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Digital journey in the roll out of Agent Banking 2018-19

Background & rationale for larger financial inclusion through Agent Banking Platform: Uganda

According to the 2017 Demand and Supply Side Survey, about 58% of Ugandan adults are unbanked.

Top inhibitors being:

1. Lack of formal banking infrastructure available in rural areas (cost-effectiveness and proximity)

2. Lack of viable identification required to set up a bank account (KYC light regulations)

3. Distrust in the formal financial system

4. Illiteracy and language barriers

Mobile Money (launched in 2009) has made rapid progress, with more than half of the Ugandan population having access to Mobile Money services, offered primarily by the two MNOs (MTN & Airtel).

The issue of affordable & necessary credit still continues, with a large part of the population not being part of the Credit information system.

The revised financial regulations in 2017 led to the formation on ABC (Agent Banking Company) to roll out Agent Banking under the supervision of the Central Bank of Uganda (BOU). ABC is a joint venture undertaking between the Uganda Bankers Association (UBA) and Eclectics international, to build and operate a shared agent banking platform that enables connectivity among the financial institutions. The aim of the shared platform is to offer a single agency banking platform that tackles the issues of costs, Application Program Interfaces (APIs), policy and regulation, shared agents, network connectivity. This project aims to increase access to financial service points in a short time and ensure that every Ugandan has banking access within a 5 km radius.

Project idea supporting the digital strategy:

The project comprised participation (plug & play) by a small Bank into the shared platform for Agent Banking, led by the Banker’s association. The objective is to create a larger outreach in serving the semi-urban and rural population; creating larger financial inclusion through proper bank accounts, reducing the cost of transaction, creating records for the customers & making them eligible for affordable and adequate credit in future. The initial objective of the Bank is to promote local currency & low-cost deposit. The Bank also proposes to distribute Insurance & Credit products to these set of customers.

Institutional SWOT analysis

Strengths of the institution or consortium to successfully implement the proposed technology

i) Technology – Skilled manpower and technology service providers for creating the backward integration with the Bank’s CBS (Core Banking Software), protecting the Open API environment through proper firewalls, creating adequate server capacity to handle the scale of transactions, proper disaster recovery and datacenter back up, creating an automated call centre with call tracking and KPIs for TAT.

ii) Trained manpower –

- industry experienced from MNOs for selection & management of agents

- operations team to embrace the new channel and scale-up operation

- the existing Call Centre facility to service the new channel

iii) The Marketing & communications to be aligned with the Business Plan & go to market strategy of the Bank.

iv) Control and Fraud prevention mechanism

- Right processes and manuals for reduced operational risks in transaction

- Integration with national identity (NIRA) site for KYC authentication

- Strong complaint management & redressal with defined TAT

Assessing potential weaknesses of the institution or consortium and how can they be handled

a) Failure to achieve the targeted number of agents

Control - Target large institutions especially those with a high distribution network all over the country. e.g. Posta Uganda

b) Delay in rolling out

Control: The commercial agreement with the service providers to have; clear structure, well-defined deliverables, reporting parameters on the progress of the project, well- defined SLAs with penalty clauses to ensure service delivery.

a) Inability to leverage the social capital in the rural and semi-urban areas and create Trust

Control: With ears on the ground, the institution should drive ‘High Tech with High Touch’. Regular engagement in the hinterland of the agents and promoting call centre support shall be key to the larger penetration and acceptance

b) Agent activation and liquidity management

Control: Providing timely liquidity support through the Agent Supervisors ( maybe an outsourced model), tie-ups with the Bank Branches or Cash centres

Opportunities and threats can be expected for the institution or consortium


i. Well established Agent network of MNOs

ii. Impact of service delivery failure may negatively affect the new channel as well as the image of the Bank

iii. Any kind of Fraud or misappropriation can cause reputational damage


i) Leverage on the experience & feedback of existing network of about 3000 agents set up by bigger Banks individually & build upon developing better customer experience

ii) IFC agreed for financial support in agent training

iii) Opportunities for institutional tie-ups with Forex Bureaus, Micro Finance Institutions, Agricultural commodity traders ensuring larger outreach

SMART Goals for the institution or consortium

The Digitization objective was clearly pronounced through the launch of the USSD -Mobile Banking, OMNI Channel, Offsite ATMs, CDMs and Smart Kiosks. This is expected to improve the efficiency in Banking transactions, reduce the cost of operation and improve the speed of services. The Bank aims to leverage this and be recognized as one of the most innovative banks in the industry. While the consortium aims for a larger market share compared to Mobile Money, the objective of the Bank was to multiply acquisition by creating a larger outreach and improve deposit balances. The Bank aims at using this channel for cross-selling Bancassurance, savings plan and other credit products. The channel experience shall equip the Bank to innovate and customize products for the future.

Technology implementation

The major steps to implement the technology (e.g. requirement analysis, training and pilot testing, maintenance

Following the Business Plan – the ICT team is expected to receive a BRD (Business Requirement Document) which enables creating a scope document for the project. The scope document to clearly evaluate the current IT infrastructure, the capacity of the organization to implement and operate the new channel and the additional IT investments that are necessary for the project rollout. The key areas being :

I. Network evaluation – existing capacity & performance 24/7. Upgrades of the network links, additional bandwidth requirement. Evaluation of connectivity offered by the MNOs in terms of stability & outreach vis a vis the proposed agent location. Contingency plan through VPN from another service provider

II. Evaluation with SWITCH service provider on the current capacity, integration and requirements for an interface with the Agent Banking Co. ( ABC – shared platform) in terms of incremental delivery & consumption.

