Closing the Gap, Halfway There

“The distance to the nearest branch office is pretty far away. I can’t leave my son and my ‘warong’ for depositing money into a bank account.”

This is one of the common answers when you ask people in rural areas why they are not having a financial account. According to the latest World Bank Global Findex, a third of Indonesian unbanked adults cited physical distance was a barrier to have the account.

Number of Indonesian banked adults rose by 13 pp to 49%, the largest increase in East Asia & Pacific Region (World Bank Global Findex Database, 2017)

Indonesia is not an easy place to provide universal financial access due to geographical limitation. However, Indonesia has recently seen promising use of agent networks to reach more unbanked segments. The number of banking agents is more than 800.000.

We have seen the successful adoption of M-PESA’s agents in Kenya to boost the ownership of mobile money account. The agent is essential to find more balance between tech and touch to give people more access to the financial institution. Financial institutions should empower their agents to better serve the customer.

Empowering agent networks

Agents have brought financial services closer reach for millions of people in Indonesia. This innovative delivery model is not without flaw. There are 4 key components are needed to empower the agents.

Improving recruitment process

Like any other jobs, the financial institution has to hire the right person who displays self-motivation and desire to do the job. The traditional scoring system might only cover how good the business is. The financial institution also has to know the reputation of the candidate. The agent is a place where clients put their trust to do the financial transaction. It is important to get a trustworthy person in the community.

Delivering proper training

After hiring the right character, the provider will have to deliver the training. This process is meant to give the skills to the agent. Agents have a diverse background to start with. The technical skill, how to operate the system or devices, is not only the essential skill to have. It is also important to give marketing training. A couple of refresher training is significant.

Maintaining agent networks

Keeping agents well maintained is one of the important aspects of the agent network. It is highly important to have a regular visit to see the agents. They could face troubles to serve their customers. Liquidity management is also important. Without having a regular visit, agents may potentially fail to deliver the services and lose their trust to the provider.

Creating more businesses

Ensuring that agents have adequate profits is critical. One of the requirements for becoming an agent is to have an existing business. If they don’t earn enough money, they might downplay the effort to provide the services. In addition to fees for money deposit or withdrawal, the providers must provide fees from other businesses such as payment of bills or loan installments.

Agents for everyone

The providers are responsible to exert control over the quality of agents and customer experience. These suggestions only identified a set of elements the providers needed to improve the quality of the services. The suggestions are not covering the problem from the demand-side, such as a low level of financial literacy. By improving the services, we can make significant progress in providing millions of unbanked of people access formal financial services.

The views expressed are exclusively my own and do not necessarily my organization and/or any of the institutions with which I am affiliated.