Agent Banking for Bangladesh

VOL 20 NO 157 REGD NO DA 1589 Dhaka, Thursday, March 28 2013 http//www. fe-bd. com/index. php? ref=MjBfMDNfMjhfMTNfMV85Ml8xNjQ1NzA= Bangladesh Bank mulls means relying for fiscal inclusion bodyM S Siddiqui Agent sticking is a fiscal servicing standed to customers by a third party on behalf of a fiscal institution (FI). An gene is an entity that is engaged by an FI to can specific financial go on its behalf using the movers premises.It is an additional voice communication channel that can enhance the convenience, the step forward distribute of quality and cheap financial services, particularly to the underserved, in a more address-efficient manner. Such an arrangement is a cheaper way for FIs to reach out to the underserved population. The use of the term ingredient is non inevitably a reference to an agent in the traditional legal instinct of a party authorised by a pass to good turn on the principals behalf and for whom the principal is li adequate with res pect to activities interpreted by the agent within the scope of its style relationship or contract.An agent is any(prenominal) third party acting on behalf of a till, whether pursuant to an agency agreement, service agreement, or former(a) similar arrangement. In most countries, the principal bounder is liable under a law for the actions of its agents, whether such actions are explicitly or implicitly authorised. Liability for the actions of a non-agent entity acting on behalf of the assert may be different and leave ofttimes depend on the contractual agreement.However, a banks liability (whether by law or contract) for third-party actors will likely impact the banks policies and procedures, which will in turn impact the supervisers forethought of the bank. The Bangladesh Bank has many recent projects for inclusive financial packages to reach out to non-bankable citizens. Achieving financial inclusion therefore requires innovative business organization models that dramatica lly void cost for e reallyone and thus pave the way for profitable extension of financial services to the paltry citizens. A major obstacle to financial inclusion is he cost-not only the cost incurred by banks in servicing secondary value accounts and extending banking infrastructure to underserved, lowly-income subject fields, but also the cost incurred by poor customers, in terms of time and expense in reaching bank branches. The banking agent method emphasises greater efforts towards achieving the vision of an inclusive financial system that best serves all members of society, including the underserved, to have nettle and usage of quality and affordable essential financial services. FIs can reach an additional client section or a geographical area.Reaching poor clients in rural areas is often prohibitively expensive for financial institutions, since consummation numbers and volumes do not cover the cost of a branch. In such environments banking agents use their brisk s ell infrastructure. Lower set-up and running cost can play a vital role in go many low income masses their first time access to a range of financial services. Also, low income clients often feel more comfortable banking at their local hold on than walking into a marble branch. The clients benefit from the agents banks with lower transaction cost and service, but closer to the clients home.Bankable persons visit stores anyway for groceries all the day, enjoy services with a tinyer crowd than in branches. Globally, retailers and post offices are progressively utilised as important distribution channels for financial institutions. The points of service range from post offices in the outback of Australia where clients from all banks can contribute their legal proceeding, to rural France where the bank Credit Agricole uses corner stores to provide financial services, to small lottery outlets in Brazil at which clients can receive their genial pays and access their bank accounts. It has been used very well in Latin America and Asia. There are few African countries that have taken up agency banking. Cheaper to operate It has been found in research that agent banking systems are up to three times cheaper to operate than branches for two reasons. First, agent banking minimises fixed costs by leveraging existing retail outlets and trim the need for financial agent banks to invest in their own infrastructure. Second, scholarship costs are lower for bank-enabled agents and bank wallets.The advancement in study and communication technology (ICT) has brought with it the tremendous innovation in the banking industry. Currently, agent banking is an intact part of modern banking in many countries. Banks in Bangladesh are offering services for transfer of money from overseas to any remote area of the rural area. The payment of different utility bills through sprightly bank outlets is very common. The agent banking will provide much more services to the clients.Whet her a client accesses his bank account at the agents outlet or in a branch or at an ATM does not break any difference. Technology can enable banks and their customers to interact remotely in a trusted way through the existing local retail outlets. Customers can be egressiond bank cards with appropriate personal appointment number (PIN)-based or biometric security features and the local store-the banking agent can be equipped with a point of service (POS) device controlled by and affiliated to the bank using a phone line or tuner or satellite technology.Infrastructure requirements can be further reduced by using mobile phones both to hold virtual cards for customers and as a POS device at the store. Responsibilities of agents The agents have many responsibilities. Such responsibilities accept * apply diligence in validating a customers identity and proceedings to avoid enciphering into fraudulent transactions or dealing with fraudsters * celebrate a transaction record inte lligence, being evidence of both transaction undertaken in the specified format or in such a manner as required by the bank.The transaction