Research & Analysis

Regulating Banking Agents

A major obstacle to financial inclusion is cost--not only the cost incurred by banks in servicing low-value accounts and extending banking infrastructure to underserved, low-income areas, but also the cost incurred by poor customers (in terms of time and expense) in reaching bank branches. Achieving financial inclusion therefore requires innovative business models that dramatically reduce costs for everyone and thus pave the way to profitable extension of financial services for the world's poor.

This is why banking agents are part of an increasingly potent model for financial inclusion. Take, for example, Kareem. Kareem stands behind the counter of a small general store on a bustling roundabout in the heart of Karachi. Although he sells a variety of toiletries and other products, the largest sign outside his shop advertises his role as an agent for Easypaisa, the mobile telephone funds transfer product of Tameerbank. Kareem is one of Tameerbank's 8,000 active agents--effectively serving as an extension of the bank's network by providing cash-in and cash-out services and other financial services to Easypaisa customers.

All parties benefit. The bank saves the cost of building expensive branches and hiring staff, enabling it to reach low-income people with financial services. Kareem earns a transaction fee from Tameerbank to supplement his sales. And customers save on transportation time and expense because Kareem's shop is close by, and they also enjoy the generally lower cost of the service.