Agent banking revolutionises delivery of financial services

Dar es Salaam. The uptake of agent banking has recorded remarkable growth, taking the financial services closer to the users.

The growth gained momentum in the last two years after the central bank relaxed conditions for one to hold the licence as agent.

The number of bank agents increased by 53.4 percent, year-on-year to 72,043 at the end of December 2022 while both volume and value of transactions also significantly improved, according to the Bank of Tanzania.

Agent banking involves the use of retail outlets by banking institutions to deliver convenient financial services to underserved communities in a more cost-efficient manner without the customers visiting the particular bank branches.

In 2013, commercial banks were allowed to contract third party retail networks as agents after successful application, vetting and approval, to offer selected products and services on behalf of the banks.

Previously, the Bank of Tanzania (BoT) required applicants of the agent banking business to have an experience of at least 18 months for one to be eligible.

However, the central bank removed the criterion in July 2021 and, alternatively, required to only have a National ID Card or National ID number.

The initiative was one of the policy measures introduced to promote credit to the private sector and lower interest rates, in the wake of Covid-19 which disrupted economic activities around the world.

The measure was expected to increase lending by improving loanable funds to banks through deposit mobilisation.

According to the BoT Consolidated Zonal Economic report for December 2022, the volume of cash deposits through bank agents recorded an annual growth of 21.2 percent to 20.1 million in 2022 while that of withdrawals increased by 15.5 percent to 11.89 million.

The value of cash deposits grew by 54.3 percent to Sh17.4 trillion while withdrawals increased by 53.9 percent to Sh5.2 trillion, according to the report.

“These agents have been supportive to the banks by not only taking the services closer to the people but also reduce the operational costs. We don’t need to build expensive physical branches to reach the customers,” said Mr Godwin Semunyu, head of corporate affairs at the National Bank of Commerce (NBC).

According to him, NBC added about 200,000 new customers last year and part of them were registered through the agents.

“Agents position our brands in many areas where we don’t have branches. We really value and respect the agents,” added Mr Semunyu.

Banking services are offered through various delivery channels which include branches, agent banking and digital banking services. Both branch and agent networks are highly dominated by large banks and concentrated in urban centers.

On the other hand, I&M Bank Tanzania chief executive officer Mr Zahid Mustafa said agent banking for the past five years has increased substantially and people prefer more mobile banking to branches.

“We have introduced agent banking because this opportunity is serving a larger population than branches. So, agents are important in the banks. It is all about technology and things are moving from physical services to mobile,” he said.

Digital and agent banking services have greatly reduced queues in the banking halls.

“I don’t need to visit a branch to deposit or withdraw Sh3 million,” said Mr Ally Omary who trades cereals in Temeke area.

“My neighbour is the working area is an agent whom I can access these services in a minute or two,” he said.

Allowing agent banking was one of the actions taken by the BoT towards achieving the vision of an inclusive financial system that ensures all members of society, including the underserved, have access to and usage of quality and affordable essential financial services.

Such kind of environment was expected to promote financial inclusion and ensure safety and soundness of the individual banks that engage in agent banking and the entire banking system.