A major obstacle to financial inclusion is cost—not
only the cost incurred by banks in servicing low-
value accounts and extending banking infrastructure
to underserved, low-income areas, but also the
cost incurred by poor customers (in terms of time
and expense) in reaching bank branches. Achieving
financial inclusion therefore requires innovative
business models that dramatically reduce costs
for everyone and thus pave the way to profitable
extension of financial services to the world’s poor.
This is why banking agents are part of an increasingly
potent model for financial inclusion.1 Take, for
example, Kareem. Kareem stands behind the counter
of a small general store on a bustling roundabout in
the heart of Karachi. Although he sells a variety of
toiletries and other products, the largest sign outside
his shop advertises his role as an agent for Easypaisa,
the mobile telephone funds transfer product of
Tameerbank. Kareem is one of Tameerbank’s 8,000
active agents—effectively serving as an extension of
the bank’s network by providing cash-in and cash-
out services and other financial services to Easypaisa
customers.
All parties benefit. The bank saves the cost of building
expensive branches and hiring staff, enabling it to reach
low-income people with financial services. Kareem earns
a transaction fee from Tameerbank to supplement his
sales. And customers save on transportation time and
expense because Kareem’s shop is close by, and they
also enjoy the generally lower cost of the service.
More and more banks (and occasionally nonbank
financial service providers) around the world—from
Brazil to Mali, to India and the Philippines—are using
agents like Kareem. This branchless banking model
is evolving, with regulation assuming a central role
in enabling—and sometimes limiting—its spread.
Regulators struggle with how to promote financial
inclusion through profitable, lower cost, delivery
models while simultaneously protecting consumers
and the integrity of financial services.
This Focus Note reviews global regulation of the
use of agents by banks (and where noted, nonbank
service providers) and focuses on four questions
related to the safe and scalable use of agents:
1. Who can be an agent?
2. What roles can agents play in the provision of
financial services?
3. On what commercial terms can banks engage
agents?
4. What is the extent of bank liability for agents?
This Focus Note concludes that regulators can safely
permit the use of bank agents to offer financial services
and verify customer identity for know-your-customer
purposes with minimal restrictions on agent eligibility,
compensation, and structuring—provided that
regulators hold banks liable for the provision of financial
services by their agents. (See Table 1 for selected bank
agent regulatory provisions from around the world.)
Who can be an agent?
Regulators want to ensure that agents, as extensions
of the banking system, are able to provide
professional customer service, keep records, handle
cash, and manage liquidity. As a result, one of the
primary questions regulators grapple with is who can
act as an agent.
Legal Form
Many countries permit a wide range of individuals and
legal entities to be agents for banks. Other countries
limit the list of eligible agents on the basis of legal form.
For example, India permits a wide variety of eligible
agents, such as certain nonprofits, post offices, kirana
shop owners,2 retired teachers, and most recently, for-
profit companies, including mobile network operators
(MNOs).3 Explicitly excluded, however, are the largest
microfinance institutions (MFIs) registered as nonbank
finance companies (NBFCs). Kenya takes a different
approach, requiring agents to be for-profit actors and
Regulating Banking Agents
No. 68March 2011
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1 the use of the term “agent” in this focus note is not necessarily a reference to an agent in the traditional legal sense of a party authorized by a principal to act on the principal’s behalf and for whom such principal is liable with respect to activities taken by the agent within the scope of its agency relationship or contract.
2 Kirana shops are the traditional, sole-proprietorship “mom and pop” shops popular in India; they account for a large percentage of India’s retail market.
3 RBI/2005-06/288, DBoD.no.BL.Bc. 58/22.01.001/2005-2006 (25 January 2006), as subsequently amended.
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disallowing nonprofit entities (like nongovernment
organizations [NGOs], educational institutions, and
faith-based organizations).4 In another example,
Brazil permits any legal entity to act as an agent, but
prevents individuals from doing so.5
These different approaches reflect the different
concerns of regulators in each country. In India,
regulators originally excluded for-profit entities from
the list of eligible agents reportedly due to a sense that
for-profits would be inclined to exploit poor clients. In
Kenya, by contrast, regulators reportedly felt that acting
as agents could steer NGOs away from their social
mission. In Brazil, the regulator felt that preventing
individuals from acting as agents would reduce
fraud, facilitate supervision, and promote consumer
confidence, though in practice, it has been difficult to
prevent individuals from operating as agents.
