By Dr. David OKYERE
According to the World bank, Financial Inclusion means the circumstance where Individuals and Business have access to useful Financial Services and Products that meets their needs. These P&S include Transactions, Payments, Savings, credit and insurance-delivered in responsible and sustainable way.
To ensure that individuals and businesses have the full benefits of Financial Products and Services, there is the need for one to have a transactional account that would enable one to store fund on their account to proceed to take advantage of the other Services.
Admittedly, over 60percent of the Africa’s population is financially excluded, thus their inability to engage in any meaningful financial transactions. Arguably, this size of the population is engaged in Agricultural activities and are classified as either poor or challenged. To tackle the financially challenged therefore means to have services that would appeal to the farming and other rural communities.
In general, having access to financial information, or being financially inclusive facilitates economic activities of families. In Ghana for example, most families in the hinterlands depend on family members in the cities for livelihood and survival.
These family members in the cities have to remit their parents and other family members on a regular basis to be able to meet the basic necessities of life. These funds are usually channeled through MoMo outlets for collection and spending.
Thus, MoMo transactions account for over 90% of all electronic transaction in the country, with over 500,000 MoMo transaction points. The increase uptake of MoMo account vis-à-vis Bank account is as a result of the low Know-Your-Customer (KYC) for MoMo account opening and the fact that Ghana has over 100percent mobile phone penetration, the fundamental requirement for MoMo penetration in the country.
To encourage an increase in the uptake of Bank Account which is a more secured form of Financial Inclusion therefore, Banks would have to offer innovative use-cases for both the customers and the channels that the Telcos are not in the position to offer. As indicated above, the Telcos have huge customers and outlet base thus, it wasn’t difficult to expand their Mobile Money base as they leveraged on both legs.
Currently, according to the Bank of Ghana (BOG), there are 69.3 million Active MoMo accounts, and over 500,000 Agents. This is against about 3m Smart Accounts and 8,000 Agents. It is therefore not surprising that for the month of June 2024 the total MoMo transaction Volumes and values were 668m and GH¢224billion, against an estimated Agency Banking figures of about 300,000 and GH¢2billion respectively.
Agency banking
The National Financial Inclusion Development Structure (NFIDS) of Ghana identified 5 pillars as fundamental to promoting financial Inclusion in Ghana. These pillars are:
- Financial Stability
- Access, Usage and Quality of Financial Services
- Financial Infrastructure
- Financial consumer Protection
- Financial Capability
Of these five pillars, Access, Usage and quality of service aims to increase the availability and usage of financial products and services for the financially excluded and marginalized in the society.
It is under this very pillar that Agency banking sits perfectly. There was an indication under the 2nd Pillar that the long distance to financial Service points such as bank branches and ATMs was an impediment to financial service expansion. It was further suggested that an effort should be made to diversify the variety of access points to boost usage.
Agency Banking is the Sales and Distribution arm of Financial Inclusion, and It is aimed at making banking services very simple and taking away the hassle and intimidation that is associated with the accessing basic banking services from the very imposing banking edifice. It provides that comfort and convenience that has eluded bank customers over the years. To put up a branch of a bank in a locality it must make an economic sense just like the putting up of a Telecom Mass.
Having established the fact that those who are financially excluded are usually those who reside in the rural areas with very small or non-existence disposable income, it would therefore be out of place economically to put up a branch which wouldn’t cost anything less than GHC3m.
This does not include staff and other monthly operational expenditure (OPEX). Thus, the only economically pragmatic way of getting closer to the people is to engage the services of these agents, whose set-up costs are far cheaper than those of a branch.
Setting up an agent has its own challenges/impediments, the reason why the rollout is relatively slow compared to the MoMo agents. Unlike the MoMo agents, the Banks’ agent must have a very strong immovable structure with a regular update of the locations of these agents to the regulator.
Furthermore, approval is required from the regulator to onboard every single agent of the Bank. To also offer economic viability to the agents, Banks must ensure reasonable distance between agents.
Thus, Agents cannot be set up haphazardly with full compliance of the BOG’s regulations. This is not to say that MoMo agents do not have any regulations, but they are not as stringent as bank Agents. Beyond onboarding the agents is motivating them to even keep enough float to undertake a Bank’s transactions. Agents do not exclusively work for banks.
As a matter of fact, banks are encouraged to onboard retailers who are already in other businesses so as to have access to business funds for transactions. Thus, the banks’ share of the agents’ wallet would be determined by the customers they have and the business their brands attracts. So, to motivate the Agents to focus on your business and to keep enough float for your transactions is to offer better incentives in the form of commissions.
