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 fix mulls gene messting for pecuniary inclusion bodyM S Siddiqui Agent intrusting is a fiscal attend toer offered to customers by a third ships comp any on behalf of a pecuniary institution (FI). An gene is an entity that is engaged by an FI to provide specific monetary service on its behalf utilise the promoters premises.It is an additional delivery channel that earth-closet enhance the convenience, the out separate out of quality and affordable financial run, particularly to the infraserved, in a more terms-efficient manner. Such an ar be givenment is a cheaper way for FIs to reach out to the underserved macrocosm. The enforce of the term doer is not necessarily a rootage to an agent in the traditional legal sense of a c exclusivelyer authorised by a bargainer to act on the principals behalf and for whom the pr incipal is liable with respect to activities taken by the agent within the celestial orbit of its room relationship or need.An agent is any third party acting on behalf of a stick, whether pursuant to an agency agreement, service agreement, or other similar arrangement. In around countries, the principal banker is liable under a law for the actions of its agents, whether such actions argon explicitly or implicitly authorised. Liability for the actions of a non-agent entity acting on behalf of the bank may be antithetical and go away often depend on the contractual agreement.However, a banks financial obligation (whether by law or contract) for third-party actors will likely rival the banks policies and procedures, which will in turn impact the supervisers oversight of the bank. The Bangladesh Bank has legion(predicate) recent projects for inclusive financial packages to reach out to non-bankable citizens. Achieving financial inclusion therefore requires innovative business models that dramatically reduce be for every one and only(a) and olibanum pave the way for profitable extension of financial services to the paltry citizens. A major(ip) obstacle to financial inclusion is he cost-not precisely the cost incurred by banks in servicing low value accounts and extending banking stem to underserved, low-income areas, but excessively the cost incurred by poor customers, in wrong of cadence and expense in reaching bank showtimees. The banking agent manner emphasises greater efforts towards achieving the vision of an inclusive financial system that best serves all members of society, including the underserved, to have access and usage of quality and affordable essential financial services. FIs can reach an additional client segment or a geographical area.Reaching poor clients in rural areas is often prohibitively valuable for financial institutions, since effect numbers and volumes do not cover the cost of a branch. In such environments banking agents use their existing retail infrastructure. let down set-up and running cost can play a vital design in offering many low income people their first time access to a range of financial services. Also, low income clients often go through more reliefable banking at their local store than walking into a marble branch. The clients return from the agents banks with lower transaction cost and service, but snuggled to the clients home.Bankable persons visit stores anyway for groceries all the day, enjoy services with a little crowd than in branches. Globally, retailers and ring armor offices are increasingly 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 conduct their transactions, 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 so cial payments and access their bank accounts.It has been used very well in Latin America and Asia. in that location 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 cost by leveraging existing retail outlets and reducing the need for financial agent banks to invest in their own infrastructure. Second, acquisition costs are lower for bank-enabled agents and bank wallets.The advancement in development and communication technology (ICT) has brought with it the tremendous innovation in the banking industry. Currently, agent banking is an integral part of recent banking in many countries. Banks in Bangladesh are offering services for tape transport of money from overseas to any remote area of the country. The payment of different utility bills through diligent bank outlets is very common. The agent banking will provide much more services to the clients.Whether a client accesses his bank account at the agents outlet or in a branch or at an ATM does not make any difference. engineering can enable banks and their customers to interact remotely in a bank way through the existing local retail outlets. Customers can be issued bank cards with appropriate personal identification number (PIN)-based or biometric security features and the local store-the banking agent can be equipped with a point of service (POS) maneuver controlled by and connected to the bank using a phone line or wireless or beam 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 include * apply persistence in validating a customers identity and transactions to avoid go in into fraudulent transactions or dea ling with fraudsters * honor a transaction record book, being evidence of every transaction undertaken in the contract format or in such a manner as required by the bank.The transaction record book should be the home of the bank and be returned to the bank by the agent upon termination of the contract or when it is fully completed before issuance of a new transaction record book * comply with the banks Know Your Customer (KYC) and Anti-money wash/Combating Financing of Terrorism (AML/CFT) requirements and/or laws or other regulations in strength * keep details of customers or customer transactions confidential * maintain their connectivity with the internet in order to gain access to the web agent vena portae provide sufficient currency for the location 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 * fit employees are trained by the bank on agency operations. Banks likewise have to ensure that agents, as extensions of the banking system, are able to provide master disclose 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 availability of advanced information technology services, is having an impact on al nearly 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 requisite foundation for agent banking by introducing mobile banking that has already got a unassailable response, especially from rural people.Currently, eight banks are providing mobile banking services involving the countrys major mobile phone o perators. Many countries permit a wide range of individuals and legal entities to be agents for banks. Other countries limit the lean of worthy agents on the basis of a legal form. For example, India permits a wide variety of eligible agents, such as indisputable nonprofits, post offices, some 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 another example, Brazil permits any legal entity to act as an agent, but prevents individuals from doing so. The issue of liability in that location is the delicate issue of liability of any mistake or misappropriation.Imposing liability on ban ks for acts of their agents is often the key factor in giving bankers the comfort needed to permit the use of agents. There is a point of gilded 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 likewise impose bank liability for these agents. Brazil, a country with perhaps the most widespread use of banking agents, requires banks to be fully responsible 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 inattention and commission. Interestingly, Pakistan impose s bank liability but states that the bank may take travel 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 surety that could steer banks toward large and well-capitalised agents capable of indemnifying the bank while forgoing agent relationships with smaller retailers who may nevertheless be better 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 related to the provision of financial services.A failure to do so potentially increases costs of the financial services provider who may have to pay damages for agents actions unrelated to the decision of the agency. These costs could have a market chilling effect, negatively impacting not only on the emerg ence of viable business models but also the ease and speed by which such models reach a certain scale. Some countries more clearly limit the extent 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 charge 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 meaning regulations, aimed at defend customers from excessive fees, can endanger the spread of branchless banking models, if they leave participants inefficient to make an acceptable return in light 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, transfe r of fund, bill payment and the receipt of remittance, payment 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 pursuing PhD at pay University, Malaysia emailprotected com