In many parts of the world, including Nigeria, agent banking is gaining momentum as a key tool for driving financial inclusion.
Agent banking is the provision of financial services to customers by a third party (agent) on behalf of a licensed deposit-taking financial institution and/or mobile money operator.
In 2015, the Central Bank of Nigeria recognised and acknowledged the role played by agent network managers by releasing the Regulatory Framework for Licensing Super Agents in Nigeria to expand financial inclusion through increased touchpoints across the country.
A super agent is a corporate entity that has been contracted by an agent banking service provider (mobile money operator, deposit money bank or micro-finance bank) and thereafter may subcontract other agents in a network while retaining overall responsibility for the agent relationships.
“In other words, this new player will take on the agent management as its core business, while the operator focuses on the core business of providing financial services. This can be a better strategy for operators who seem to struggle with managing agent banking relationships in the first place,” Enhancing Financial Innovation and Access said in a recent report.
In 2012, the National Financial Inclusion Strategy was launched by the CBN, which aimed at reducing the percentage of Nigerian adults who are financially excluded from 46 per cent in 2010 to 20 per cent by 2020.
Agent banking, EFInA noted, has been identified as one of the key influencers to drive mass markets to formal financial services as they will enable customers to cash in, cash out, make payments or conduct other financial transactions without necessarily having to go through the traditional brick-and-mortar channels.
Inlaks, a financial technology solutions provider in Nigeria and sub-Saharan Africa, is one the companies licensed by the CBN to operate as super agents and lead the charge in agent banking.
“Inlaks is evolving from an Information Technology systems integrator into adding a number of businesses, which include payment solutions. We have obtained Approval in Principle as a super agent and are currently rolling out a network of agents and also a number of innovative last mile banking services to bring people into the financial architecture,” the Managing Director/Chief Executive Officer, Mr Femi Adeoti, said.
He said in an interview with our correspondent that the company would provide the platform for rural Nigerians to have access to key banking services next to their doorsteps through its network of agents across the country.
According to him, one major challenge facing financial inclusion is the lack of a national identification system.
He said, “As a result of this, the Know Your Customer requirements from the financial institutions could be quite stringent. Some of the requirements stipulated as conditions to participate in the financial system, therefore, are hard to meet for the kind of people the policy is targeting. These people are at the bottom of the pyramid.”
Adeoti stressed the need for other players to complement the efforts of banks by being involved in the provision of financial services in order to reach people in rural areas.
“That is a good reason to use super agents and an agent network to carry out last mile banking services since these agents (corner shops, supermarkets, pharmacies, business centre and others) exist everywhere in the country,” he said.
The CBN, in a recent report, described verifiable ID as a prerequisite for accessing formal financial services, saying, “Yet 60 million adults do not have a government-issued ID in Nigeria.”
Adeoti said a national ID system would have been a better way to ensure participation in the financial architecture.
He said, “However, in the absence of that, we need to find other ways to capture the details of those that we are enlisting. The process should be relaxed without necessarily compromising key details.
“Inlaks and other selected super agents for this programme can assist with that since we would be closer to those that we are registering to be included.”
According to him, policy makers must set minimum service criteria to ensure efficiency, trust, customer service delivery, consumer protection and others in order to give an experience that is better than the alternative (keeping cash at home).
“Finally, consumer literacy and education (in Nigerian major languages) are very important to serve as information and education on the existence of financial services, their rights as a customer, service expectations and the protection they have in case things go wrong,” Adeoti added.
The Inlaks boss also believes that telecommunication companies have a major role to play in deepening financial inclusion in Nigeria.
He said being the country with the highest mobile penetration in Africa meant that the mobile phone could play a key role.
Adeoti said, “Mobile phones have also been used in other climes as platforms to render financial services in rural communities. Government can provide incentives for telecommunication companies to deploy high-quality data services in the rural communities since the 3Gs and 4Gs connections are usually deployed to cities.
“Modest data services are required for the platforms on which these financial services run to operate effectively. Poor data services giving rise to service failures are going to be major disincentive for Nigerians to bring them into the financial architecture. In addition, service notifications by way of SMS are equally important to perform optimally to give good customer experience and satisfaction.”
According to him, there is a connection between economic prosperity and financial inclusion.
He said, “Being included in the financial architecture makes the average Nigeria to be ‘bankable’ and being bankable makes available many ways of improving the economic prosperity of the individual.
“For example, the individual will be ‘known’ within the financial system and will then be able to build a savings history, which can serve many purposes. From cushioning in case of emergency to profiling the individual for loans to improve his/her business.
Adeoti added, “Other ways by which financial inclusion impact economic prosperity is that the more people in the financial system, the better is government able to plan and derive micro and macroeconomic policies to better the lives of the citizens.
He noted that micro loans and micro savings had been demonstrated in Nigeria and other countries to improve the economic well-being of the people through improved access to business loans, improved ability to deal with emergencies through cash saved and financial discipline that accompanies interaction with formal financial service providers.
“Using our platform, Nigerians will be able to open a bank account without visiting a bank branch. They will be able to transact using the account and use a debit card at the same location to send and receive money, buy airtime, pay bills like cable TV, utility and some other important financial services like requesting for a mini bank statement.
“We will do all these within the regulatory provisions but with clear goals and objectives in terms of the number of rural people we plan to reach and serve,” Adeoti added.