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Agency Banking: Lessons For Uganda From Other East Africa Markets

By Michael Ssekyondwa

Following the signing of Agency banking regulations by the Bank of Uganda, commercial banks in the country will now start offering Agency banking. These services allow banks to provide financial services virtually anywhere across the country through third parties called agents.

Today’s customer is concerned about convenience, simplicity, security and ability to make choices.

Agency banking comes in handy to provide all these.  It will offer several benefits over brick and mortar model in many ways to both the customer and the bank which include improved customer experience arising out the flexibility it brings and most importantly, many Ugandans who have been excluded from the formal banking systems for several reasons will now have access in the manner they chose.

To the bank, Agency banking will improve efficiency as banks will now be in a position to reach many customers in a cost-effective manner.

The current brick and mortar model prohibits banks from reaching a wider market due to its cost implications. This has left many Ugandans excluded from formal banking ecosystem.

Agency banking comes in to solve this dilemma as banks will be able to extend their services through agents at a wider scale and still be in position to offer those services affordably.

However, even before local commercial banks roll out Agency banking, our neighboring countries, where Agency banking has already taken root should serve as learning lessons before it’s full implementation.

Being a regional bank, KCB Bank has set clear benchmarks for agency banking within the region.

For six years since 2011, KCB bank has been carrying out agency banking in four East African countries (Kenya 2011, Rwanda 2014, Burundi 2015 and Tanzania 2015); this experience not only cements the bank as an industry leader in this sector and the region, but also provides vital lessons that if implemented here, will benefit the local industry.

Like any other business, agency banking offers both opportunities and challenges. Therefore, the banking industry must address the challenges that are posed by having agency banking while at the same time taking advantage of all the benefits of having this channel of banking.

Although, customers will now be dealing directly with the agents as opposed to physically visiting the bank, the financial sector still needs to maintain the banker-customer relationship. The customer is still the bank’s responsibility.


Security Concerns

Studies carried out in the East African region indicate that Uganda leads in financial related crimes such as fraud, theft and armed robberies.

Mobile money agents and mobile distributors of FCMGs have fallen victims in numerous instances.

Therefore, financial institutions should therefore ensure that agents have taken into consideration security measures that safeguard customers while transacting.

The issuance of National Identification Cards will go a long way in preventing fraud cases.

Addressing fraud will be one of the key issues that the bank will have to invest in by putting in place proper risk mitigating measures.

Ongoing training and support for the agents from the banks will ensure that the agents are alert, aware and can respond to scams in the market.

In every business, customer service is its core service; the agents will need to deal with customer queries, complaints and questions in a professional manner. This should serve as part of the agents training to ensure that customers receive good services.

Once Agency banking is fully implemented, Ugandans will now be in position to access formal banking services in a most convenient and less costly way.

To the businesses, as more people get involved in formal banking system, businesses will be provided with many options and costs of doing business with commercial banks will generally go down in the long run.

To the Uganda economy, to begin with, Uganda is a signatory to the “Maya Declaration” that seeks to achieve greater financial inclusion for her people by optimizing digital financial services.

In addition, agency banking if implemented well will lead to growth of the financial sector and make monitory policies more effective.

The Author is the Agency and Digital Finance Manager, KCB Bank Uganda



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