Competition
In the late 90s and early 2000 the Telecom companies took over the retail space with each one of the them struggling to take charge of the share of the available space for branding. This led to clutter at the premises of the agents. It was believed and rightly so, that the more visible a Telecom company was, the bigger market share it commanded.
Thus, the Telco spent a lot of money to brand outlets along the major roads and within towns, deployed a lot of umbrellas also known as (AKA) parasols, tables, danglers, buntings, Tier drops, Telescopic, etc.
I quite remember between 2007 and 2008 when Zain took over from Westel, as the Trade Marketing Manager then, I led the team to brand buildings and outlets along the Accra Kumasi highway with the beautiful zain colors of Aqua green, magenta and Yellow.
We also ensured that all table-top agents were supplied with Parasols and other beautiful paraphernalia. This alone encouraged a lot of people to go into the Telecom retail business, as well as attracted many more customers to take up Zain sim cards to become their customers.
As if the Telecom companies woke up one morning to decide to put a stop to this high competitive venture, that phenomenon ended abruptly, coinciding with the gradual fading out of scratch cards and the introduction of E-top through Mobile Money.
The Banks are gradually revisiting this phenomenon of fighting for branding space at various Agent points. Fidelity Bank, GCB, Ecobank, SG-SSB, Access Bank, CAL Bank, etc are all struggling to have dominance at the agent points.
This is done to ensure that Customers of the various banks are aware of the possibility of undertaking basic banking services at their agent locations. Thus, the mere onboarding of an Agent is not enough, one must go the extra mile to ensure that the Agents are visible to existing customers of the banks, and prospective ones as well.
Driving visibility itself at the agent point is not bad, it is meant to create awareness and to inform customers of the available services. It is, however, how uncoordinated and haphazard it has become in recent times.
Imagine all the 23 banks decide to engage the services of agents to drive the customer onboarding and to offer basic banking services, with all the banks fighting for branding spaces at the agent points? That would be very chaotic to say the least.
It is therefore important that going forward the banks at a point would have to come together to offer a consolidated platform that would offer banking services for all banks’ customers without necessarily creating chaos at the agent point.
Driving low-ticket transactions through the agent points
One of the fundamental reasons why Banks are moving towards the establishment of agents is to decongest their banking halls, allowing customers who wish to undertake low ticket transactions to visit their agents, so the banking halls can focus on high value transactions that agents are unable to undertake.
It is supposed to further drive the cost of expanding the banks’ network down, for it does not make economic sense to establish bank branches in areas that are predominantly rural or where basic financial transactions are likely to take place. 10 years after the coming into being of Agency Banking, the banking halls are still experiencing high footfalls of low-ticket transactions.
A recent Voice of customer (VOC) survey conducted by MSR at the behest of fidelity bank highlighted few reasons why customers still throne into the banking halls to undertake low ticket transactions.
According to MSR, there were several reasons why some customers do low transactions at the bank, but trust was a major issue that underlies their behaviors. Some respondents who deposited small amount of money with the bank branches attributed it to their proximity to the bank and their money being safe there.
The research further suggested that the relatively unstable platform of the agents drive them to the branches where they are sure of reliable service.
Undoubtedly, traffic to agent points has increased significantly in the last 10 years since the introduction of Agency Banking, although bank customers still have reservations about services that are being rendered at those agents points and the security of same.
That said though, the research also proved that some customers have developed trust in the agency channel so much so that, they do not see the need to go through the long queues that are usually present in the banking halls to make deposits, withdrawal or other basic transactions.
With the extended opening hours of the agents and their closeness to these customers, working with these agents provides them with the comfort and convenience they require to run their businesses.
Celebrating 10 years of Financial Inclusion with much emphasis on Agency banking has become imperative that the banks put in much effort to work towards creating the awareness about agency banking and allaying the fears of the public by working to improve the security and operational risks associated with transactions at the agent points. Customers would ordinarily prefer to undertake transactions where their security is assured.
For most customers, convenience and comfort are secondary to security, thus they wouldn’t mind travelling for a longer distance to undertake transactions in the banking halls because of the assured security. To ensure therefore that the customers believe in the agency banking business, banks should be intentional about the provision of security to the agents, without losing sight of the convenience and comfort.
Customer vigilance
The introduction of Agency Banking as one of the major pillars of Financial Inclusion is to provide basic financial services to customers who are remote from the bank branches. Thus, the interest of the customer is paramount in this agenda.