While these varying limits may be reasonably
motivated, they may unintentionally restrict the
involvement of actors who may be the most
promising agents due to their existing network
of retail locations and their capacity to manage
decentralized operations. As global experience
deepens, some countries have relaxed initial
restrictions. The Reserve Bank of India, for example,
initially restricted agents to nonprofits, post offices,
and cooperatives—a restriction that contributed to a
sluggish launch of branchless banking. But revisions in
2009 extended eligibility to small-scale retailers and
other well-placed actors, and revisions in 2010 further
extended eligibility to most for-profits,6 resulting in
a number of bank–MNO partnerships. Regulators
are now trending toward liberalizing agent eligibility
requirements, recognizing that overly restrictive
policies can conflict with financial inclusion.
Broad eligibility rules alone, however, do not
guarantee successful agency models. For instance,
Colombia’s 2006 decree on agent banking permits
any type of legal entity, including savings and credit
cooperatives, to be a banking agent.7 Nevertheless,
banks have been slow to engage agents—to date,
only two Colombian banks have a significant number
of agents.8
Location
Some countries also restrict the location of agents,
though such restrictions are sometimes eased when
regulators recognize that the regulations create
obstacles to financial inclusion. For example, due to
concerns that agents could threaten bank branches,
Brazilian regulation originally allowed agents only in
municipalities that did not have bank branches. To
facilitate customer access to government transfers,
this restriction was lifted in 2000,9 enabling the
expansion of agents as a lower cost and more
convenient alternative to branch banking, even in
places already served by bank branches.
Indian regulators initially required agents to be
located within 15 kilometers of a “base branch” of the
appointing bank in rural areas, and within 5 kilometers
in urban areas. This policy, intended to ensure adequate
bank supervision of its agents, limited the use of agents
by banks with only a few branches. Consequently,
regulators have since expanded the distance to 30
kilometers, and banks can seek exemption from this
requirement in areas with underserved populations
where a branch would not be viable.10
Experience has shown that overly restrictive location
requirements can complicate the business case for
viable agent-based banking and ultimately work
against financial inclusion goals. In addition, the
real-time nature of most agent services has enabled
remote supervision, thereby obviating one of the
central arguments for location restrictions. Countries
such as Mexico appear to be taking their cue from the
experience of other countries and although originally
having considered location-based restrictions,
ultimately decided against them.
4 Guideline on Agent Banking—cBK/PG/15, section 4.2.5 Resolution cMn 3110/03, Article 1 (July 2003), as amended by Resolution cMn 3156/03 (December 2003).6 RBI/2010-11/217 DBoD.no.BL.Bc.43 /22.01.009/2010-11, Art. 3 (28 september 2010). However, nBfcs, the corporate form of the
largest MfIs, are still expressly prohibited from acting as agents due to concerns over the possibility of comingling customer funds with intermediated funds.
7 Decree 2233 (July 2006), as amended by Decree 1121 (March 2009).8 see cGAP (2010).9 Resolution cMn 2707/00 (2000).10 RBI/2007-2008/295 (24 April 2008).
3
Agent Due Diligence: The “Fit and Proper” Test
Regulations often impose some form of “fit and
proper” requirements, mandating a form of agent
due diligence that requires financial institutions to
verify that would-be agents have good reputations,
no criminal records, and no history of financial
trouble or insolvency. Fit-and-proper tests sometimes
go beyond these requirements to specify other
qualifications, such as citizenship, literacy, minimum
age, or technical or operational capability. Such
regulations are deemed important as a way to ensure
appropriate customer service, security, and reliability.
Regulators should nevertheless be mindful of
unwittingly creating costly burdens that threaten
the business models they are regulating. While fit-
and-proper criteria listed in regulation often are not
problematic, providers and agents have occasionally
argued that compliance with particular details can
impose significant cost, particularly with respect
to gathering documentation. For example, while
requiring a clean credit history may seem reasonable,
many countries do not possess credit registries
or, if they do, such registries would not include
information about small retail establishments likely
to act as agents. Even when credit registries do exist,
obtaining a credit history may be costly and time-
consuming, posing a particular challenge for remote
retailers most likely to reach the underbanked.
Recommendations
• Tailor fit-and-proper restrictions narrowly so as to
enable best placed actors to be agents:
Permit organizations with large distribution
networks to play an active role in serving as (or
managing) agents—e.g., MNOs, chain retailers,
etc.
Avoid location-based restrictions, as the costs
of such restrictions unduly limit the spread of
agents and ultimately limit financial access.
• Frame fit-and-proper requirements in a proportionate
manner, paying particular attention to the potential
costs and practicality of demonstrating fitness (e.g.,
credit reports, etc.) and complying with ongoing
requirements (e.g., periodic recertifications).
What roles can an agent play?
