The Shared Agent Banking Platform is Increasing Financial Inclusion in Uganda

By Brenda Banura-Ssekalo

Fast; there are hardly any queues. Convenient; agents are within the neighbourhood and open for longer hours than bank… These are some of the phrases customers use to describe agent banking. This is where bank customers can carry out transactions at contracted retail outlets known as bank agents. “I no longer have to spend money on transport to access the bank branch. My community now has an agent,” a customer in Eastern Uganda says. Thanks to shared agent banking, customers of one bank can make cash deposits and withdrawals at agents established and shared with another bank.

Over four years since the first steps to create a shared agent banking platform, Financial Sector Deepening (FSD) Uganda is proud to report that as of 2022, 22 out of Uganda’s 25 commercial banks (Tier I) are part of the shared agent banking platform. This is in addition to one regulated financial institution in Tier II which category includes credit and finance companies.

The journey to establishing a shared agent banking platform started in January 2016 when Uganda’s Parliament passed the Financial Institutions (Amendment) Act, 2016 which enabled banks to use agents to deliver their services across the country.

In 2017, BoU released the agent banking regulations that provided a regulatory framework for agent banking services. The guidelines did not explicitly allow for a shared agent banking platform prompting the Uganda Bankers’ Association (UBA) to come up with the concept of a shared agent network within the existing agent banking framework, which concept BoU approved.

UBA then approached FSD Uganda to bring the idea to fruition. Recognising the potential of this industry-driven initiative – the impact it would have on formal financial inclusion, customer choice and market competition, FSD Uganda was quick to come on board along with Consultative Group to Assist the Poor (CGAP), a think tank within the World Bank. The possibility of extending the reach of
the financial services to the underserved, underbanked, and unbanked in rural, remote, and frontier markets made this worthwhile for FSD Uganda.

FSD Uganda’s role in making the platform operational
To get the process started, FSD Uganda brought together several banks interested in joining the platform, working with the industry to create a robust governance and participation framework, technical standards, and business model.

In addition to providing technical assistance, FSD Uganda supported the initial set-up personnel required to establish the Agent Banking Company and the platform. FSD Uganda provided grants that helped to hire the project manager, oversee the project, develop the training curriculum that set the standards for agent recruitment and management for all banks, and train bank staff in deployment of the solution.

Our initial support and the credibility of the agency helped crowd-in the support of multiple development partners and secure financial commitments towards providing further technical assistance to the initiative.

On 25 April 2018, UBA launched the shared agent banking network with only two banks. The increase in the number of participants to 22 by 2022, saw 20,463 agents join the shared agent banking network. The platform has cumulatively processed 4.6 million transactions valued at UGX 5.14 trillion (USD 1.4 billion). 533,532 customers with bank accounts were served between January
2020 and December 2020.

Impact of the shared agent banking platform
These numbers show that a shared agent banking network has significantly contributed to deepening access and enhancing the use and uptake of financial services even in rural areas, a key outcome for FSD Uganda. For example, an FSD Uganda study in collaboration with UBA and Uganda Christian University shows that between October 2019 and December 2020, the total number of agents in Hoima and Mbarara grew by 90%, and active agents by 69%.

Through this network, competing banks ride on a shared technology platform and rather than competing on the reach of their agent networks, these banks compete on price, products, and agent and customer satisfaction. Agents on the platform provide various services such as cash deposits and withdrawals, inter-bank transfers, utility payments, and statutory payments among others. The reduced cost of service delivery enables banks increase their reach, a win for enhancement of financial inclusion. Ease of operation also broadens customer choice and shifts market competition from reach to quality of service.

Varghese Thambi, CEO of Diamond Trust Bank (DTB) considers the platform advantageous because it significantly reduced the cost of reaching DTB account holders and general customers in  the banking sector.

This innovation has helped banks to serve under-served populations better by facilitating Ugandans to open accounts with participating banks from their neighbourhoods. This is especially so in the urban and peri-urban areas where 95% of the agents are based.

In the rural areas, the shared agent banking network has enabled the proximity of access points to women who are less likely to be financially included than men and created income opportunities for youth and rural populations to serve as agents.

The future of the shared banking agent platform
At the time of establishing the shared platform, Uganda’s mobile money had matured so much that the mobile money agents outnumbered bank branch and Automated Teller Machine access points by nearly 100 times.

A go-ahead to establish the shared platform gave financial institutions an opportunity to level up to the telecommunication companies. To achieve this, several things must happen. Connectivity infrastructure needs to be improved, and pricing models and stakeholder compensation need to be integrated, among others. The participating financial and non-financial institutions and agents being
on-boarded also need to increase.

A few banks reported closing some of their branches which are more expensive to operate to focus on enhancing financial access through the platform. As more agents sign on to the shared agent banking platform, the program will work to deploy at least 615 agents or more for every 100,000 people.

The shared agent banking network still has a long way to go, especially in rural and remote areas where most that are financially excluded reside. But the journey has begun and by the look of things, it will only go forward.

For more information, read FSD Uganda’s ‘Making elephants dance’ – The pioneering journey of Uganda’s shared agent banking network.