Going Further: The Next Steps for Agency Banking
By Rupert Scofield, President of FINCA International
Traveling to a bank can be risky business. For Seraphine, a kindergarten teacher who runs a fabric and snack stall in Kinshasa, Democratic Republic of Congo to supplement the income from her meager salary, the risk of theft on the journey to her bank branch is real. “While walking, you can encounter thieves. While walking, your bag can be stolen,” she told us.
Seraphine is like many microfinance clients who have to travel long and sometimes unsafe distances just to make a simple financial transaction or payment. The journey often leads to people losing money, time and productivity that could be spent on their businesses.
As a solution to these problems, in 2012, FINCA launched agency banking in the Democratic Republic of Congo. Agency banking utilizes a network of local merchants and shopkeepers, in areas where FINCA usually doesn’t have a presence, to provide basic banking services. In other cases, the agents can be right across the street from a FINCA branch to handle the overflow of customers so that they don’t have to wait in line for a teller. The agents are equipped with POS machines, a portable device that connects to FINCA bank accounts, easily and securely, through biometric fingerprints.
Today, thousands of microfinance clients in the Democratic Republic of Congo, like Seraphine, utilize FINCA’s agency banking network to access financial services conveniently. Over 75% of all FINCA client transactions in the DRC are done through our agent network. We offer these services in Tanzania and Zambia as well.
FINCA’s initial success with rolling out agent banking in the DRC has provided us with a template for deploying these services in other countries in our network. Aside from easing traffic in our urban branches, agency banking has great potential to reach people in the more remote and rural areas of the countries we serve.
Location, Location, Location
For agency banking to work, FINCA has to strategically place agents around our branches. Initially, the agents cannot be too close or too far from the branch as they would not receive enough business.
As awareness on FINCA’s services and our agents grows in the community, the agent network is expanded to other areas with high potential of customer penetration. Communities ideally should have a good number of both FINCA clients and potential new customers. The distances can increase but still cannot be too far from a branch or other FINCA agents.
A Balancing Act
Balancing the needs of FINCA agents is one of the key drivers to how far, and possibly remote, FINCA can expand its services. Agents need to rebalance their cash reserves regularly and need access to a FINCA branch to do so, as the cash still needs to be physically transported if an agent’s “float” needs to be increased or cash builds up too quickly from deposits. In remote areas, customers may face problems withdrawing cash if not enough was deposited with the agent. If the branches are too far away, it would become expensive to run the agent’s business with low investment.
To troubleshoot this, FINCA is experimenting with its model to reach more areas where our branches don’t have a presence. We know that connecting agents with each other can also help to maintain cash flow. In Zambia, for example, about 90% of our agents maintain cash reserves by rebalancing with each other instead of at the branch. In addition, FINCA needs to assure that rural or remote areas can generate enough customers. We’ve seen sales drives help bring more customers to our agents in our current locations and could possibly serve as a solution in less customer-penetrated areas.
As FINCA rolls out our agent banking model across our network, we’ll continue to explore other ways technology and innovative solutions can achieve financial inclusion and reach more of the “unbanked.”