A year later, agent banking, a new model of financial service through approved small outlets out of the conventional banking halls, has returned a market share of nearly 20 per cent in the financial industry, according to the latest statistics.
According to Agent Banking Company of Uganda (ABC), agents of at least 10 commercial banks that are providing this new banking service are transacting an average of Shs30b daily.
“We are seeing the revolution in this space. We continue to encourage participating banks to enlist as many agents as possible across the country. Besides promoting financial inclusion, agent banking will reduce the cost of providing banking services,” says Mr Richard Yego, the commercial director at ABC Uganda.
Nearly a dozen of all the leading commercial banks that have since released their annual financial results indicate that agent banking with nearly 10,000 customers on the shared platform combined is driving their volume and value of transactions a notch higher by way of more customer service as well as expanded turnover.
Stanbic Bank’s managing director Mr Patrick Mweheire, says the digital agenda is kicking in with 80 per cent of the lender’s transactions now being done digitally.
“There has been some success around agent banking, which is now almost 20 per cent of our transaction volume and that is less than a year old. We have signed up almost 1,000 agents and all those are points of representation that Stanbic customers can bank with us,” he says.
Mr Mweheire adds, “We are not only restricted to banking halls, which are roughly 90 branches that we have today. We can have almost 1,000 areas and touch points with our customers. This value proposition is multi-pronged.”
Dfcu Bank is another financial institution that on its own account is admitting the emerging net effect of agent banking.
“Agency banking is part of the disruptive power of technology that is eating into the banking sector. The main objective is to reduce on our cost of intermediation as an industry which is now at 70 per cent and extremely high in this region,” says Mr William Sekabembe, the executive director of dfcu Bank.
“Agency banking will help us cut down on our cost to income ratio. We are already moving a bit of our transactions from the banking hall into agency banking where we are doing about 10 per cent. We are looking forward to push agents to about 5,000 in the next two years. We are confident we shall within a year have moved to 30 per cent of all our transactions into the agency banking space.”
Centenary Bank’s managing director Fabian Kasi, says agents are doing 12 per cent of transaction up from 5 per cent as of December 2018. It now means it is a trusted model of transactions.
“Whichever of our agent you visit is a replica of our banking services,” he says.
He adds: “Being secure and authentic in respect to the transactions that take place on agent banking, we want to encourage the 1.2 million customers to fully utilise this avenue of financial service delivery.”
According to Equity Bank, agent banking has delivered formidable volumes of cash in transaction through this platform to the tune of nearly Shs5b each week.
“We are the leader in agency banking. Today, through the Equi-duuka, we have more than 1,000 agents. Within the next couple of months (before mid-year), we shall have doubled that number. We are recording Shs20b in transactions through agency banking monthly,” says Mr Apolo Makubuya, the board chairman of Equity’s operations in Uganda.
According to Dr Twinemanzi Tumubweine, Bank of Uganda’s executive director in charge of supervision, banks must establish banking services at a much lower cost.
The agents are assisting in lowering these costs by way of economies of scale. We encourage all commercial banks to take advantage of this platform. It will bring more members of the public conveniently into this diversified mainstream banking platform and sustain the sector’s growth.”
Ministry of Finance
The Ministry of Finance, Planning and Economic Development, says agent banking, which is part of the diverse financial products that the new amendments of the Financial Institutions Act 2016 delivered, has provided expanded financial inclusion and that it will soon lower the cost of delivering banking services.
“Agent banking will reduce on the cost of credit. We are highlighting some of these products in our financial eco system that we believe should strengthen credit supply to the private sector,” the acting Secretary to the Treasury Mr Kenneth Mugambe, said during the launch of the Budget Week recently
The Federation of Small and Medium Enterprises of Uganda, is also confident that agent banking given its increasing spread across urban and peri-urban areas of the country, will go a long way in enabling millions of the business community reduce the costs in time, value and convenience in transactions.
“You need to understand what it takes to move from one point to another while trying to seek banking services. The higher volumes that a business owner can transact from within an agent means the value of money may not erode as fast as it has been happening,” says Mr John Walugembe, the executive director of the Federation of Small and Medium Enterprises of Uganda.
The indicators emerging from agent banking in Uganda has since motivated multilateral lenders such as the International Finance Corporation (IFC), a private sector lending arm of the World Bank, to extend a grant of $1.9m (approximately Shs7b) to the ABC of Uganda.
This is aimed at supporting the growth of the platform shared by 10 commercial banks; into the rural parts of the country as well.
According to Mr Richard Yego, who is also the acting chief executive officer of ABC, the funds will be used to roll out agent banking network infrastructure and accelerate financial expansion services to enhance financial inclusion in rural areas of Uganda.
He says with an average of seven million bank accounts today, agent banking will add two million accounts within three years. Speaking in Kampala, on April 24, Ms Jumoke Jagun-Dokunmu, IFC’s regional director for Eastern Africa, said people living in low income countries including Uganda and Africa “are still in need of a broad range of financial intermediaries in order to take advantage of economic opportunities.”
Agent banking, she said, has been proven to be an affordable strategy to expand financial inclusion beyond higher income customers concentrated in cities.