“Agency banking essentially entails extending banking services to lower levels of the society through an agent and this increases financial inclusion.
Agency banking that is expected to be rolled out late this year will increase financial inclusion. According to Wilbrod Owor, the Executive Director of Uganda Bankers Association, an umbrella body that brings together all commercial banks in Uganda, the approach will drive financial inclusion by increasing financial and banking services outreach to the underserved, under banked and the unbanked population.
"Agency banking essentially entails extending banking services to lower levels of the society through an agent and this increases financial inclusion. What the banking sector has done is to marshal the advantages and economies of scale by coming together, pull resources so that ultimately the cost of delivering these services is cheaper," said Owor.
He adds that the new model will further reduce access barriers to financial services as well as deepen and broaden the range of financial services like formal savings, credit products and many others including financial literacy and advisory services.
"The regulations are in the final stages and what the commercial banks are doing is to ready themselves by putting up infrastructure that will deliver agent banking," Owor added.
Owor was speaking at the launch of the first Annual Bankers Conference scheduled for July this year, whose key objective will be to take stock of and gain insights from global, regional & country specific issues, trends & drivers in the banking & financial services sector and discuss the dynamics that are increasingly shaping sustainability strategies in banking & finance.
Agency banking in Uganda
Early this year, the Ugandan Parliament passed the long delayed Financial Institutions Act (Amendment) Bill 2015, opening new possibilities for the country's financial sector. The Bill is an amendment to the Financial Institutions Act 2004, which governs Uganda's financial sector especially the commercial banking and insurance sectors.
In the amended bill, concepts of agency banking, bank assurance, Islamic banking were to be introduced as well as regulation of mobile money transfers.
Agency banking is a form of banking that will allow commercial banks to use Agents in the form of established business entities such as petrol stations, post office branches, hardware stores and the alike to conduct minor banking services like deposits, loan applications and so forth on behalf of the commercial banks. This is expected to reduce the cost of operation for the commercial banks, which will no longer need to set up brick and mortar branches to extend reach.
According to Fin scope 2013, only twenty percent of Uganda's adult population is banked or using a formal regulated financial intermediation service. Available data shows that in a population of nearly 34 million Ugandans, there are just only over 5 million bank accounts.