Agents may be able to play a role in a broad range
of services, including account opening, cash-in and
cash-out services (including cash disbursement of
bank-approved loans and repayment collection),
payment and transfer services (including international
remittances and person-to-person domestic
transfers), and perhaps even credit underwriting.11
Regulation, however, often sets limits on the role
agents can play in providing financial services,
reflecting concerns over the reliability, security, and
competence of such third parties. Some regulators
are even considering different categories of agents
based on the services offered—with less stringent
eligibility standards for those agents offering only
basic services, such as cash-in and cash-out services.
Cash-in and Cash-out Services
Most regulations permit agents to process cash-in
(deposit) and cash-out (withdrawal) transactions. This
enables customers to conveniently store and access
cash in areas underserved by traditional branch or
automated teller machine (ATM) channels. It also
makes commercial sense for institutions: migrating
low-value transactions to cheaper channels helps the
business case for offering basic accounts, and may
serve to decongest crowded bank branches.12
In some contexts, however, this basic functionality
has been compromised by legacy “outsourcing” or
other banking regulations that restrict cash-handling
outside of branches. A common obstacle is regulation
that deems cash-in services as “deposit” taking, an
activity that is limited to banks or that otherwise
requires licensing (such as a money remittance
11 to date, with rare exception, agents have not been permitted to play a role in making decisions to extend credit on behalf of financial institutions; regulators believe this kind of technical judgment raises not only prudential concerns but also consumer protection concerns, particularly if agent fees are linked to the amount of any credit. nevertheless, agents sometimes play a role in evaluating credit applications even though final decisions on credit extension are taken by bank employees.
12 for a brief discussion on cost reductions associated with branchless banking, see Ivatury and Mas (2008).
4
license). Such licenses are often burdensome to
obtain and keep for smaller agents. For example,
in Indonesia, agents providing cash-out services
require separate licensing as a “money remitter,”
and the process and requirements of such license
(such as risk management mechanisms and proof of
operational readiness) are impractical for small retail
agents. Indeed, Indonesian regulators recognize
that this requirement has effectively blocked the
development of viable agent networks.13
Recommendation
Regulators should permit cash-in and cash-out
services at agent locations. In particular, regulators
should understand that when transactions are real
time and transacted against the agent’s own account,
cash-in and cash-out services do not present more
risk than bank deposits. (See Box 1.)
Verifying Customer Identity
One of the biggest challenges many regulators
face is what role, if any, to permit agents to play in
conducting customer due diligence (CDD) measures
required for account opening and other transactions.
Permitting customer verification at remote locations
through agents (who likely have no experience in CDD
measures and are one step removed from the financial
institutions well versed in CDD) could impede anti-
money laundering and combating financing of terrorism
(AML/CFT) efforts. Nevertheless, the potential financial
inclusion benefits could be significant.
The Financial Action Task Force (FATF) is the
international body responsible for developing and
promoting national and international standards
and policies to combat money laundering and
terrorist financing. It requires that financial service
providers identify “and verify” customer identity
using “reliable, independent” documentation,
though FATF does not expressly mandate the forms
of such documentation.14 In an effort to comply
with this requirement, national governments have
sometimes insisted on documentation, such as
specific identification cards or proof of address, that
are beyond the reach of many unbanked poor. In
addition, some have even required biometric data
that are not only too difficult to obtain for poor
customers but also require infrastructure (such as
eye scanners or fingerprint readers) that is too costly
or technologically incompatible with the realities
of local agent locations. Pakistani regulations, for
example, require fingerprint scans as a condition of
account registration, but the technology required for
accurate fingerprinting makes it too costly for many
smaller agents to operate in low-traffic areas. Aware
of the negative impact on financial inclusion, Pakistani
regulators have issued temporary exemptions to this
requirement to enable the spread and adoption of
branchless banking services through agents.
13 for a discussion on the use of agents in Indonesia, see cGAP (2010b).14 fAtf 40 Recommendations, Recommendation 5.
Box 1. How Agents Commonly Provide Cash-In/Cash-Out Services
While agents can provide a wide array of financial
services, agents are most often used as cash-in/cash-
out points where customers may deposit funds into
their account and redeem electronic value for cash.
