Agent Banking: Up-Scaling Outreach For
Increased Profitability And Impact
Presented by
Director, Banking and Payments System Department
Central Bank of Nigeria, Abuja
at the
D-8 Workshop on Microfinance for SMEs & 7th Annual
Micro, SMEs Finance Conference, held at Transcorp
Hilton, Abuja
• Introduction
• Definitions of Agent Banking
• Principle and Logic for Agent Banking
• Countries experiences on Agent Banking
• Highlights of Nigeria’s Agent Banking Guidelines
• What Agent Banking Means to the various Stakeholders
• Permissible Activities to be carried out by the Agents
• Prohibited Activities of Agents
• Benefits of Agent Banking
• Challenges of Agent Banking in Nigeria
• Conclusion
• In the last decade, there has been an explosion of different forms of remote
access financial services that is beyond banks’ branches. These have been
provided through a variety of different channels, including mobile phones,
Automatic Teller Machines (ATMs), Point-of-Sale (POS) devices and agent
• In many countries, these branchless channels have made an important
contribution to enhancing financial inclusion by reaching people that
traditional branch-based structures would have been unable to reach.
• Studies conducted by Enhancing Financial Innovation and Access (EFInA),
2012, showed that 34.9m adults in Nigeria are financially excluded.
• One of the factors that is responsible for this is the distance from financial
services centers which is a direct result of the high cost of establishing brick
and mortar branches, and staffing such branches. This when juxtaposed with
low volume of business and low interest rates creates serious disincentive to
serving remotely located clients
• Agent Banking, especially in developing economies are rapidly evolving and making tremendous impact
in the economies and lives of its citizenry
•Financial Institutions have successfully expanded their outreach by engaging local agents to offer their services,
among which are; cash in/cash out, electronic transfers, bill payments, pre-approved credit lines, accounts opening,
international remittances, government and other micro credit payments and other banking transactions that may be
permissible by the Financial Institution and CBN
•Nigeria had begun the process as far back as 2007 with the development of the Payments System Vision 2020
document, which has charted the course for the recent developments in the payments system
Definition of Agent Banking
What is Agent banking ?
• Agent banking (or Branchless banking) is the provision of financial/banking
services by an authorized third party on behalf of the Principal (Financial
Institution), to customers through a single business unit or distributed networks
of retail or postal outlets. Banking agents can be pharmacies, supermarkets,
post offices, kiosks, etc. The best suited are however, businesses that have
built good customer relations and gathered experience in handling cash floats.
• Agent banking is also known as correspondent banking, this is a model for
delivering financial services whereby a bank partners with a retail agent (or
correspondent) in order to extend financial services in locations for which bank
branches would be uneconomical. Agents can be both banking (small banks)
and non-banking correspondents (post offices, gas stations, and retail shops).
Agent banking is a delivery channel that holds high potential for closing the
location gap.
•Despite being the most populous African nation, Nigeria is a midlevel player in the Sub-Saharan financial sector and lags behind
some of its peers in Africa with respect to Financial Inclusion.
•In setting out the Financial Inclusion agenda, the Bank identified
Agent Network for banking as one of the channels with great
potential to overcome the distribution challenges and increase the
use of financial services to the unbanked and the under-banked.
•To achieve this objective, the Bank issued the Guidelines on the
Regulation of Agent Banking and Agent Banking Relationship in
Nigeria in February 2013.
Principle and Logic for Agent Banking
• Leveraging mobile payments and agents' banking networks will
allow Financial Institutions to focus on product innovation and
• Microfinance agent banking could increase the linkage of rural
cooperatives to microfinance banks as was done in various other
Countries Experiences on Agent Banking
• Agent banking is quickly becoming recognized as a viable strategy in
many countries for extending formal financial services into poor and
rural areas.
• In recent years, agent banking has been adopted and implemented
with varying degrees of success by a number of developing countries,
particularly in Latin America.
• Brazil is often recognized as a global pioneer in this area since it was
an early adopter of the model and over the years has developed a
mature network of agent banks covering more than 99% of the
country’s municipalities.
• Other countries in Latin America have followed suit, including Mexico
(2009), Peru (2005), Colombia (2006) and Brazil (2000)
In Malaysia, agent banking initiative has already produced
promising results. Three financial institutions, namely
Malayan Banking Berhad, RHB Bank Berhad and Bank
Simpanan Nasional have a combined agent network of
4,120 agents as at end-December 2012, which includes
post offices, petrol stations, retail outlets and
telecommunication agents. Compared with branches,
financial institutions reported that agent banking channels
delivered cost savings in terms of set-up costs of more
than 80%, while agents have also benefitted from the
increased customer flow to their business premises.
