That journey to financial inclusion begins with trust, having no formal connections to cost-effective, reliable cash-in and cash-out (CICO) services for people unfamiliar with formal financial systems. Such services create confidence and motivate the movement of people’s funds toward smart wallet storage and other financial instruments.
Financial inclusion extends beyond transactions. It allows people to fund small businesses, foster entrepreneurship, and support community development. When communities have access to financial services, they build resilience against economic shocks, reduce poverty, and promote sustainable growth.
Barriers to Financial Access in Developing Countries
Due to critical challenges, access to finance remains limited in developing countries. Inadequate infrastructure, low incomes, and high banking charges mean many potential African customers are disconnected from the financial system. The scarcity of branches, ATMs, and digital networks and the lengthy distances to urban centers create a lack of financial access for those in geographical and economic peripheries, heightening inequality.
Statistics make such disparities vivid. Across the sub-Saharan region of Africa, only 49 percent of adults are said to own a formal bank account. The percentage varies from country to country, with Ghana at 62%, Nigeria at 64%, and Kenya at 79%, where mobile money has played a critical role.
ATM availability also varies significantly among different nations, such as Nigeria, which has approximately 16.2 ATMs per 100,000 adult heads; Ghana, 11.4; and Kenya, 6.9. Internet usage is almost similar at 70% in Ghana, 41% in Kenya, and just 35% in Nigeria, much lower than 64% worldwide.
Agency Banking Promoting Financial Inclusion
Nigeria and Kenya are proof that agency banking is innovative and works. This system can significantly enhance financial access in less-developed places around the world. Agency banking’s basic approach involves mobilizing an established network of authorized agents equipped with point-of-sale (POS) devices and extending services such as cash deposits, reclaiming, payments, and money transfers.
The M-Pesa in Kenya supports a viable case study proving the success of agency banking. A vast network of agents expanded M-Pesa’s reach, bringing financial services even to rural areas with little conventional banking infrastructure. Today, over 30,000 retail outlets in Kenya double as bank agents, thus providing financial access and more credit and savings options to small business owners.
Challenges in Agency Banking
Despite its success, agency banking faces challenges, particularly in rural and peri-urban areas. Agents in remote areas struggle with logistical hurdles, such as maintaining adequate cash supplies. They are also vulnerable to hardware or software failures and often lack formal training, limiting their ability to serve customers efficiently.
Additionally, fraud and counterfeit currency pose financial risks.
First movers—organizations pioneering agency banking in new markets bear high costs in training agents, educating users, and building trust. Competitors can later enter the market at a lower price, discouraging initial private investment.
Moreover, inconsistent regulations across African markets create fragmented implementation. While some regions impose strict oversight, increasing compliance burdens, others lack adequate regulation, exposing agents and customers to risks.
Strengthening Agency Banking
Financial institutions can strive to overcome these obstacles by establishing a training program to enable agents to have various practical skills and invest in institutional infrastructure for effective service delivery. Other technologies, such as biometric authentication and improved POS systems, can mitigate fraud losses. A strong cash logistics network can ensure enough liquidity for agents in remote locations to fulfill their customers’ demands.
Public-Private Partnerships Turns a Model for Expansion
While private-sector-led agency banking has flourished in urban areas, expanding into rural regions requires tailored strategies. Rural markets face lower transaction volumes and weaker economic activity, making agent operations less profitable. Hence, governments and regulators must create public-private partnerships (PPPs) to connect private innovation with public resources.
Other countries can learn much from India’s Business Correspondent (BC) concept. The BC model, introduced by the Reserve Bank of India in 2006, was based on agency banking to disburse welfare payments. It ensures that funds reach the proper beneficiaries and includes them in the mainstream financial sector.
The model became even more efficient with Aadhaar, India’s biometric ID system, which streamlined customer verification, reduced onboarding costs, and improved service delivery. Interoperable agent networks allowed multiple banks to use the same infrastructure, significantly expanding financial access in rural areas.
The Future of Agency Banking
Agency banking is an approach to achieving financial inclusion. It decentralizes the ability of banking services to be accessible to unbanked communities. However, for agency banking to reach its full potential, collaboration between financial institutions, regulators, and local agents must continue.