These agents often operate, particularly when the
mobile telephone channel is used, by first opening
and funding their own account with the bank,
and all transactions with customers are transacted
against this personal agent account. For example,
when a customer wishes cash to be credited to her
electronic account, the agent accepts the cash and
transfers electronic value from the agent’s account
to the customer’s account. Conversely, when a
customer wishes to redeem electronic value for
cash, the customer transfers electronic value to the
agent’s account, and the agent gives the customer
the corresponding amount from the agent’s cash
reserves. These agents are sometimes viewed as
“cash merchants”—retailers who engage in the
business of transferring value between electronic and
physical forms. Since these cash merchants transact
against their own accounts—and because transactions
are typically conducted in real time, permitting the
customer to confirm receipt of electronic funds—the
risks involved (such as systemic or consumer protection
risks) may be less than sometimes assumed.
5
Agents (in the traditional legal sense)15 are viewed by
FATF as simply an extension of the financial services
provider, and consequently, the conduct of CDD by
these agents is treated as if conducted by the principal
financial institution. FATF also permits third parties to
perform CDD, provided the financial institution (i )
remains liable for such third-party compliance with
applicable money laundering and terrorist financing
requirements and (ii ) “satisfies itself” that CDD
information will be made readily available to it and
that the third party is regulated and supervised.16 This
last requirement can be problematic in the context of
small retailers conducting CDD since such retailers,
if considered third parties by FATF, may not be
adequately “regulated and supervised.”
It is unclear how FATF views the difference between
an agent and a third party if the bank is liable in
either case. Unsurprisingly, FATF is in the process
of reviewing its recommendations and clarifying the
role of agents and third parties. Recognizing that the
supervision requirement de facto limits the types of
entities who can act as agents, FATF is considering
giving countries more discretion regarding the types
of third parties permitted to engage in CDD, provided
they are supervised or monitored.17 In addition, FATF
is considering adopting a new standard for CDD
verification by other parties—with a central factor
being whether such parties apply their own CDD
procedures or simply implement the procedures of
the bank, subject to the bank’s control.18
Many countries are comfortable in permitting agents
to conduct CDD. Throughout Latin America (such
as in Peru, Colombia, Mexico, and Brazil) banking
agents routinely verify customer identity. In India,
banks “may, if necessary, use the services of the
Business Correspondent for preliminary work relating
to account opening formalities” provided that the
bank remains ultimately liable for observance of AML/
CFT requirements. In Fiji, retail agents may conduct
CDD on behalf of MNOs offering mobile financial
services. In the Philippines, regulators permit licensed
remittance agents (RAs) to verify customer identity,
provided such RAs undergo training, retain records
for five years, and report suspicious transactions.19
Some countries have taken a different path with
respect to the use of agents in CDD—permitting
agents to conduct CDD only with respect to
financial products viewed as lower risk for money
laundering and terrorist financing. In Pakistan, for
example, the 2008 branchless banking regulations
permit banking agents to open Level 1 accounts,
which carry relatively low balance and transfer
limits.20 Similarly in Mexico and Peru, banking
agents may conduct CDD with respect to low-
transactional, low-risk, or basic accounts subject to
deposit and transactional limits.
Regulators are realizing the wisdom of leveraging
the reach of retail agent networks to play a role in
verifying customer identity for account opening and
transactional purposes. The common denominator,
however, is ultimate bank liability for agent
compliance with applicable AML/CFT regulations.
(See “Liability for Agents.”)
Recommendations
• Enable agents to verify customer identity for AML/
CFT purposes.
• Ensure that forms of required identification are
reasonable in light of technical and infrastructural
realities of agent locations.
• Hold financial institution liable for agent compliance
with AML/CFT measures.
15 In a traditional legal sense (and not as most commonly used in branchless banking regulations and in this focus note), an “agent” is a party authorized by a principal to act on the principal’s behalf and for whom such principal is liable with respect to activities taken by the agent within the scope of its agency relationship or contract. Liability can also sometimes extend to agent actions reasonably assumed by customers to be within the scope of the agency.
16 fAtf 40 Recommendations, Recommendation 9.17 fAtf consultation Paper, the Review of the standards—Preparation for the 4th Round of Mutual evaluations, p. 9. (october 2010)18 Ibid.19 Bangko sentral ng Pilipinas, circular 471, series of 2005. It should be noted that such RAs are licensed financial services providers
themselves and are, from a legal perspective, agents of the customer, not agents of another financial services provider. nevertheless, these RAs are often used by other financial services providers to expand outreach of cash-in and cash-out services to customers in areas without a bank branch.
20 state Bank of Pakistan, Branchless Banking Regulations, section 4 (March 2008).
6
On what commercial terms can agents be engaged?
Beyond questions of who can be an agent and what
the agent can do, the business potential for agent
networks can be facilitated or limited by a number
of other critical issues related to how agents are
regulated. These issues include (i) how agents may be
compensated, (ii) whether agents may be engaged
on an exclusive basis, and (iii) how agents can be
managed by an agent network manager (ANM).
