CRDB's agency banking to reach the unbanked

CRDB Bank Managing Director, Charles KimeiCRDB Bank, one of the largest financial institutions in the country, has amplified the chances of reaching a large number of unbanked populations through the launch of agency banking that simplifies client outreach.
Tanzania, the most populous state in the East African Community (EAC), according to available data, has the highest rate of unbanked populations, trailing behind Kenya and Uganda. Official data show that out of 45 million Tanzanians, only 12.5 per cent has access to banking services.
The rates in Kenya and Uganda are 23 and 19 per cent, respectively. The limited access to banking services impedes the country’s rapid economic growth and social development as most citizens rely on traditional ways of storing money, crippling the banks’ ability to lend due to low rate of savings.
And it’s not that ‘wananchi’ prefer to put their money under the pillows or pig banks where the financial resources generate no interest.
CRDB Bank Managing Director, Charles Kimei, says most bank expansions were being derailed by relative high costs of opening new branches that go as high as reaching over half a billion while it takes years to recoup the investments, especially in rural areas.
“That is the reason most banks are located in urban centres where it takes shorter period to recover the invested capital because of high population and awareness on banking services,” said Dr Kimei during the launch of CRDB agency banking - Fahari Huduma - the first of its kind in the country.
The bank became the first in Tanzania to introduce banking services through a third-party since it was formalised early this year. The agency banking, which doesn’t need heavy investment, seems to be the liberator of the rural unbanked population.
Even though the rural dwellers want the bank services, putting up a branch is expensive while distances between villages make it even more difficult to reach masses.
CRDB wants to capitalise on the agency banking, a concept that involves a commercial bank contracting different entities or individuals to provide services on its behalf.
A recent study in Tanzania shows that only 12 per cent of the 45 million Tanzanians - some 5.6 million people - have access to conventional banking services.
CRDB Bank has appointed Tanzania Posts Corporation (TPC) its first agent countrywide.
Other potential agents are also welcome but should have permanent address and operational business of not less than two years with minimum capital. The bank will train the agents’ staff to equip them with the minimum banking skills.
The approved agents will offer a range of services including cash withdrawals and deposits, repayment of loans as well as payment of utility bills and transfer of funds within CRDB bank network.
The services will be offered via mobile phones and points of sale (POS) which will be connected to the bank's network.
The bank has engaged M-Pesa and Airtel Money for mobile money transfers. But, why the bank with 90 branches scattered all over the country goes for agency business? Dr Kimei cites poor infrastructure and bureaucracy in addition to scattered human settlements among the impediments that frustrate the provision of banking services.
"It costs about 700m/- to set up a full-fledged branch and many banks, the small and new entrants in the market in particular, can hardly afford to open up branches in remote areas," Dr Kimei, the economist turned banker says.
There are currently 50 registered financial institutions in the country with a total of 525 branches, with each branch serving an average of 85,000 customers. The situation is quite different from the developed world where one branch serves less than 1,000 people.
And that tells why there are hardly queues for customers seeking banking services in developed countries. CRDB Bank Manager for Agency and Compliance, Donath Mushi, says apart from expanding its reach to customers, the new product also presents a business opportunity for local entrepreneurs.
"Agents will be paid commissions for transactions they undertake and this will help to boost their income and be part of the CRDB Bank's network," Mr Mushi said. Listed on the Dar es Salaam Stock Exchange (DSE), the bank boasts of over 90 branches, 300 automated teller machines (ATMs) and 1,000 points of sale spread all over the country.
CRDB share had recently rallied to reach 205/-, an 18 month high. The bank takes advantage of the various technology solutions available to enable customers to transact at convenience.
The objective of the agency model is to offer the full range of banking services to customers without having them to visit the bank branch. Low income and the high cost of banking, coupled with lengthy procedures as well as lack of extensive bank networks, have denied many Tanzanians access to financial services.

The selection of bank agents will be stringent but friendly to protect the customers’ money and adhere to banking regulations.
Source: The Daily News, reported by Sebastian Mrindokoin Dar es Salam
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