Last week the financial inclusion ecosystem was jolted with the announcement of the Shared Agent Network Expansion Facilities (SANEF). The SANEF project, which is a joint initiative of the Central Bank of Nigeria (CBN), several Deposit Money Banks (DMBs), licensed mobile money operators (MMOs) and super agents, involves the establishment of a 500,000-strong agent network over the next few years. It also places higher target priorities on the geopolitical zones in Northern Nigeria where financial exclusion is predominant.
The dearth of financial service points in several regions of Nigeria, especially the Northern geopolitical zones, is attributed as one of the factors limiting financial inclusion.
The sufficiency of agents to serve the Nigerian population has been a much debated argument. According to the CBN, there were only 11,000 mobile money agents in 2017. When compared with other countries like Ghana with 140,000 agents; Kenya with 165,000; the distribution and access to financial services requires capacity.
While this collaborative initiative is admittedly in the right direction, the scaling up to 500,000 agents is not without its unique challenges. From our research incursion in the financial inclusion ecosystem, this article highlights some of the operational issues in the hope that it will guide the implementation of SANEF and make it the revamped, vibrant agent network Nigeria needs to achieve her financial inclusion targets of 80 percent by the year 2020.
One of the primary agent activities/functions is the provision of cash-in cash-out (CICO) services. The ability of agents to serve consumers cash over-the-counter is grossly limited by their liquidity levels/status. Cashing out, which involves the agent disbursing cash to the customer in exchange for e-money, is the primary activity at agent locations (agents are more or less seen as mobile ATMs after all). This means the agent must have significant cash in hand if he’s to keep serving customers.
Some agents have been able to mitigate these liquidity challenges by providing agent services alongside other businesses. Their ability to manage liquidity and e-money float to cater cash-in (deposits) is a critical success factor. Nevertheless, liquidity shortfalls where agents run out of physical cash are still a common reality.
Transaction Settlement Period
In addition, an agent’s liquidity is further constrained by transaction settlement periods that are typically T+1 or T+2. The delayed access to cash in the bank after providing cash-out services inhibits their ability to operate. Hence to keep agents serving, the CBN may need to revise the transaction settlement framework and include provisions for the instant settlement of risk-free transactions, especially for micro and small business enterprises providing agency or merchant services.
Agent Business Profitability
In the delivery of financial services, agents earn commissions on the provision of transactions such as CICO, airtime vending, bill payments and the like. These commissions are dependent on the CBN Guide to Bank Charges. The current tariff guide does not ascribe any fees to cash-out transactions. Hence, an agent that provides customers cash for e-money will earn nothing! While the cash-out example is an extreme, our research revealed that without complementary businesses, the notion of independent agents is unsustainable. This makes sense because the margins on transactions are miniscule and require high volumes to build a strong business case. These high volumes can only be driven by widespread knowledge and awareness of digital financial services to drive utility (i.e. transactions). Hence, a strong marketing and awareness campaign with the aim of creating top of mind awareness about DFS options and agent services as well as building trust in these solutions are a necessary complement to SANEF.
Agents usually have to couple the agent business with other commercial activities. The most popular businesses among the agents we interviewed included business centres, provision stores, IT sales and repair shops and sales of recharge cards. Thus, in recruiting new agents, attention should be given to already established micro and small business entrepreneurs.
Agent Skills and Capacity Development
As opposed to traditional financial service provider channels, agents will become the front line service delivery channel with responsibilities encompassing customer service and trust building. With regards customer service, how will agents capacity be developed to ensure customer complaints and other enquiries are handled and resolved on time? Will agents have such responsibilities or will these be centralised and managed by the financial services provider? On trust, the scepticism around digital or electronic services is still relatively high; hence how will issues related to building trust and confidence be addressed? What about agent fraud issues? What happens when transactions fail? In essence, careful thought on agent development through capacity building programmes should form part of the SANEF strategy.
The race for 2020 is on. Building a shared agent network that is half a million strong is bodacious and the SANEF initiative, if executed well, will be pivotal in meeting the NFIS targets but the stakeholders – CBN, DMBs, MMOs and super agents – need to be meticulous and complement action with informed strategy and the right partnerships.
Ibukun Taiwo & Olayinka David-West