To understand the resiliency of the agent banking model, the assessment identified ways the agent banking model absorbed, adapted, and transformed during the COVID-19 crisis. The assessment identified the following capacities of the agent banking model:

COVID-19’s Impact on Agent Banking

Absorbing the Shock

Agent banking outlets faced challenges related to COVID-19, not only due to changes in regulatory policy but also the necessary changes to health and safety procedures. The pandemic created numerous hurdles and opportunities related to the alarming trends of massive drops in traffic, remittances, and transactions at banking outlets. At the same time, it increased the need for agents to disburse capital within their local communities. The agent banking sector bounced back quickly during the pandemic, and all three parent banks cited their agent banking outlets as key to alleviating constraints in both the supply and demand of capital. Given the Activity’s strong relationship with partner banks and proven methods for supporting the agent networks, it pivoted quickly in response to the pandemic.

Adapting to the Shock

Agent banking has changed the way financial services are delivered to agribusiness and rural communities. Although both parent banks and government responses aided the agent networks in absorbing the shocks of the pandemic, agents still needed to adapt to the "new normal." Traditionally, banks delivered direct financial services through face-to-face transactions. These personal interactions and relationships between banks and their customers often determined the customer’s creditworthiness and supported their overall financial literacy and banking know-how. This structure typically disadvantages women in Bangladesh, where social norms restrict their mobility to travel to banks and limit or even prohibit their ability to interact with individuals of the opposite sex in public places. The emergence of agent banking changed this landscape. Bangladesh Bank’s latest quarterly report stated that women hold 46 percent of agent banking accounts. Using banking agents may not reduce the need for face-to-face interactions, given preferences for over-the-counter service, but it significantly increases the availability and accessibility of banking services to customers, especially women.

As mentioned in the previous section, the mobility restrictions of COVID-19 amplified the benefits of using the agent networks to disburse financial services to customers, particularly those in rural areas. As governments responded by encouraging stimulus payments through agent networks, parent banks shifted priorities to build out their agent networks. Given the uniquely agile nature of the agent model, agents had the resources and support to adapt to the COVID-19 crisis. Before COVID-19, the Activity supported banks to adapt their strategies and increase their capacity to finance agricultural SMEs, which are traditionally underserved by financial institutions. The Activity's support to expand agent banking outlets, diversify financial product offerings, and strengthen relationships between agents and agriculture communities became even more critical in the face of COVID-19's economic impact.

Customers Prefer Over-the-Counter Transactions

• Over-the-counter transactions are prevalent. More than three-fourths of agents offer money transfer services, and 47 percent of agents assist customers in performing transactions on their handsets. 73 percent of mobile money users prefer asking an agent to conduct a transaction on their behalf.

MicroSave Agent Network Accelerator Survey: Bangladesh Report 2016

Transforming in Response to the Shock

Agent banking outlets offer simple banking services, like account openings, remittance, and cash transfers. The COVID-19 pandemic induced a strong shift toward agent banking outlets offering a more diverse range of products and services—a trend that is likely to continue. Banking agents are well-positioned to diversify their products and services, including digital financial services, which, in turn, should increase financial inclusion among groups left behind, notably women. A recent International Monetary Fund report on the promise of fintech stated that digital finance is increasing financial inclusion and associated with higher GDP growth. During interviews, parent banks mentioned an interest in diversifying the products and services offered by agents, including alternate verification processes for agents who currently require a fingerprint. Banks are already exploring alternatives like facial recognition, which would fundamentally shift banking services to the digital space and be safer for both the agent and customer during and even after the pandemic. Through various engagements with the Activity, parent banks supported their agent outlets while also looking for opportunities to increase financial inclusion. The Activity has received multiple testimonials from partner bank executives highlighting agent banking as a catalyst for meeting their future strategic vision. The following are three specific examples of parent banks building long-term resiliency by transforming their product and service offerings in response to the pandemic.

“During a recent conversation with BRAC Bank, we learned that the bank is supporting the agents in becoming more mobile. The agents can walk door-to-door and use a portable device/smartphone with an application that has biometric software to open accounts and provide a range of financial services with rural customers. The customers, thus, do not have to travel to the agent points. And the agents can work 24/7 without any restrictions, which enhances their chances to increase business by commission."

—Bidowra Khan, Team Leader of Market Systems and Social Inclusion for the Feed the Future Bangladesh Rice and Diversified Crops Activity

The Activity Supports Agent Banking’s Transformation During COVID-19

Recognizing the need for targeted interventions, the Activity looked to address the systemic constraints faced by banking agents that inhibit their potential productivity, profitability, and expansion during the pandemic. In June 2020, the Activity released a Request for Application (RFA) asking for private companies to submit applications in response to COVID-19 challenges. The RFA resulted in several opportunities to continue expanding the services of banking agents. Among these active opportunities are the following:

Activities to Expand Agent Services

Throughout the crisis, financial institutions had to adjust their business strategies to overcome the obstacles presented by COVID-19. The Activity built on those adjustments to ensure rural smallholder farmers were not excluded or exploited within the market system, safeguarding their positions as key players. The crisis tested global development efforts, including the Activity, driving changes to implementation strategies and strengthening overall understanding of what it means to build resilient market systems. ACDI/VOCA’s mission to build inclusive and resilient market systems remains central to the Activity’s work.

Agent banking grew rapidly over the past year, demonstrating its key role in financial inclusion. However, these banking outlets faced severe challenges stemming from the pandemic.

Note: Please adjust zoom in/out options if text appears cut off

50 F Street Northwest, Washington, D.C. 20001 +1 202 469 6000 | | Follow Us @acdivoca