III. Current Server infrastructure position to support new channel volume & additional investments if any for increasing server capacity

IV. Additional license requirements for the database & the operating systems

V. Evaluation of the CBS (Core Banking System) and its readiness to route additional volumes. Integration costs with ABC, mPOS, POS and mobile platforms for the agents

VI. Reevaluate the functioning of the Transaction Alert ( SMS) and the USSD Mobile Banking platform

VII. Communication bridges between solutions/platforms will need to be created that direct and settle transactions properly, manage fees, reconciliations, etc.

VIII. Additional hardware requirements like POS machines, CDMs, ATMs etc.

IX. Assess the availability of skills & expertise to develop, support and manage the new channel. GAP analysis for technology lead, training requirements & associated costs thereof

X. Include the product and channel into the Bank’s BCP ( Business Continuity Plan ) & Disaster Recovery mechanism.

Project Plan:

VPN Connection

SWITCH Integration PHASE- 1 interface incremental delivery to ABC ( Agent Banking Company- shared platform )

SWITCH PHASE- 1 interface incremental consumption by ABC

Detailed Business Scenario & User test case preparation

ABC Portal Access & Training

Incorporating the Charges & Tax matrix

Accounting Entries Review

UAT Champion Identification

New Accounts and GL's( General Ledger) creation in CBS ( Core Banking Software)

Internal Audit requirement for this rollout

Agency Banking Risk Assessment

UAT (User Acceptance Test) environment readiness with IT System Integration Testing

UAT Round 1

UAT Status Review with all the stakeholders

Final Round UAT

Training to bank staff

UAT Signoff

Internal Audit/Risk Review

Go Live Deployment

Go Live - Pilot Launch with one agent

Go Live - with all the agents

Go Live Monitoring

Product Rollout Review with Business Team after Pilot

Go Live Signoff

Internal preparation for the transformation process (i.e. organization transition, change management)

This transformation process requires significant cultural and operational change at every level in the organization, thereby the following may be necessary:

- Support of the Internal stakeholders & Senior Management in dedicating resources or sufficient budget for execution

- Dedicate existing staff to support the project roll-out, reduce the current workload and realign the incentives

- Skill Gap analysis of the staff, complemented through training programs

- Deal with legacy organizational culture and structure, communicate opportunities for taking short term risks to efficiently grow business, gain support for cross-functional collaboration and ensure meeting milestones on project delivery

- Process mapping and systems review to ensure alignment with the digitization objectives, ensuring that all service and product manuals are in templated versions and ready to use

Clearly communicate the benefits of the initiative; improved customer satisfaction, reduction in transaction costs, convenience and accessibility of services offered through Branchless banking. Internal staff to be the ambassadors for the new product.

Risk management

The key risks associated with the channel being;

i) Lack of knowledge among the rural unbanked population & poor network availability

In the agent selection criteria, the agents can be hardware shops, pharmacies and retail shops in almost every corner of this country. These agents are easily accessible to the unbanked population & even known faces. It is expected that these agents will have some existing infrastructure and assured footfalls. Lack of knowledge among the unbanked population will be mitigated by ensuring agents are trained thoroughly in product information, service/product delivery processes and customer service. Massive campaigns & market storms through radio, TV, etc. to increase awareness. The agents will be supported by the branches in the respective locations. Impromptu visits to be made to gauge the level of service.

ii) Business Risk and long-term investment

Business Plan to clearly state that growth in income can be driven on a Medium to long term basis. The Bank needs to be strategic in increasing the outreach and carefully select the agents & locations. The activity of agent selection, onboarding, training and activation shall involve high operating expenditure vis-a-vis the income /float margin earned in the initial period. Indiscriminate Agent selection, increasing the network for the sake of numbers etc. can hurt the Bank and delay the break-even. The Bank’s shareholders to be clearly informed through a properly drafted Business Plan and consent should be obtained for this long-term investment and digital growth objective of the Bank. Speed of delivery and emergency availability of funds beyond banking hours should provide a competitive edge.

Technology support; in terms of DFA (Digital Field Application) module facilitating faster account opening and KYC updation & automated tracking of liquidity with agents and alerts system to avoid any Cash Out situation shall be key to support the Business Plan of the Bank in improving their market share.

In addition to the profits, Agency Banking offers other benefits that increase its viability:

1. Leverage on the agency relationship to grow other business

2. Mobilization of cheap Local currency deposit deposits through the countrywide collection

3. Improvements in customer service by giving access to a wider network location.

Seven banks had connected on to the system including Stanbic Bank, Barclays Bank, Bank of Africa, Diamond Trust Bank, DFCU Bank, Housing Finance Bank and GT Bank. 14 additional Banks were at different stages of the integration process, securing the necessary regulatory approvals & implementation.

The long-run success shall depend upon:

· Biometric solutions to move away from the PIN-based solution for Card transactions in the Agent Platform.

· Integration with National Identification and Registration Authority (NIRA) for online authentication of the Unique Identification for opening KYC lite accounts.

· Interoperability between Mobile Money and Banking account for transactions at the Agent platform linked to mobile wallets and sharing of fees.

Profitability can be further driven through Cross-Selling across the Agents Platform &

working with or through Savings and Credit Cooperatives (SACCOS) and Savings and Lending Associations / Groups (SLAs/Gs), Offer client-centric products like Agrifinance, crop & microinsurance.

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