How is Dutch-Bangla Bank Limited's Agent Banking initiative contributing towards financial inclusion in Bangladesh?

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In this blog post, we will discuss Dutch-Bangla Bank Limited’s Agent Banking initiative which Business Finance for the Poor in Bangladesh (BFP-B) co-invested in as a part of our Challenge Fund programme. Dutch-Bangla Bank Limited (DBBL) Agent Banking is a venture designed provide banking services to the “unbanked” populations across Bangladesh.

Millions of small businesses in Bangladesh contribute significantly to the economy of the country. Unfortunately, a majority of these businesses lack access to affordable financial services due to geographical dispersion, high transaction costs, poor infrastructure and limited offering of products and services. The cost of doing business is increased and these businesses face challenges which greatly hinders economic development.

Currently there are roughly 6 branches for every 100,000 rural adult citizens in Bangladesh.

Dutch-Bangla Bank Limited (DBBL) Agent Banking was created to reach out to this segment of the population and to enable them with better access to financial services. While regular banking models require customers to physically visit a bank, this model engages agents to carry banking transactions from their outlets. These agents are more like distributors under a legal agreement with the bank to provide a wide array of financial services.

Range of financial services provided by agents

• Biometric-based banking services to rural and semi-rural areas so that unbanked citizens can join formal financial sector from their doorsteps

• Deposits and payment services

• Regular courtyard meetings to address rural customer relationship gaps

• In future, the agents will also facilitate loan application and disbursement.

The initiative focuses on providing guidance on bank accounts and funding to small businesses who previously did not have any form of bank access. In addition it encourages women to open bank accounts and highlights the value of saving habits.

Business dynamics of DBBL Agent Banking

The set-up cost of agent outlets is approximately £4,000 where agents share 80% of the cost, and DBBL shares 20%. On average, an agent can start profiting within 2 years of business.

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What are the key benefits of DBBL Agent Banking?

• Greater convenience, and cheaper transaction costs

• Travel shorter distances to use banking services

• Services available after regular business hours, as agent banks are open 9am to 7pm

Shuchorita Chakma, DBBL banking agent  

Shuchorita Chakma has been a DBBL banking agent in Sadar, Rangamati, for more than two years. In mid-2016, she learned from DBBL officials how agent banking provides formal banking services to the unbanked, including small businesses like hers that have traditionally been excluded from formal financial services. She set up Nandana Enterprise, a DBBL agent outlet, smaller than a regular bank branch, well-equipped with biometric point of sales (POS) devices, mobile phones, fingerprint scanner machine and computer devices.

This agent banking model has enabled Shuchorita to enhance the range and quality of service to DBBL customers. According to Shuchorita, it has also proved to be convenient for minimally educated populations to carry out banking transactions. The agent point enables customers to open an agent banking account, deposit and withdraw cash, transfer funds, and make payments. In 2017, Shuchorita was one of DBBL‘s leading agent outlets, with customer savings of BDT 3 million (GBP 30,000). As a result of expansion of her business, she also created employment for one new person, who now manages the booth with her.

Impact of DBBL Agent Banking services

This co-investment by BFP-B and DBBL has provided banking services to more than 800,000 customers, including 206,000 small business, and has created roughly 3,000 jobs. Previously, a customer had to travel 7 kilometres to avail banking services. Now, customers can find DBBL Agent Banking outlets within 2 kilometres of home. Cost per transaction was previously BDT 51, and it is now BDT 17 (mainly transportation). As of March 2018, the total deposit amount in agent banking clients’ accounts is approximately £40 million. Cumulative daily credit transaction of these agents is around £4 million.

What about consumer security?

Strict compliance of the policy and consumer complaint hotline for DBBL (16216) as well as Bangladesh Bank (16236) is widely visible at agent outlets. Like formal banking services, all of the payments made by agent banking are traceable and accessible to clients through transaction records and monthly bank statements.

Cost sharing with BFP-B

During the project cycle, DBBL shared 78% of the total cost of this project, and BFP-B shared 22%. This cost-sharing has helped DBBL to establish 1,500 agents within 1.5 years of operations, making the model self-sustaining.