Agent Banking: Expanding Financial Inclusion in Bangladesh

Concept and Mechanism

Agent banking involves commercial banks appointing local agents—often community business owners—who operate banking outlets equipped with digital devices and secure connectivity. These agents provide a suite of services, including account opening, cash deposits and withdrawals, fund transfers, utility payments, loan disbursement, and remittance collection. The model was formally introduced in Bangladesh in 2013, with the central bank issuing licenses to commercial banks to operate agent banking networks.

Impact on Financial Inclusion

• Rural Penetration: Agent banking has significantly deepened financial inclusion in rural Bangladesh. As of June 2024, rural transactions accounted for over 84% of total agent banking volume, with transaction values exceeding Tk 485 billion5. The majority of agents and outlets are situated in rural areas, making banking services accessible to populations previously excluded due to distance, lack of trust, or financial illiteracy.

• Deposit Mobilization and Credit Access: Agent banking has catalyzed deposit growth and formal credit inflow in underserved regions. By December 2024, deposits through agent banking grew by 15.4% year-on-year, reaching Tk 419.56 billion, while lending surged by 56%, with 65% of loans disbursed in rural areas. This expansion addresses a critical barrier to financial inclusion—access to formal credit.

• Remittance Facilitation: The agent banking network plays a vital role in channeling inward remittances, with a 21.16% increase in remittance volume recorded at the end of 2024. These funds are crucial for rural households, supporting local economies and livelihoods.

• Women’s Financial Inclusion: Agent banking has also contributed to increasing women’s participation in the formal financial system. Some banks, such as Bank Asia, report that over 45% of their agent banking customers are women.

Determinants of Acceptance and Challenges

The adoption of agent banking is strongly correlated with perceived trust, convenience, service quality, and awareness among users. The proximity of agent outlets and the ease of banking are key drivers for customer uptake. However, challenges persist, including:

• Lack of training for agents

• Insufficient logistical support

• Cybersecurity risks

• Maintaining high service standards

Banks address these challenges through careful agent selection, comprehensive training, and the deployment of secure, technology-driven solutions such as biometric verification.

Socio-Economic Implications

Agent banking is reshaping the rural socio-economic landscape by:

• Enhancing savings mobilization and liquidity management for rural consumers.

• Providing real-time, secure banking services comparable to those at main branches.

• Supporting entrepreneurship and local economic activity through improved access to credit and financial services.

Conclusion

Agent banking stands as a pivotal innovation in Bangladesh’s financial sector, driving inclusive growth by integrating marginalized populations into the formal banking system. Its continued expansion, supported by regulatory oversight and technological advancement, is essential for sustaining and deepening financial inclusion across the country.