It is for this reason that banks through agency banking and with the supervision of the regulator, ensures that notices are placed at vantage points within the premises of the agents, amongst other things, advising them to ensure that their transactions are completed before they leave the locations.
Fidelity and other notable Bank for example, train their agents at least twice every year, taking them through the BOG regulations and compliance of same. Fidelity bank has gone ahead to introduce Sanction Grid that highlights over 30 possible breaches and their possible sanctions. These sanctions include, suspension, exiting and handing over to the authorities for possible prosecution depending on the severity of the breach.
Cash suppression, a situation where customers who are supposed to ensure that their transactions go through at the agent points before leaving, leave these funds to the agents with the hope that agents would deposit these funds into their accounts.
Some unscrupulous agents, because of familiarity with these customers end up suppressing the cash with the hope of depositing the cash at the close of business. At that point these agents use the funds of the customers to undertake other transactions before depositing same in the customers’ accounts.
This is a very serious breach per BOG regulation which stipulates, and same have found it way in the agreement banks sign with their agents, should there be any issue including technical, for which reason transactions cannot be completed, customers funds must be given back. Agents who are found engaged in such practices have been exited and if there were any outstanding funds that have been suppressed, are made to refund.
To ensure that funds are protected, customers should ensure that they receive SMS notification of the exact amount they intend to deposit into their account before leaving the premises of the agents.
They should take note that when it comes to deposit, a mere receipt without SMS notification on their phones does not suffice. They can also check their accounts through their mobile app or USSD to ensure that the funds have reflected if the SMS notification delays.
Liquidity challenges
The significance of Agents in the financial inclusion ecosystem is largely dependent on their ability to educate and undertake transactions for the unbanked and underbanked population.
To do this the agent requires enough funds, which is the basic ingredient for transactions at the agent’s points, either physical or electronic. How liquid agents are would determine their ability to successfully undertake transactions for customers.
To undertake transactions at the agent points the agent must move funds from their float accounts into the customers’ accounts electronically. This requires the agent to have enough E-funds to be able to do such a transaction in terms of deposit. Before such a transaction takes place, the agent must ensure that he takes the said amount from the customer, after all the required processes have been completed.
In the case of withdrawal, the agent must move E-funds from the customer’s account with their consent, into the agent’s float account after which physical cash is handed to the customer.
These processes for deposit and withdrawal are similar to all other transactions such as transfers, bill payments, etc. Thus, the availability of funds for the agents is the basic requirement for any transaction, apart from enquiries and balance checks.
Agents have found it difficult to meet customers demands for the two major transactions at the agent points because of:
- The lack of enough funds to complete transactions for the customers,
- The inability for agents to liquidate funds to undertake transactions.
These are same challenges from the point of view of the customer who is the ultimate beneficiary. But from the agents’ point they are different; whereas the former lack funds to complete transactions, the latter have funds available but not in the right form.
For example, an agent could have enough E-cash in his/her float but without physical cash and might not be able to serve customers who want to do withdrawals.
On the other hand, when an agent has enough physical cash but little or no E-cash, such agent cannot undertake deposits. It is for this reason that agents must always have the right balance to undertake all forms of transactions.
To ensure the sustenance of agent relevance in the Financial Inclusion ecosystem by way of providing the necessary and needed support to the agent, the bank must do the following:
- Onboard agents who are liquid such as MoMo agents,
- Work with the MNOs to integrate their MoMo platforms with the banks’ agent platform for ease of liquidity management,
- Site agents not too far from the branches to ensure that agents can liquidate their funds at the branches,
- Cordial relationship should exist between the bank branch staff and agents to ensure appropriate and timely support,
- Provide short term liquidity support to the agents to undertake basic transactions for the customers on behalf of the banks.
Even though the are other equally important factors that are necessary to ensure the successful running of Agency Banking, the above mentioned are the most significant without which the banks would find it difficult to fully run the Agency Banking concept.
The future of Agency Banking in the financial Inclusion discussions cannot be discounted, especially in the area of increased access in the remote and underserved areas. It is also an avenue for deepening financial literacy programs, educating the rural population on the benefits and usage of financial services.
It is important for the government and other relevant stakeholders to clear all bottlenecks that would mitigate against the expansion of the agency business. Some of which include but not limited to improvement in road infrastructure network and telecommunication network improvement across all the Mobile Network Providers to enhance access to the agents locations, as well as seamless transactions.
>>>the writer is Head of Agency Banking, Fidelity Bank Ghana Limited. He can be reached via +233501300309
