‘Agent banking transforms financial landscape’

Agent banking has the potential to transform the country’s financial landscape and access to services, Reserve Bank of Malawi (RBM) chief examiner for policy and regulations Sopani Gondwe has said.

He said in agent banking model, retail outlets such as shops, post offices, supermarkets, agro dealers and lottery outlets act as agents for banks in areas where banks do not have sufficient incentive or capacity to establish formal branches.

“Cash-in, cash-out services are managed using new communications technologies, which electronically link transactions to a bank, typically using a bank card and/or a point-of-sale [PoS] device and/or cellphone,” he said last week in Mangochi in his presentation at a payments workshop for business journalists.

Gondwe said in agent banking, interoperability—the extent to which systems and devices can exchange data and interpret the shared data—means more convenience to the public.

He, however, said there is need for financial institutions and mobile money operators (MNOs) to leverage on each other, stressing that regulatory support for the model is guaranteed.

Gondwe cited two models in agent banking operational in Malawi.

Bank based model where customers have direct contractual relationship with a bank and customers are directly linked to their bank accounts, for example, bank mkhonde by Opportunity Bank of Malawi (OBM).

There is also the non bank model in which customers have no direct contractual relationship with a bank, in which customers details are kept on the telco virtual servers such Airtel Money and TNM Mpamba.

The RBM official said setting up agent banks is less costly than traditional bank branches because it requires smaller investments in staff and infrastructure.

“It is also more flexible. Agents have lower security requirements than brick-and-mortar branches. There is also significant potential to expand outreach, especially remote areas,” he said.

The agent banking model also cuts customers’ travel costs and allows for greater convenience.

Gondwe said retailers’ commissions from agent banking provide an additional source of revenue for communities as well as agents themselves, and the development of the national switch—the shared switch platform—will significantly enhance the agent banking model.

On the backside, he said laws and regulations to support agent banking are not enough which means there must also be sufficient business incentives for agents and financial institutions to implement this model.

But Gondwe said government cash transfers can kick-start the model, but agents must also be able to offer other services.

There is also need to maximise the number of transactions per customers as one way to ensure the system is financially viable.