The next phase of developing agent networks in Pakistan

This post is written by Khurram Sikander, Senior Lead, SBI ADC Implementation Group & Gerald Rasugu, Global Lead, SBI Agent Network Group.  Khurram is based in Karachi, Pakistan and Washington, DC, USA, and Gerald is based in Nairobi, Kenya.

Photo credit: State Bank of Pakistan

SBI, at the behest of the State Bank of Pakistan (SBP), hosted a branchless banking workshop focusing on agent network development last quarter. The workshop attracted key stakeholders from the branchless banking industry, including financial institutions, technology and telecom companies. Several points were covered regarding the success of branchless banking and its dependence upon the quality of banking agents in the market. Among the opportunities identified as imperative critical factors pertaining to branchless banking is the strength of its agent network. A well-developed banking agent network is undoubtedly the most efficient way of penetrating the un(der) banked segments of the population.

The main purpose of the conference was to understand the nature of challenges encountered when institutions deploy branchless banking initiatives and identify opportunities as branchless banking initiatives evolve beyond the implementation stage.

The workshop was well attended by the various industry players and thought leaders, and was moderated by SBI. The session began by highlighting IFC’s 2011 Mobile Money study which suggests that a country’s location on the branchless banking demand curve determines the kind of mobile money business model that should be developed. As such, the need for Pakistan may initially be for low speed, infrequent transactions and eventually move towards relative demand for high speed, high volume/value transactions. Previously Pakistan was in a phase where the branchless banking system was being utilized as an alternative infrastructure to existing financial services. It is now entering a new phase and is transitioning to a reality where branchless banking is an integral part of the core financial ecosystem, rather than just being an alternative.

SBI shared its global experiences on the strengths and limitations of two of the principal models implemented around the world (bank-led and telco-led), as well as the three different types of agent network infrastructures (master agent, or aggregator, model; direct agent structure; third party structure) that exist globally.

There were meaningful discussions around three key areas:

  1. Agent exclusivity vs. interoperability: There is always concern as to whether agents should be dedicated to one service provider or whether the agent can be shared by other service providers. The driving force normally is how this will impact financial inclusion. In the session, SBI highlighted the difficulty in trying to make agents exclusive. In short, without an enforcement arm, monitoring exclusivity is a monster that should otherwise be left to market forces to determine
  2. Price capping: This would entail the regulator limiting the cost that customers can be charged for services offered. However, price caps will only lead to service providers shying away from providing more products and would curtail innovation.
  3. Creating an agent / customer information bureau to be housed at the regulator: The SBP, in its efforts to have better control and management of branchless banking, is seeking to build a single database that will capture all players (agents and customers alike). This is seen as a positive move as it will always provide them with the confidence that the market is trending on the right path, while at the same time ensuring agents are aligned to serving customers effectively

In terms of what lies ahead for the Pakistani branchless banking industry:


  • Introduction of new functionalities including simple user interfaces and services such as IMT, ATM withdrawals, merchant payments, etc. These are already in place for some successful deployments.
  • Involvement of the private sector to invest in and drive uptake for branchless banking projects, based on rational expectations depending on their profit margins and returns.
  • Innovations: Great opportunities for new innovations, mHealth, mAgriculture, micro-insurance, micro-savings will arise and these will have a positive impact on the economy. Innovation needs to be supported by appropriate policy and regulations to develop a stable and efficient system.
  • Maximization of potential: In order to maximize returns, branchless banking should focus on delivery of various services other than just payment options.

Challenges to address:

  • Risk of abuse of branchless banking services by customers & agents.
  • Sustainability & viability of service. To achieve productivity, providers should be encouraged to design services and products that are more user-friendly and not fully dependent on agents.
  • Increasing customer activity by ensuring service providers improve on agent recruitment efficiency resulting in better customer experience at agent outlets
  • Competitive environment. Minimizing disruption of price wars and sharing of agents due to the imminent entry of new players.
  • Educate and train communities via agent networks, media and word of mouth, in a way that does not compromise consumer protection
  • The need for an exclusive party to document key learnings of this new but growing industry and address issues to identify solutions for the betterment of the infrastructure, which involves market players, technologies and telecommunications

Successful branchless banking deployments all over the world have demonstrated that an effective agent network is paramount. Despite the fact that it’s not a ‘one-size fits all’ approach, agent network development and structures have certain critical aspects in common, not least of all a clear and well understood selection & recruitment process, consistent agent monitoring and practical liquidity management procedures. It’s therefore worth noting that these continue to be the drivers for the continued increase in agent activity in Pakistan, witnessed by the growth in number of agents, increased activity of agents and increase in average number of transactions per agent.

For more info on the session, please see The State Bank of Pakistan’s Branchless Banking Newsletter for April – June 2012.


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