record book should be the property of the bank and be returned to the bank by the agent upon termination of the contract or when it is fully completed before number of a new transaction record book * comply with the banks live Your Customer (KYC) and Anti-money Laundering/Combating Financing of Terrorism (AML/CFT) requirements and/or laws or other regulations in force * keep details of customers or customer transactions confidential * maintain their connectivity with the internet in order to gain access to the web agent portal provide sufficient cash for the muddle offering cash load and payout services * comply with the central bank regulations, where the online web portal is in use * display merchandising materials provided at their location * ensure employees are trained by the bank on agency operations. Banks also have to ensure that age nts, as extensions of the banking system, are able to provide nonrecreational customer service, keep records, handle cash, and manage liquidity. As a result, one of the primary questions regulators grapple with is who can act as an agent.BBs initiatives The ongoing global expansion of high-tech telecommunications infrastructure, coupled with the increased handiness of advanced information technology services, is having an impact on almost every industry, including banking. The Bangladesh Bank (BB) plans allowing agent banking to gear up further its drive for financial inclusion aiming to help the government achieve sustainable economic growth. The BB has already laid the necessary foundation for agent banking by introducing mobile banking that has already got a good response, especially from rural people.Currently, eight banks are providing mobile banking services involving the countrys major mobile phone operators. Many countries take into account a full(a) range of individuals and legal entities to be agents for banks. Other countries limit the key of eligible agents on the basis of a legal form. For example, India permits a wide variety of eligible agents, such as certain nonprofits, post offices, somewhat shop owners, retired teachers and most recently, profit companies including mobile network operators (MNOs).Explicitly excluded, however, are the largest microfinance institutions (MFIs) registered as non-bank finance companies (NBFCs). Kenya takes a different approach, requiring agents to be for-profit actors and disallowing non-profit entities (like non-governmental organisations (NGOs), educational institutions, and faith-based organisations). In some other example, Brazil permits any legal entity to act as an agent, but prevents individuals from doing so. The issue of liability There is the delicate issue of liability of any splay or misappropriation.Imposing liability on banks for acts of their agents is often the key factor in giving bankers the comfort postulate to permit the use of agents. There is a point of imposing liability on banks for agents non-compliance with bankers requirements. Imposing liability on banks for acts of their agents is often the key factor in giving banks the comfort needed to permit the use of agents. The bank liability for agents noncompliance forces the agents to ensure professional agent behaviour and agents compliance with agreed norms and rules issued by central bank.All countries that permit bank agents also impose bank liability for these agents. Brazil, a country with perhaps the most widespread use of banking agents, requires banks to be fully liable for services rendered by its agents. Similarly, India requires that all agreements/contracts with the customer shall clearly specify that the bank is responsible to the customers for the agents acts of omission and commission. Interestingly, Pakistan imposes bank liability but states that the bank may take steps it deems necessary to safeguard itself against liabilities arising out of the actions of its agents?. This clause suggests that banks should enter into indemnification agreements with their agents-a protection that could steer banks toward large and well-capitalised agents capable of indemnifying the bank speckle forgoing agent relationships with smaller retailers who may nevertheless be reveal positioned to serve the low-income population segments. However, despite the widespread imposition of liability for agents acts, financial inclusion goals would benefit from limiting the provider liability to those actions or omissions link up to the provision of financial services.A failure to do so potentially increases costs of the financial services provider who may have to pay remedy for agents actions unrelated to the purpose of the agency. These costs could have a market cooling system effect, negatively impacting not only on the emergence of viable business models but also the ease and speed by which such models reach a certain scale. Some countries more clearly limit the cessation of liability to the financial services provided. For example, Kenyas banking agent guidelines impose liability on banks for agents actions, even if not authorised in the agency contract.The service frivol away of an agent is a matter of concern. Nearly all countries prohibit the agent from charging customers directly for agent services, and some countries even restrict how much a bank can charge customers for agent transactions. Such well heart regulations, aimed at protecting customers from excessive fees, can endanger the spread of unbranching banking models, if they leave participants unable to make an acceptable return in crystallize of the unique challenges and costs of reaching the poor.According to the BB plan, the agent could be an employee of bank who would offer people banking services including deposit and withdrawal of cash, transfer of fund, bill payment and the receipt of remittanc e, salary and government benefits. We would wait with interest for the BB rules on bank agency, particularly the list of eligible agents, the liability of errors and omission of agents. The writer is move PhD at Open University, Malaysia email&160protected com