Traditional brick-and-mortar banks use agent banking to expand the reach of formal banking services to rural communities. The model has played an important role in delivering critical financial resources and providing safe, accessible, and cost-efficient ways for underbanked communities to access financial services. Services are provided by banking agents who act as much smaller bank branches but are equipped with point of sale (POS) devices, mobile phones, barcode scanners, computers, and biometric devices. Agents provide select banking and financial services, such as cash‐in and cash‐out, utility payments, bank account openings, savings products, and fund transfers. The use of agent banking can play an effective and cost-efficient role for SMEs to access financial services while also diversifying revenue sources for the parent and agent bank. Agent banks that traditionally act as their community's primary agriculture trading post and technical expert have diversified their portfolio by acting as their communities' go-to point for providing financing needs, including for both agricultural and non-agricultural products.

The term “parent bank” is used in this report to refer to a licensed deposit-taking financial institution that is a more traditional brick and mortar bank based in city centers and more urban areas. The term “banking agent” is used in this report to describe a person or business that works exclusively* with the parent bank, acts as the representative, and carries out transactions on behalf of the parent bank through their agent outlets. The term “agent outlets” is used to describe the physical location where agents conduct their business. Banking agents typically have multiple outlets from which they provide financial services. *In Bangladesh, agents are exclusive to one bank. This is not always the case in other countries.


Agent banking in Bangladesh dates back to 2013 when the Bangladesh Bank (Central Bank of Bangladesh) approved the use of agent banking in rural areas where traditional brick-and-mortar banks do not have branches. Banks are required to have two agent points in rural communities for every one agent point in urban areas. As of December 2020, 21 banks expanded the reach of formal banking services to rural communities by operating almost 16,000 agent outlets. Agent banking has played an important role in delivering critical resources to support resiliency, including financial products and services, remittance disbursements, digital technologies, and safe, accessible, and cost-efficient ways for underbanked communities to access financial services. In addition, governments are increasingly using banking agents as a distribution channel for public programs, such as cash transfers and commodity subsidies. In some cases, agent banks are 86 percent less expensive than setting up traditional branches. Agents reduce infrastructure and fixed costs for the parent banks by using their businesses as banking outlets, resulting in cost savings.

In Bangladesh, 87 percent of agents and 88 percent of outlets are located in rural areas. One of the main benefits of agent banking is that agents are typically members of the community, allowing them to build personal and trusted relationships with customers who may have been unable or hesitant to access formal banking services in the past due to mistrust, financial illiteracy, or the long distances they had to travel. As of 2018, 52 percent of Bangladeshi bank branches are located in urban areas, while only about a quarter of the total population lives in these areas, highlighting the need to further expand the agent banking to rural populations.

The Activity has been working closely with several financial institutions in Bangladesh to encourage the use of agent banking to increase access to finance for SMEs and rural smallholder farmers. The Activity provided technical assistance and grants to three banks—Bank Asia, BRAC Bank, and City Bank—to support the expansion and reach of banking services to the underserved in the Feed the Future ZOI. As a result of the Activity’s partnerships, banks have expanded banking services to the underserved, with over 2,500 participants, including 20 percent women, availing of formal financial services. Furthermore, more than 160 farmers accessed low-cost agricultural loans directly from their community retailers, gradually reducing the farming communities' dependencies on microfinance institution credit schemes, which charge almost three times higher interest rates than commercial banks.

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