Agent Compensation: Fees and Revenue
The spread of branchless banking depends on agents
making an attractive return, whether directly (such
as through transaction fees paid to the agent) or
indirectly (such as in the form of increased footfall,
brand building, customer loyalty, etc.) (Flaming,
McKay, and Pickens 2011). While most regulatory
approaches leave the issue of agent revenue to free
negotiations between the agent and the financial
institution, nearly all countries prohibit the agent from
charging customers directly for agent services, and
some countries even restrict how much a bank can
charge customers for agent transactions. Such well-
meaning regulations, aimed at protecting customers
from excessive fees, can endanger the spread of
branchless banking models if they leave participants
unable to make an acceptable return in light of the
unique challenges and costs of reaching the poor.
In India, for example, agent regulation initially denied
banks and agents the ability to charge customers for
using agents. Recognizing the adverse impact of this
approach on the viability of agent banking models,
the Reserve Bank of India lifted this prohibition in
November 2009,21 and now banks are permitted to
charge reasonable fees under policies approved by
the bank’s board. Regulators may be reassured to
know that, in some cases, market forces moderate
prices even without regulation. For example, Latin
American countries generally permit banks to charge
for agent transactions, although banks do not always
apply such charges due to competitive or affordability
concerns—and often because it is in a bank’s interest
to shift low-value transactions toward agents and
away from more expensive bank branches.
Regulations also sometimes specify that agents
cannot modify charges to customers unless cleared
through the bank—this is the case in Pakistan, for
example, where agents cannot alter the fee structure
set by the bank in any way.22
Even in places where banks are permitted to charge
customers for using agents, regulations often still
require banks to collect these fees directly from
customer accounts (rather than permit agents to
charge customers directly). These regulations are
intended to mitigate the risk of agents using the
collection process to unfairly charge customers
for their services, particularly in locations with few
available agents.
In rare cases, agents have been permitted to set their
own fees (sometimes within a range defined by the
service provider). In Tanzania, agents of one bank
were permitted to establish their own fees on the
assumption that competition in urban areas would
drive fees down, while increased costs of liquidity
management in remote areas would necessitate higher
agent fees. However, a free market approach carries
its own risks. In the case of the Philippines, RAs can
exercise some discretion in setting their own pricing.
One electronic money service provider permits RAs
to charge up to 3 percent of the transaction amount
(even though they are encouraged by the provider
to charge only 1 percent). The lack of uniform fees
has led to some customer confusion and a lack of
a consistent marketing message—factors that may
have contributed to limited customer adoption of
branchless banking services.
Recommendations
• Permit service providers and agents to freely
negotiate fees paid to agents.
• Permit service providers to freely set retail prices,
subject to prevailing consumer protection norms,
such as transparent pricing disclosure.23
• In situations where agents are permitted to set
their customer fees and charge customers directly,
21 RBI/2009-10/238, DBoD.no.BL.Bc. 63 /22.01.009/2009-10 (30 november 2009).22 state Bank of Pakistan, Branchless Banking Regulations, section 6.1 (March 2008).23 for a fuller discussion of consumer protection in the branchless banking context, see Dias and McKee (2010).
7
monitor such pricing for signs of exploitation or
customer confusion.
Agent Exclusivity
Regulations often prohibit banks from contracting
agents on an “exclusive” basis in order to promote
commercial viability, financial inclusion, and
competition. First, the viability of an agent business
depends on sufficient transaction volume, and agents
in low-traffic areas may need to process transactions
on behalf of multiple banks and other service
providers to generate attractive revenues. Second,
in areas facing a deficit of suitable agents, some
regulators believe “no exclusivity” provisions will
increase the chances that multiple banks will penetrate
into remote areas, promoting competition and
outreach and preventing banks from monopolizing
the choicest agents and locations. Regulations in
Kenya for example prohibit agent exclusivity, but
do require each service provider to have a separate
agreement with each agent for supervision and
liability purposes.24 In Fiji, regulators prohibited agent
exclusivity as a condition to launching two mobile
payments platforms—though operators there have
suggested that they pressure agents to favor their
services over those of their rival. For example, an
agent that does not undertake an adequate number
of transactions on behalf of a specific operator may
find her contract cancelled.
In some markets, rather than simply prohibiting
exclusivity, regulators go a step further to promote
sharing. In Pakistan, the Branchless Banking Guidelines
explicitly contemplate the adoption by banks of an
“open architecture” that would enable agents to
serve multiple banks without separate contracts with
each bank. In rare situations, regulators have also
considered mandating “agent interoperability”—in
other words, requiring that an agent, once signed
up by one bank, can be used by customers of any
bank to process transactions. In the Maldives, the
Monetary Authority currently plans to require any
agent, once signed up by one bank, to be able to
process transactions on behalf of customers of any
bank participating in the payments system.
