Ugandans living in areas without a commercial bank branch are now able to access formal banking services, thanks to Agency Banking which has brought a bank agent to their locality.
This follows the passing of the FIA 2017 bill that created the legal framework that guides new services such as Agency banking, Bancassurance and Islamic banking which, combined give the industry the flexibility to venture into new products as well as the modes for delivering those services to the public. Simply put, Agent banking is the delivery of financial services outside conventional bank branches, where a licensed financial institution like a bank, contracts a third party to provide a specified range of financial services on its behalf.
The agent profile could be a petrol station, a supermarket, a permanent mobile money agent, a retail shop or hardware shop, among others. It is anticipated that with agency banking, the banking industry will achieve a lot more growth due to the convenience it brings to the customer. One immediate benefit is that a customer no longer has to travel long distances to access banking services.
For the banks, it means a reduction in the costs associated with brick and mortar branches which gives them an opportunity to improve the overall customer experience. A customer that only wants to settle a water bill or pay school fees is saved the burden of going in to the banking hall. On the other hand, taking the small transactions out of the banking halls frees resources and allows the bank more time to focus on value adding services to the customer such as advisory, lending, investment and wealth management.
Connectivity between member banks
Earlier this year, the Uganda Bankers Association (UBA), the umbrella body for all banks in Uganda launched the Agency Banking Company. This is a shared platform that provides connectivity between member banks and enables agents to serve customers from any of the member banks. Besides the associated cost benefits to the customer, this minimizes duplication of agency networks and maximizes points of presence to ensure coverage across the country. This will in turn increase access to formal banking services and increase financial inclusion.
In the first six months of the year, there has been an increased number of Agent outlets across the country which is an indication that Ugandan businesses are steadily embracing Agent Banking. The impact of agent banking is already evident in the number of new bank customers acquired especially outside Kampala, driving economic activity by creating jobs and additional incomes.
Services offered on Agent banking
At Stanbic Bank the common services offered on Agent banking are; utility payments, cash deposit, school fees, cash withdrawals and account opening. The bank has over 1,000 agent outlets strategically located across the country enabling it to serve as many customers. All these agents have been adequately trained to provide banking services consistent with that offered in the banking halls.
There is no exclusivity with Agency Banking. This means banks need to focus more on building a distribution network as well as diversifying on product offering to be able to offer the services customers need. Identifying customer needs gives banks a chance to create the right offerings.
The population of salaried employees in Uganda currently stands at over 7 million. In addition, there is over 160,000 MSMEs employing over 2.5 million people. As a bank, by providing solutions for this population to access banking services easily through agents we will have met our objective of bringing services closer to the people. Our ultimate objective is to have over 10,000 Agent outlets in strategic locations over the next 5 years.
At the end of the day, we will see the branch evolve into providing advisory, lending, investment and wealth management services.
Ronnie Muganzi is the Head of Agent Banking Acquisition, Stanbic Bank Uganda