Agency banking can be tricky. So this past spring, MicroLead organized a study visit for nine of its partners to NBS Bank in Malawi. NBS has become a model for agency banking. This July, MicroLead held a debriefing webinar for participants of the study visit. Below is a Q&A with two of the webinar participants – Prisca Assimwe of Ugafode in Uganda, and Michael Wiafe of Sinapi Aba in Ghana.
Q1: What is the biggest challenge that agency banking may face in your organization based on what you observed at NBS, and how would you tackle that?
Prisca Asiimwe, Operations Manager, Ugafode: The identification, supervision and support of the agent network is probably going to be the biggest challenge.
Agency banking is a new concept in the Ugandan market. Giving the customers confidence that our services can be obtained from a provider other that our branch network may take time. So the selection of agents must be meticulous. We need the right agents, infrastructure, and skillsets to deliver our services at the standards that we provide directly ourselves.
From my observations during our visit in Malawi, the value proposition for the agent must be adequate to make them want to serve our clients. Because the commission structure for the agency network at NBS was fixed based on transaction numbers, it’s bound to encourage agents to serve numbers and not volumes. This means agents are likely to turn away high-value transactions, which they foresee depleting their cash/float levels.
For our bank, I’d like to propose a tiered commission structure that is also dependent on the value of the transaction being processed. This way, the more the agent’s cash flows go into serving our clients, the more they earn. Setting the service standards will also be very important to ensure that the customer experience is excellent, and that our standards of service delivery for UGAFODE are as consistent with the agent as they would be if the client was transacting in one of our branches.
An intensive training program will be necessary to equip the agents with the right skillsets in customer service, cash management and security, cash projections and liquidity management, know your customer (KYC) requirements, filing and record keeping, and handling complaints, among others. These programs may be costly in the beginning, but in the long run, if the agent network has been well trained and is adequately monitored, supervised and supported, we believe it will be cheaper to manage and maintain than a full blown brick and motor branch.
Michael Wiafe, Deputy Head of Deposit, Sinapi Aba: Liquidity will be the biggest challenge in rolling out agency banking within my institution. Agents must be highly liquid to help serve customers well and on time. In instances where a customer needs to withdraw a large amount of money but the agent does not have enough cash to satisfy the withdrawal, the customer will walk away very frustrated. This is one of the reasons why take-up of these channels is slower than expected. This is the “agent liquidity problem” - how to ensure that the agent has sufficient cash available to satisfy the client needs.
Sinapi Aba as an institution has identified agent liquidity as its key challenge and will adopt the following measures to address it:
- Set up and select agents who are highly liquid in their normal business, i.e. concentrating on agents who have a strong cash flow and good Credit Reference Bureau report (CRB), if this is available in the country.
- Withdrawal limits. SASL will establish tiered withdrawal limits for all our agents. This will help control the amount of money an agent can cash-out to clients.
- Cash flow management. A team will be set aside to monitor the cash flows of agents with regard to electronic and physical cash. Where it’s detected that an agent has more electronic money than physical cash, an officer from the nearest branch will be sent to help the agent top up, while agents will be given preferential treatment when they walk to any of our branches to make withdrawals. On the other hand, an agent who has more physical than electronic cash will have a SASL officer travel to his/her premises to collect cash.
Q2: What elements of agency banking did the study visit bring to life?
Prisca Asiimwe, Ugafode: The end-to-end process of getting an agent network in place came to life for me. I also learned the importance of having a delivery channel that’s both easy to use for the clients and the agents, and that is available at all times. In Malawi, NBS opted for both POS and mobile phones. The mobile phones were not working well for them because for the customer to use mobile with an agent, the customer must first register on NBS’ Eazymobile banking solution. Many more customers have debit cards which can be used on POS machines than are registered with Eazymobile. However, the POS machines are more expensive to purchase – especially when one includes all the accessories required, such as a card printer and PIN mailer printer – and access compared to mobile phones, which most of our clients already possess. It’s important, therefore, that the delivery channel selected is the best possible option for the market, taking into consideration literacy levels, geography, and infrastructure. I’m sure mobile will eventually do well in Uganda, considering the current high mobile usage here.
Michael Wiafe, Sinapi Aba: The best part of the visit was having direct discussions with the agents on how agency banking has helped bring about financial inclusion among the people of Malawi, specifically the inclusion of rural women.
Q3: What ideas did you come away with after the exposure visit?
Prisca Asiimwe, Ugafode: I knew agency banking was possible for us but needed to visualize it to better put the concept into perspective. As a result, we at Ugafode have collectively developed our deployment strategy for the next few years to enable us to reach our projected targets. Our strategy has the right mix of digital field applications, agency banking, and debit card/POS tools to deliver our services to our market.
Michael Wiafe, Sinapi Aba: Some of the ideas we came away with after the visit included:
- Getting all stakeholders involved in setting up the agency banking model, i.e. departmental involvement.
- Record keeping (files/registers management) – keeping accurate and consistent data at both agent and SASL, creating a register for transaction records, and daily system reporting of transactions including call overs (reconciling transactions by the agents with that of our core banking system).
- Consistent supervision and checks by agent supervisors.
- Weekly reporting on agency activities and performance.
Learning the in’s and out’s of agency banking is an ongoing process. MicroLead will continue to share knowledge within the industry as lessons are learned.
MicroLead is a UNCDF-managed global initiative challenging regulated FSPs to develop and roll-out deposit services which respond to the rural vacuum of services. With the generous support of the Bill & Melinda Gates Foundation, The MasterCard Foundation and the LIFT Fund in Myanmar, MicroLead works with a variety of FSPs and technical service providers to reach rural markets, particularly women, with demand-driven, responsibly priced products offered via alternative delivery channels such as rural agents, mobile phones, roving agents, point of sales devices and group linkages. This is combined with financial education, so customers not only have access but can effectively use quality services.