Countries Experiences on Agent Banking
• In Kenya, agent banking is continuously improving and growing, and as it
grows, the level of financial inclusion is also growing proportionately.
• Other countries around the world have also utilized the agent banking
model to expand financial services, including Pakistan, Philippines,
Venezuela, South Africa, Uganda, India, etc.
Countries Experiences on Agent Banking
Year Agent
banking was Regulation
Source: Central Bank of Brazil,
No of
Countries Experiences on Agent Banking
Studies have shown that increasing the area covered
by agents within the country has had the effects of
increasing the reach of the financial services to the
people, thus raising the levels of financial inclusion.
Highlights of the Nigeria’s Agent Banking Guidelines
• The Guidelines for the Regulation of Agent Banking and Agent Banking
relationships in Nigeria outlines the minimum expectations to be
observed by FIs that intend to undertake agent banking. Broadly, the
Guidelines aim to facilitate the implementation of agent banking in unserved/under-served areas, in a reliable, safe and sustainable manner
whilst safeguarding consumer interest and confidentiality.
• The Guidelines operate on the premise that Financial Institutions (FIs)
retain the ultimate responsibility and accountability of all agent’s banking
Highlights of the Nigeria’s Agent Banking Guidelines
Other aspects of the document include:
•Application and Approval Requirements: Documentary requirements, Agent
Structure, Information requirements for agent structure, Renewal of engagement
and Monitoring of Agent Banking relationships (Further clarification issued to
remove the need for approvals)
•Minimum Requirements of Agent Banking Contract: Amongst other things it
states the FIs full liability with respect to customers, obligation of the FI and the
agent, services the agent can conduct on the principal’s behalf, fees & charges to be
stated in the contract, etc
•Assessment of Agents: Suitability assessment of an agent, Moral and professional
suitability of a prospective agent, Agent due diligence
•Key Roles & Responsibilities of the Financial Institution: Management of agent
banking business, Permissible activities, Prohibited activities, Operational and
Transactional Limits
Highlights of the Nigeria’s Agent Banking Guidelines
•Rules on exclusivity of agents: No exclusivity of agent banking contracts
between the FIs and agents
•Supervision of agents: FIs shall put in place prudential and operational risk
measures for monitoring the activities of agents
•Settlement of transactions and the technology requirement: Real time
transactions, Minimum IT requirements for the operation of agent banking,
Data and Network Security Requirements
•Money Laundering: Put in place customer due diligence (daily and
transaction limits, minimum IT security requirements, authentication of each
customer’s transaction), Anti-Money Laundering and Combating the Financing
of Terrorism (AML/CFT) requirements,
•Consumer protection measures: Ensure appropriate consumer protection
systems against risks of fraud, loss of privacy and loss of service
What Agent Banking means for key stakeholders
• Banking agents help financial institutions to divert existing
customers from crowded branches, providing a complementary and
more convenient channel.
• Financial institutions, can utilize agents to reach an additional
customer segment or geography. Reaching poor customer in rural
areas is often prohibitively expensive for financial institutions, since
transaction numbers and volumes do not cover the cost of a branch.
• In such environments banking agents that take advantage of an
existing retail infrastructure and lower set up and running cost, can
play a vital role in offering many low-income people their first-time
access to a range of financial services. Also, low-income customers
often feel more comfortable banking in their immediate environment
than walking into a FI’s branch
Permissible Activities of agents
Cash deposit and withdrawal.
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
Agent mobile payments/banking services
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.
It shall be the responsibility of the FI to determine, based on agent risk
assessment, which services a particular agent may provide.
An agent shall not:
i. Operate or carry out any transaction when there is
communication failure with the FI.
ii. Carry out a transaction where a receipt or
acknowledgement cannot be generated.
iii. Charge the customer any fee.
iv. Give any guarantee.
v. Offer banking services on its own accord.
