NIGERIA:Agency Banking as Retail Penetration Strategy

Commercial banks are increasingly targeting the unbanked segments of the society through agency banking, writes Obinna Chima

Since the Central Bank of Nigeria (CBN) unveiled the framework for agency banking in the country, Nigerian banks have increasingly deployed the channel to expand their financial intermediation role.
The objective of agent banking is to provide minimum standards and requirements for agent banking operations, enhance financial inclusion and provide for agent banking as a delivery channel for offering banking services in a cost-effective manner.

Agent banking is the provision of financial services to customers by a third party (agent) on behalf of a licensed deposit taking financial institution and/or mobile money operator (principal).
The agent banks receive cash deposit and withdrawal, carry out bills payment (utilities, taxes, tenement rates, subscription etc.), payment of salaries, funds transfer services (local money value transfer), balance enquiry, generation and issuance of mini statement, collection and submission of account opening and other related documentation among others.

They also carry out cash disbursement and cash repayment of loans, cash payment of retirement benefits, cheque book request and collection, collection of bank mail/correspondence for customers, any other activity as the CBN may from time to time prescribe.

The applications for agent banking licence is always accompanied with board approval, document that will outline the strategy of the financial institution, including current and potential engagements, geographical spread and benefits to be derived among other factors.
Under the guideline, Super-Agents are described as agent networks that will establish a collection of outlets or franchise within its wide network of outlets that will be under its supervision and control.

On the other hand, Sole Agents are expected to be a sole agent, who does not delegate powers to other agents but will assume the agent banking relationship/responsibility by himself while the Sub-Agents are networks of agents that will be under the direct control of a super agent as may be provided in the agent banking contract.
To qualify as an agent for specific banking operations, on behalf of deposit financial institution or mobile money operator, it must be an entity that have been in a legitimate commercial activities for at least one year before the date of the application and that the business must be a going concern.

Considering the low level of financial inclusion in the country, commercial banks, have continued to embrace this banking channel to reach improve their customer base and support their cost-saving strategy.
That was why as part of efforts to bring more Nigerians into the banking system, Keystone Bank Plc recently signed a partnership with the Nigerian Postal Service (NIPOST) and IONEC Limited, to provide agency banking services to its existing and intending customers. The initiative was christened ‘KeyServ’.

Keystone Bank’s Strategy
Under this partnership, KeyServ offers services such as Account Opening, Bills Payment, Cash-In, Cash-Out, ATM Services, Fund Transfers, Balance Enquiries, ATM cash withdrawals, Mini Statements and a whole lot more.
The platform seeks to leverage on NIPOST’s networks and locations across the country to provide access to financial services to many Nigerians, particularly youth and rural dwellers who are excluded from financial services.
The platform is a complementary effort of the bank towards encouraging the financial inclusion drive of the Central Bank of Nigeria (CBN).

Under the arrangement, NIPOST will through its Post Outreach system, provide outlets in different locations using people’s houses as offices for banking services while the house owner becomes an agent of the bank.
IONEC Limited on the other hand, acts as the technical partner providing the needed technical input for the success of the operation.

With its agency banking already operative in Lagos, Kano, Edo and other states in the country, the bank has made ATM machines available to enable customers in the locations withdraw and deposit money with ease.
Speaking during the launch of the platform in Lagos, Managing Director, Keystone Bank Plc, Mr. Obeahon Ohiwerei, said the three partners had through the initiative, succeeded in democratising banking in Nigeria, stressing that with the agency banking, the bank can be able to take banking services to everywhere in the country.

“This is just a simple solution that is riding on the platform of NIPOST. So, we’re going to replicate this action, riding on this collaboration to take banking services to every state, every local government, and every area in Nigeria. And what it means is that the country itself stands to benefit largely from it,” Ohiwerei said.
He added: “And we heard that about 40 million adults are not banked today in Nigeria. So, what does that tell you? If we’re able to attract half of that using this platform, and each person banks an average of N10, 000, it then means that you have fully 200 million into the banking system and that has several implications for the society.
“It means that if such money is available it can be applied to the key sectors of the economy – we can lend more money; we can provide more services.”

Also speaking at the event, the Post Master-General of Nigeria, Mr. Bisi Adegboye, said the partners would use the mutually beneficial platform which rides on technology to ensure that more Nigerians were captured.
“The philosophy behind it is that Keystone is the principal. Whatever you can do in any of the Keystone branches in Nigeria, we can help you to do it in any of our locations. What we are providing them is our networks in the country,” Adegboye said.
He explained that the agency banking window provided by the bank would in no small way benefit people living in the rural areas.
“Going by the demographical architecture of this country, the greater percentage of this country lives in the rural areas. I know what our people in the rural areas go through.

“They are underserved, they are unbanked, they are excluded from the formal financial ecosystem that the elites of this society operate. They will benefit greatly from this platform.”
Lending his voice, Managing Director, IONEC, Mr. Kelechi Dozie, said: “This tripod will not be here without NIPOST and without the vision of Keystone Bank. When we started this journey with NIPOST over a year and half ago, we needed a bank that has a vision to believe in bringing services to the poor, the financially excluded and the unbanked, and that bank is Keystone Bank.”

Also, the ED Corporate Banking & South, Keystone Bank, Yemi Odusanya, added that “with this scheme, customers, especially in the rural areas will enjoy unfettered access to banking services. As at today, we have about 106 approved agents across the country.”

Challenges of Agency Banking
Nevertheless, a report by Enhancing Financial Innovation & Access (EFInA)had pointed out possible challengeswhich should be addressed in order to strengthen the agency banking operations in the country.
According to EFInA, which is financial sector development organisation that promotes financial inclusion, noted that the relatively small number of installed Point of Sale (PoS) in the country was a challenge.
In addition, it also noted the lack of interoperability between PoS devices which limits banks’ ability to provide effective agent banking services.

The organisation noted that agent banking is a push product and extensive marketing (building the brand and sensitisation) is crucial for a large-scale adoption of digital financial services by the users.
According to the EFInA Mobile Money Agent survey of 2015, 76 per cent of the agents surveyed expressed that awareness of mobile money among potential users is too low.

The EFInA Access to Financial Services in Nigeria survey also showed that one per cent of the adult population in Nigeria actually use mobile money with 87 per centof the adult population unaware about mobile money.
“For effective agent banking, banks need to downscale by acquiring and developing new skills to better understand and meet the mass market’s financial needs

“Penetration levels among the unbanked and those living in rural areas are very low. For instance, Northern Nigeria in particular is grossly underserved and the overall size of the agent network is currently inadequate for Nigeria’s size.
“Due to a lack of proper agent modelling frameworks as well as internal and external incapability, issues such as liquidity management, inadequate knowledge on digital financial services and poor relationship management arise. “Most potential agents run out of cash and e-float from time to time as they find it difficult to leave their businesses/stores to re-balance.

“To a large extent, this deters potential business entrepreneurs from providing agent banking services. Agents and potential agents are not aware of all the opportunities and services that digital finance offers.
“Most businesses that meet initial requirements qualifying them as potential agents are constrained by the lack of adequate capital to provide agent banking services, especially in the rural areas where the service is needed the most.
“This is because these agents lack sufficient funds to meet up with demand of cash-in, cash-out and other agent banking services,” EFInA added.