Rwanda: Local Banks Cut Back on ATMs in Favour of Agency Banking

Rwandan banks are reducing the number of ATMs across the country with some opting to roll out agency banking instead.

According to the latest statistics from the Central Bank's Monetary Policy and Financial Stability Statement, banks are reducing the number of ATMs and instead increasing agency banking rollout.

With that, the number of ATMs in the country reduced to 331 as of June this year from 390 in June 2019.

Agency banking is a model of availing limited scale banking and financial services through engaged agents under an agency agreement with the owner of an outlet who conducts banking transactions on behalf of a bank.

The outlets offer a range of financial services including cash deposit and withdrawal, sending and receiving money, paying taxes, funds transfer and balance inquiry among others.

The move is expected to among other things drive up penetration of financial services across the country.

Reduction of ATMs is also viewed as ideal in reducing use of cash in the local economy. With increased cashless uptake buoyed by measures to curb the transmission of the Covid-19 pandemic, use of cash for payment of goods and services has been discouraged with the members of the public encouraged to use digital payments.

Increased rollout of agency, banking is further expected to leverage the flexibility of financial services in comparison to physical bank branches.

While bank branches often operate within regular structures and confines such as working hours, location among others, agency banking outlets operate as ordinary businesses and can operate even in neighbourhoods availing financial services to users.

The development could help curb challenges identified in the Finscope 2020 survey on financial inclusion which noted that an average Rwanda takes an average of 43 minutes to reach a bank branch and an average of 41 minutes to reach an ATM.

While the time taken to reach a service provider may not necessarily be a barrier, Access to Finance Rwanda, the report's authors noted the need for improvements to reduce the time taken to reach financial access points in areas that exhibit longer distances in order to stimulate ease of access to financial institutions.

This could also serve to increase the number of the banked population which currently stands 2.6 million Rwandan adults, only 36 per cent of the adult population.

A BPR Hafi agent at an outlet in Kigali. Agents are providing a range of services including cash deposit and withdrawal, sending and receiving money, paying taxes and balance inquiry among others. / Photo: Dan Nsengiyumva

Reducing ATM has also been said to be strategic in reducing cost of operation for banks as well as cost of service delivery. For instance, an ATM machine costs around $4,000 while agency banking is relatively affordable as the outlets are owned by individual operators.

Several banks who spoke to The New Times said that the development is strategic in reducing the cost of operation as they seek to reach more parts of the country and the unserved population.

Opening bank branches, banks said attracts high costs going into rent, utilities, meeting regulatory requirements, staff among other costs. The agency banking model on the other hand does not come with such costs as the outlet is owned by individual business operators. Most of them operate other business operations at the site.

Some banks said that some agency banking outlets have been handling transactions values and volumes similar to and in some instances more than bank branches further making the model the most preferred among a majority of players.

The Central Bank also observed that cashless payments values and volumes continue to grow significantly with mobile money being the largest driver.

In the first half of 2020, there were over 500 million transactions valued at Rwf3,840 billion, an 86 per cent growth compared to the first half of last year.

The growth is largely due to the measures during the lockdown period to remove charges on transactions for a period of three months as well as the downward review of charges thereafter.

Mobile banking and internet banking also grew significantly with volumes going up by 29 per cent and 71 per cent respectively.