Agent Banking: High Expectations, Low Delivery in Nigeria

By Bamidele Ogunwusi

After seeing successes recorded in many African countries in mobile banking and agent banking, Nigeria’s apex bank, the Central Bank of Nigeria (CBN), introduced the system in 2013 to fill the void left by contemporary banking and bring banking to the doorstep of unbanked Nigerians.

The agent banking system was one of the initiatives of the CBN to achieve the nation’s financial inclusion goal of reducing the national exclusion rate, or the number of adult Nigerians without access to financial services to 20 per cent by year 2020.

Agency banking is a financial model where easy-to-access “agents” (individuals in the community) process customer transactions on behalf of licensed banking institutions.

It is a dispersed and more mobile nature of ensuring deepened financial inclusion for the unbanked.

Considering the fact that banking today is not limited to banks halls only, several non-banking institutions from unrelated areas such as telecoms are stepping into this space by providing financial products and mobile wallets products, for instance, Airtel mobile money. They also have a lot to gain from this partnership.

Accessibility, technicality and eligibility barriers to deposit, loan, and payment services are some of the major barriers in the usage of financial services. But with ‘Agent Banking’ distance and transaction size are no longer going to be problems.

This initiative is meant to ensure that many more people have access to their deposits and are able to withdraw from bank accounts and mobile money wallets. They are also able to make utility bill payments and airtime recharge as well as manage their savings even from these ‘informal mechanisms’.

These agents are also expected to expand into rural areas and urban metropolises to serve the hard-to-reach. Financial transactions such as cash-in, cash-out, funds transfer, bill payments, airtime purchase, government disbursements, and remote enrollment on BMS infrastructure (Bank Verification Number) would now be carried out by these agents making it easily accessible to everyone, irrespective of status.

However, despite the rapid growth in many other emerging markets and the high penetration rate of mobile phones in Nigeria (60.4% of Nigerian adults) the uptake and awareness of Mobile Money and Agent Banking have been persistently low at 1per cent and 16 per cent respectively according to the EFInA Access to Financial Services in Nigeria 2016 Survey.

Mobile money is an obvious channel for Nigerians at the bottom of the pyramid to use as they adopt financial services for the first time.

Up to 25 mobile money Operators (MMOs) have been licensed since the launch of mobile money service in Nigeria in 2009.

Despite this large number of MMOs, high mobile phone and SIM card ownership, mobile money uptake and usage is still low in Nigeria.

The Central Bank of Nigeria (CBN) issued the Guidelines for Agent Banking and Agent Banking Relationships in Nigeria in 2013; and the Operating Framework for Super-Agent in 2015 in its bid to deepen the uptake of mobile money and agent banking products.

However, the uptake of mobile money and agent banking services still remain low in Nigeria.

According to Henry Chukwu, Programme Specialist in Agent Networks at EFInA, low awareness, access and trust are some of the key obstacles affecting the uptake of mobile money in Nigeria.

“Awareness and understanding, however, remain important drivers of mobile money uptake and usage. Customers need to be fully aware of the mobile money service and understand how it could be beneficial to them. To ensure mobile money and agent banking services get the best visibility possible in Nigeria, operators need to consider a wide variety of marketing strategies and options”.

Based on findings from the EFInA Access to Financial Services in Nigeria 2016 Survey, the fact that 73.4 per cent of adults who have not heard of mobile money are prepared to use new technology shows an immense opportunity for mobile money and agent banking penetration in Nigeria.

EFInA has therefore, developed and engaged in different initiatives, working closely with financial services providers and the regulator to promote awareness, uptake and usage of these services in Nigeria.

However, operators in the mobile money market appear to be struggling with services delivery due to the two days transaction settlement cycle of the Central Bank of Nigeria (CBN).

Investigations revealed that due to the limitation of the two day (T+1) settlement cycle on their liquidity, agent banking operators are turning down request for financial services from members of the public.

Confirming this development, Mr. Olojo Victor, President of the Association of Mobile Money Agents in Nigeria (AMMAN), said:  “One of the problems affecting the business is the CBN’s T+1 policy. What the T+1 policy mean is that an agent does not receive settlement in his/her bank account the same day after performing a withdrawal transaction for a customer. For instance, if you do transactions on a Friday, you don’t get settled until late Monday night.

“Imagine paying out N300,000 to customers and you don’t get your cash until Monday. More needs to be done in terms of how this policy can be tweaked a bit to support and favour those in the business. For instance someone who is a Mobile Money agent or Agent banking partner should be able to do a N5, 000 transactions and get the value instantly. This would encourage the players in the industry.”