In other cases, regulators permit exclusivity, believing
it improves incentives for providers to invest in
agent banking. Without exclusivity, competitors can
piggyback off of the investment of first movers—
taking advantage of a first mover’s investment in
identifying, vetting, and training potential agents.
While agent regulations in Brazil, Colombia, and Peru
are silent on the question of agent exclusivity, exclusive
arrangements are common in these countries. Other
jurisdictions, such as Nigeria, clarify that agents
are permitted to represent more than one financial
institution, but technically allow agents to enter into
exclusive arrangements should they choose to.
The situation in India is more complicated. While
Indian regulations permit an agent (as in the case
of a large retail chain or other agent with multiple
outlets) to represent more than one bank, “a retail
outlet or a sub-agent of a[n agent] shall represent
and provide banking services of only one bank.”25
Consequently, at the point of customer interface,
exclusivity is the norm—though, as with ATMs, it is
assumed that banks may negotiate with other banks
to arrive at pricing and other terms by which other
bank customers could use the exclusively branded
point of customer interface. This policy is ostensibly
intended to promote clarity for the end user and
ensure clear bank accountability for each location,
though it may make it difficult for banks to compete
in areas facing a deficit of suitable agents. Also, as
a practical matter, this regulation may be difficult to
enforce: industry experts suggest that individuals or
family members working from the same storefront
could sign separate agreements with different banks
and likely escape detection.
The question of agent exclusivity goes beyond
balancing first mover incentives against increased
points of access to maximize short-term financial
inclusion. As markets develop and more actors enter
the sector, the question of exclusivity broadens into a
question of competition policy. (See Box 2.)
Recommendation
Permit temporary agent exclusivity, particularly in the
early stages of sector development, to provide banks
24 Guideline on Agent Banking. section 6.1. As mentioned, Kenya’s regulation applies only to banks, and not to Mnos such as safaricom.25 RBI/2010-11/217 DBoD.no.BL.Bc.43/22.01.009/2010-11, Art. 3 (28 september 2010).
8
with short-term incentives to invest in building agent
networks, while enabling other providers to compete
effectively in the long term in areas with few suitable
agents.
Agent Network Management
While banks are used to managing branches, they
often find that identifying, training, and managing
agents is a different and challenging undertaking.
Consequently, they are increasingly turning to ANMs
to play this role. There are a variety of ANM models
but typically ANMs are (i ) specialized third parties
who contract with banks for outsourced agent
management services, but who do not operate as
agents themselves; (ii) large retailers (such as grocery
chains) or other entities with a large, proprietary
outlet network who sign a single agency agreement
with the bank and who then manage agent functions
at each of their retail outlets; or (iii) third parties
(such as MNOs) who sign a single agency agreement
with the bank but who then subcontract other legal
entities or individuals as agents.
ANMs are often critical for the development
of banking agent networks. Not only do they
simplify the use of agents for banks, but they also
play an important role in managing risk. Due to
their specialized management services and daily
interaction with agent outlets, ANMs are often better
positioned and capitalized to assume liability for their
subagents and indemnify banks for bank payments
made as a result of agent liability. (See “Liability for
Agents.”)
Regulation sometimes restricts ANM models by
preventing agents from subcontracting or otherwise
delegating their agent duties. Kenya’s 2010 Guideline
on Agent Banking, for example, explicitly provides
that an agent shall not “subcontract another entity
Kenya hosts the largest mobile phone-based
branchless banking service in the world. In 2007, MNO
Safaricom launched M-PESA, a money transfer service.
M-PESA now has nearly 13 million customers serviced
by more than 20,000 agents. These agents serve
Safaricom on an exclusive basis, meaning they cannot
provide similar financial services on behalf of other
providers, including banks. After the Kenyan Guideline
on Agent Banking was issued in 2010 (which does not
apply to MNO Safaricom), commercial banks sought to
scale their own agent networks. But now some banks
are crying foul, complaining that the Guideline does
not permit banks to pursue exclusive agent contracts
(putting them at a competitive disadvantage vis-a-vis
Safaricom) and Safaricom’s headstart has allowed it
to use exclusivity provisions to tie up the supply of
potential agents. (Banks are also arguing that agent
qualification criteria and approval processes applicable
to bank agents are unduly burdensome in light of the
lack of similar criteria and processes for MNOs.)
