EFInA: Why agent banking may fail financial inclusion target

Nigerian banks’ move to achieve increased financial inclusion through agent banking is set to fail, the Enhancing Financial Innovation & Access (EFInA), has said. The financial sector development organisation said its recent survey revealed that the agents were doing more of cash-in and cash-out as opposed to opening new accounts.

Analysis of the survey report showed that while 68 per cent of the agents were opening accounts for customers in 2015, 51 per cent of them did the same in 2017 but by 2020, only 19 per cent of the agents are engaging in account opening. On the other hand, the percentage of agents engaging in cashout (withdrawal) and cash-in (deposit) increased from 60 per cent in 2015 to 96 per cent in 2020. Agent banking is seen as a key driver of financial inclusion and very useful in providing access to financial services, especially in underserved/unserved areas.

The National Financial Inclusion Strategy identified agents as an important channel for achieving the financial inclusion target. However, EFInA noted that the percentage of agents, who offer account opening services, had decreased significantly since 2015, thus threatening the country’s financial inclusion target. “The Shared Agent Network Expansion Facilities (SANEF) has been actively coordinating providers towards achieving the target of 500,000 agents by the end of this year.

“However, if agents are not driving account opening, it makes it harder to achieve the national financial inclusion target. This calls for an urgent need for financial service providers (FSPs) to address the factors driving this trend and offer more incentives to agents to facilitate account opening,” EFInA said in the report.

The study also revealed that financial services agents lose about 2 per cent of their recurring monthly cost to transactions associated with fraud. “In recent times, the agent banking business has been threatened by robbery, fraud, and harassment from law enforcement agencies. Some agents have been arrested and imprisoned for processing transactions linked to fraud unknown to them. “FSPs need to invest more in agent training, especially on fraud prevention and management. Agents need to know how to identify, document, and escalate to their principals any suspicious transaction,” it noted.

The report shows that six out of 10 agents run out of cash at least once per week, on average. “This is unsurprising given the most patronised agent service is cash withdrawal. 66 per cent of agents interviewed cannot access loans to manage the amount of money they have available to transact, which is referred to as ‘float.’

“To address this lingering challenge, providers need to seek partnerships with digital credit providers, banks, and others to unlock access to credit opportunities for agents. Super Agents can negotiate for bank partnerships to allow then access overdraft facilities or float loans – even if it means targeting weekend float loans to start as they monitor the performance of these loans,” EFInA said. Beyond liquidity management issues, EFInA observed that failed transactions, and platform instability are the top challenges faced by agents.

“This has the potential to affect trust, uptake, and usage of agent services. As such, there is a need for stakeholders to collaboratively build initiatives to address this bottleneck,” it stated. The survey also revealed that 30 per cent of agents are dedicated and are profitable. EFInA noted, however, that the guidelines for the regulation of agent banking and agent banking relationships in Nigeria states that an agent must be an entity that has been in legitimate commercial activity for at least 12 months immediately preceding the date of the application to become an agent and the business must be a going concern. “Market information shows limited or no compliance from providers. The market realities are facilitating the evolution of the agency business from non-dedication to dedication, implying market maturity. This may be the right time for the regulator to review the existing guidelines to meet the current market reality,” it added.


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