Q1 agent banking lending up 12.53pc

The total volume of loans disbursed through agent banking channels increased by 12.53 percent or over Tk210.898 billion in the first quarter (July-September period) of the fiscal year 2024-25, compared to the previous quarter.

The growth highlights the rising popularity of agent banking as a financing mechanism in rural Bangladesh.

However, deposits collected through agent banking during the same period declined by 1.36 percent or Tk5.436 billion.

At the end of September 2024, the total deposit volume through agent banking reached Tk395.293 billion.

Industry insiders attributed the surge in lending to multiple factors.

"The interest rates on loans provided through agent banking are lower compared to conventional lending institutions operating in rural areas," said Darpan Kanti Roy, vice president and head of Agent Banking and Mobile Banking at Mercantile Bank PLC.

Mr Roy explained that banks are comfortably offering small-scale loans in rural areas due to the lower risk of non-performing loans (NPLs).

He noted that previously many rural residents were unaware of the loan facilities available through agent banking.

"Agent banking activities have now reached the areas where NGOs or microfinance institutions have yet to establish a presence," he said.

The growth in lending through agent banking underscores its effectiveness in fostering rural economic development.

For example, a Tk0.2 million (Tk200,000) loan to a rural entrepreneur involved in poultry farming can stimulate job creation and economic activities in the area.

As of September 2024, rural customers received more than Tk 136.577 billion, representing 64.76 percent of the total loans disbursed through agent banking channels. This aligns with the core objective of agent banking to enhance financial access in rural areas.

Male borrowers accounted for over Tk173.228 billion or 82.14 percent of the total loans while female borrowers received only Tk28.005 billion or 13.28 percent, indicating limited participation by women in rural enterprises.

Despite a slight drop in deposits during the July-September quarter, the total number of savings accounts reached 23.49 million at the end of September 2024.

Rural areas contributed 81.28 percent of the total deposits, with male customers accounting for 58.44 percent of the deposits, compared to 36.36 percent from female customers.

Savings accounts comprised 43.15 percent of total deposits while institutional and term deposits made up 51.07 percent and current accounts accounted for 5.78 percent.

However, the top five banks accounted for 94.70 percent of total loans disbursed through agent banking by September 2024.

BRAC Bank PLC led the sector with more than Tk137.892 billion in loans, constituting 65.3 percent of the total. The other four banks are: City Bank, Bank Asia, Islami Bank and Dutch Bangla Bank.

In contrast, five banks held an 80.91 percent share of total deposits, with Islami Bank Bangladesh PLC topping the list, holding Tk156.667 billion or 39.63 percent of the total deposits.

Dutch-Bangla Bank PLC ranked second, with 14.45 percent of the deposits. The other three banks area: Bank Asia, Al Arafah Islami Bank and BRAC Bank.

Inward remittances through agent banking reached Tk 1,656.592 million by September 2024, marking a 4.64 percent increase compared to the previous quarter.

This growth is attributed to the government's 2.5 percent cash incentive on inward remittances.

By September 2024, 84.20 percent of agents and 85.51 percent of outlets were located in rural areas, reflecting significant progress in financial inclusion.

The total number of accounts opened through agent banking reached 23,489,109, with 83.76 percent being savings accounts, 2.90 percent current accounts, and the remaining 13.34 percent in other categories.

The network included 16,011 agents operating 21,367 outlets nationwide.