So what’s the regulator to do? Some have argued
that the lack of a level playing field is justified since
banking agents can offer far more than the cash-in/
cash-out services of Safaricom agents and financial
inclusion considerations weigh against permitting
this fuller array of services to be monopolized by
one actor through the use of exclusive contracts.
But realistically, it is the cash-in/cash-out services
that banking agents also provide that would be of
most immediate value to many unbanked poor. So,
is the answer to allow banks exclusivity with respect
to agents providing the same cash-in/cash-out
services provided by Safaricom? Or is it now time for
Safaricom’s exclusive arrangements to be reviewed
for possible anti-competitive impact? Should
Safaricom’s exclusive agent arrangements now be
prohibited since they have already benefitted from
their first mover advantage—and if so, what signal
would that send to first movers in other countries
wondering to what extent their initiative will be
rewarded? On what basis should regulators evaluate
bank claims that the market of potential agents has
been tied up already? Should banks be forced to
affirmatively prove this claim and, if so, how?
Kenyan regulators, including those from the Central
Bank and the Monopolies and Prices Commission,
are struggling to develop a regulatory approach
that promotes competition and financial inclusion,
while simultaneously respecting the free market and
providing incentives to first actors.
Box 2. Agent Exclusivity and Competition Policy: Kenya’s Dilemma
9
to carry out agent banking on its behalf.” Such
prohibitions are often intended to ensure greater bank
involvement down to the “last mile” agent locations.
While such regulations prohibiting subcontracting
may still permit banks to engage intermediaries to
help manage agent locations, these arrangements
are more costly and complex because the bank must
still bear the expense and hassle of signing separate
agreements with every agent location.
In most cases, regulators recognize the benefits of
ANMs and permit subcontracting, so long as the bank
remains liable for the provision of financial services.
For example, in Mexico, regulation enables third
parties, including MNOs and retailers, to set up and
manage agent networks for banks. In Pakistan, the
branchless banking regulations expressly contemplate
a role for “superagents,” which may be organizations
with existing retail outlets or a distribution setup,
including fuel distribution companies, Pakistan
Post, courier companies, and chain stores.26 These
superagents would be responsible for managing and
controlling subagents, and agreements between
subagents and superagents would have to be similar
in form and substance to the agreement between the
superagent and the bank. In Brazil, recent regulations
permit only one level of subcontacting. Regulators
there believe that several levels of subcontracting
created too much distance between the bank and
the frontline agents for whom they were liable. Banks
were not able to effectively supervise their agents,
resulting in poor customer service and fraud.
Recommendation
Permit agent subcontracting, provided bank is
ultimately liable for the financial services rendered.
Liability for Agents
Imposing liability on banks for acts of their agents is
often the key factor in giving regulators the comfort
needed to permit the use of agents.27 Imposing bank
liability for agent noncompliance with regulations
forces providers to ensure professional agent behavior
and agent compliance with CDD norms (see “Verifying
Customer Identity”) and ultimately alleviates many
regulator concerns about the use of agents.
Based on the countries reviewed for this publication,
all countries that permit bank agents also impose
bank liability for these agents. Brazil, a country with
perhaps the most widespread use of banking agents,
requires banks to be “fully responsible for the services
rendered by its agents.”28 Similarly, India requires
that “all agreements/contracts with the customer
shall clearly specify that the bank is responsible to
the customer for acts of omission and commission
of the [agent].”29 Interestingly, Pakistan imposes
bank liability but states that the bank may “take
steps it deems necessary to safeguard itself against
liabilities arising out of the actions of its agents….”30
This clause suggests that banks should enter into
indemnification agreements with their agents—a
protection that could steer banks toward large and
well-capitalized agents capable of indemnifying the
bank while forgoing agent relationships with smaller
retailers who may nevertheless be better positioned
to serve low-income population segments.31
However, despite the widespread imposition of
liability for agents, financial inclusion goals would
benefit from limiting provider liability to those actions
or omissions related to the provision of financial
services.32 A failure to do so potentially increases
costs to the financial services provider who may have
to pay out damages for agent actions unrelated to
the purpose of the agency. These costs could have a
market chilling effect, negatively impacting not only
the emergence of viable business models but also the
ease and speed by which such models reach scale.
Some countries more clearly limit the extent of liability
in banking agency to the financial services provided.
