year-on-year in March

In comparison, in March last year, loan disbursements stood at Rs 11,667 crore.

Loan disbursements through agent banking rose 41.27% year-on-year to reach Rs 16,482 crore in March, driven by improved access to finance for rural residents, Bangladesh Bank said.

In comparison, in March last year, loan disbursements stood at Rs 11,667 crore.

Deposit and remittance inflows also grew by 16.52% and 23.11% respectively compared to the previous year, according to central bank data.

Bankers said that with the gradual expansion of agent banking, many people who were previously excluded from banking services in rural areas can now easily avail the services themselves, which is the main reason behind the increased flow of such loans.

Speaking to The Business Standard, Syed Mahbubur Rahman, Managing Director and CEO, Mutual Trust Bank Limited, said: “The increase in the number of customers in the banking system is due to the expansion of new services provided by the banks. Moreover, Agent banking is flourishing thanks to banks’ efforts to provide services to the grassroots through agent banking.”

He further said, “In the future, agent banking will become more popular. Banking services are now offered through biometric models in rural areas. There are also transaction messaging services, which reduces the risk of irregularities, encouraging more loan disbursements. agent banking.

“In addition, many banks have started offering small loans through agent banking, increasing the number of loans. Moreover, this has further stimulated growth as many banks are lending through digital channels.”

Regarding the increase in loans through agent banks, the Managing Director of a Sharia-based bank said, “Since loans through agent banks are short-term and have a high recovery rate, banks also prefer these loans.

“Moreover, since inflation has risen in the past two years, low-income people are taking loans from agent banks to cover their expenses.”

He also noted that agent banking plays a crucial role in providing financial services, especially to rural women, small entrepreneurs and remittance beneficiaries.

Selim RF Hussain, Managing Director, BRAC Bank, said, “53% of our small business loans come from agent banks. BRAC Bank’s share of agent bank loan disbursements stands at 62% nationwide.”

At the end of March, total deposits through agent banking stood at Rs 36,870 crore, up from Rs 31,641 crore a year ago.

A central bank report states that the volume of loan disbursements through agent banking is still insignificant compared to the volume of deposits, with the loan-to-deposit ratio standing at 44.70%.

This is due to the fact that most banks are yet to develop viable infrastructure for loan disbursement and recovery through agencies, the report said.

According to central bank rules, banks are allowed to disburse 87% of their total deposits in the form of loans. However, Sharia-based banks can disburse 92% in the form of loans. Therefore, the credit ratio in agent banking is still very low.

On the low growth of loans in agent banking compared to deposits, a senior Bank Asia official said: “Microfinance institutions in rural areas are charging interest rates of up to 30%. The maximum interest rate for banks is now around 13%. Due to high transaction costs and lower returns, providing loans at rural level becomes a challenge for banks.

He further said, “If the central bank were to provide an additional 1-2% incentive on loans through agent banking, credit growth would increase.”

“Despite this, loans through agent banking at our bank continue to increase.”

Agent banking in Bangladesh has continued to grow in all dimensions this quarter. As of March 31, 31 banks offer agent banking through 21,613 points of sale managed by 15,835 agents.

The number of accounts opened through agent banking stands at 22,250,305, of which 11,060,879 accounts belong to women customers and 19,145,672 accounts (86%) belong to the customers in the rural areas.

Bangladesh Bank launched agent banking in 2013 with the aim of providing a secure alternative channel for banking services to the underserved population, who typically live in geographically remote areas beyond the reach of formal banking networks.