VI. Continue with the agency business when it has a proven criminal record involving
fraud, dishonesty, integrity or any other financial impropriety.
vii. Provide, render or hold itself out to be providing or rendering any banking service which
is not specifically permitted in the contract.
viii. Open accounts, grant loans or carry out any appraisal function for purposes of opening
an account or granting of a loan or any other facility except as may be permitted by any
other written law to which the agent is subject.
ix. Undertake cheque deposit and encashment of cheques.
x. Transact in foreign currency.
xi. Provide cash advances.
xii. Be run or managed by an FI’s employee or its associate.
xiii. Sub-contract another entity to carry out agent banking on its behalf except where there
is a super-agent structure in place.
xiv. FI may in the contract document specify other activities, which the agent is prohibited
from undertaking.
Benefits of Agent Banking to Stakeholders
Benefits to a customer
• Cheapest means of accessing financial services with lower transaction cost
• Service closer to his immediate environment
• Longer opening hours
• Shorter lines than in branches
• More accessible for less educated, the very poor and less privileged who
might feel intimidated in traditional bank branches
• Benefits of greater economic development to isolated communities
Benefits to the Agent/ Agent Network Provider
• Increased sales from additional foot-traffic
• Differentiation from other businesses the agent might normally operate
• Reputation from affiliation with well-known financial institution
• Additional revenue from commissions and incentives
Benefits of Agent Banking to Stakeholders
Benefits to the Financial Institution
•Increased customer base and market share
•Increased coverage with low-cost solution in areas with potentially less number and volume
of transactions
•Increased revenue from additional investment, interest, and fee income, Improved indirect
branch productivity by reducing congestion
Benefits to Mobile Money Operators(MMO)
•Provides standards and guides for engaging Agent Network providers for the provision of
mobile money offerings
•Non-exclusivity of agent network provides a shared platform for customer take-up
• Provides more geographic spread for the scheme
Benefits of Agent Banking to Stakeholders
Benefits to the Government
•Facilitates financial inclusion
•Provides a tool for government to utilize for government to person and person to government
payments (disbursements, microcredits/repayments, subsidies, tax/levies etc.)
•Facilitation of domestic remittances
•For the private sector and individuals to invest in and drive uptake for agent banking by
signing up as agents with the expectation of generating revenues from transaction charges
and other benefits that the Financial Institution will provide
•For Innovations: As has been with other similar jurisdictions, mHealth, mAgriculture, microinsurance, micro-savings, will arise and these will have a positive impact on the economy.
These innovations provide opportunities for businesses to customize their products offerings
to suit the changing times
Success Factors for Agent Banking
The Key Success Factors For Agent Banking rest heavily with the agents at the customer frontline
Credibility: The agent has to be a trusted brand, or member of the community
Proximity: Agent networks have to be easily accessible by the customer
Consistency: Offer similar customer experience regardless of location
Security: As the main interface with the customer, agents have to ensure compliance not
only with KYC as required by CBN regulator but with all fraud prevention
processes. As such agents will be responsible to ensure that their counter staff
appropriate levels of training
Simplicity: Agents are the main human interface –it is their responsibility to explain the service,
guide the user, and make the service simple and accessible
Liquidity: Customer experience is critical to the success of this venture…it is imperative that
customers have immediate access to their cash. Agents will have to ensure
minimum liquidity levels
Success Factors for Agent Banking
• Financial Institutions (FIs) are no longer required to apply for an approval
before deploying Agent Banking.
• FIs are however required to submit returns on their Agent Banking
activities as part of their statutory returns to the CBN.
• The stage has now been set for FIs to commence agent banking and
agent banking relationships.
With every new system, there are bound to be challenges. Some of the
major obstacles are mentioned below. However, it is worthy to note that
CBN with the other stakeholders are working towards surmounting the
•Epileptic Power Supply
•Poor Telecommunication Connectivity
•Need for enhanced Customer Awareness, etc.
• Successful Agent Banking all over the world have demonstrated
that an effective agent network is paramount to the success of
financial inclusion.
• Despite the fact that it’s not a ‘one-size fits all’ approach, agent
network development and structures have certain critical aspects
in common, not least of all is a clear and well understood
selection & recruitment process, consistent agent monitoring and
practical liquidity management procedures.
• As we begin this journey, It is worth noting that the afore
mentioned will be the drivers for the increase in agent activity in
Nigeria. This will be followed by the growth in the number of
agents, increased activity of agents, increase in average number
of transactions per agent and the requisite growth in financial
inclusion and profit margins for the agents and their principals
Thank You

Agent Banking: Up-Scaling Outreach For Increased Profitability And