For example, Kenya’s banking agent guidelines
impose liability on banks for agent actions “even if
not authorized in the [agency] contract so long as
26 Branchless Banking Regulations, section 6.2.27 Indeed, in common law jurisdictions, liability is imposed as a matter of law.28 Resolution cMn 3110, Art. 3 (July 2003).29 RBI circular January 2006, as restated september 2010, section 10(iv)30 state Bank of Pakistan, Branchless Banking Regulations, section 5 (March 2008).31 the practice in Brazil and other Latin American countries is to rely on indemnification by AnMs or sometimes even insurance.32 the question of what act or omission is related to the provision of financial services will ultimately be based on the facts and circumstances
of any particular incident.
10
they relate to banking services or matters connected
therewith” (emphasis added).33 This language is
reflected almost verbatim in Haiti’s recently issued
Branchless Banking Guidelines.34
See Box 3 for a discussion on liability and M-PESA.
Recommendations
• Regulation should impose bank liability for agent
actions but clearly limit the extent of such liability to
the provision of financial services on the bank’s behalf.
• Where the bank is ultimately liable for agent actions,
regulators should feel more comfortable in minimizing
restrictions on agent eligibility, location, and agent
due diligence. (See “Who Can Be an Agent.”)
Looking Forward
There is no one-size-fits-all regulatory solution for the
provision of financial services through agents, and
markets may experiment with a number of approaches
before finding one that works. As a result, some
regulators have adopted a test-and-learn35 approach,
permitting private sector experimentation, monitoring
the market, and ultimately developing regulations
based on identified market needs. In the Philippines,
for example, regulators showed great flexibility in the
early stages of development, following the market
and regulating informally through letter arrangements.
Other countries, such as Fiji, are following a similar test-
and-learn approach as they watchfully permit industry
experimentation in anticipation of regulation.36 Even
when regulators establish comprehensive frameworks,
many of them have actively listened to feedback from
the field and have revised regulations to promote
market development.
Regulators are aware that business reasons often drive
providers to behave in a manner consistent with the
best interests of customers—since ensuring a superior
customer experience, promoting transparency, and
acting in the interests of long-term business sustainability
often align the incentives of service providers with the
interests of customers. Consequently, most regulators
have generally agreed that issues such as liquidity
management at agent locations or physical security
safeguards are best left to free negotiation between the
parties—though regulators sometimes require these
issues to be addressed in some form in the contract
between the agent and the financial services provider.
Nevertheless, while the free market might produce
results consistent with customer interests, regulators
The Kenyan success story of M-PESA is sometimes heralded as a counter-example to the general principle of bank liability for agent actions. In Kenya, MNO Safaricom launched and scaled the successful M-PESA product, which now has more than 13 million customers. Since Safaricom is an MNO, it is not subject to Kenya’s banking agency regulations. Safaricom, however, claims no liability for its agents, and indeed, the M-PESA terms and conditions customers sign expressly state that “Agents are independent contractors and Safaricom shall not be liable for the acts or omissions of M-PESA Agents.”a Nevertheless, the service has so far been well-received with relatively few complaints, suggesting that market forces (i.e., incentives to protect brand reputation and other business benefits) may be sufficient to ensure security and service quality.
This argument is a red herring. Safaricom’s disclaimer, while perhaps taken at face value by Safaricom customers, is legal posturing common to many standard contracts between big business and individual consumers. Representatives of the Central Bank of Kenya have adopted the position that Kenyan common law principles of agent liability apply to Safaricom, and if the question ever went before Kenyan courts, Safaricom would be deemed liable as a matter of law. (A number of factors would support the argument that Safaricom’s M-PESA distributors are legally agents, including M-PESA branding requirements, exclusivity arrangements, and the commission structure.) The legal likelihood of Safaricom’s liability no doubt provides some added incentive to Safaricom to ensure appropriate agent behavior—regardless of its disclaimer.
Box 3. M-PESA and the Question of Liability
a M-PesA customer terms and conditions, section 18.11. While regulation has still not been issued with respect to e-money issuers such as safaricom (an Mno), banks are held liable for their agents under the Banking Agent Guidelines. some have justified this differential treatment on the basis that bank agents engage in a broader array of financial services than M-PesA agents.
33 Guideline on Agent Banking—cBK/PG/15, section 5.1.1.34 Banque de la République d’Haïti, Lignes Directrices Relatives à La Banque à Distances, section 5.1 (september 2010)35 first coined by the GsM Association, the term “test and learn” was later adopted by the G-20 in its “Principles for Innovative financial
Inclusion” (toronto, 27 June 2010).36 see tarazi (2010).
(continued on page 20)
11
Tab
le 1
: Ag
ency
Reg
ulat
ions
: Glo
bal
Ap
pro
ache
s
Co
untr
y W
ho c
an b
e an
ag
ent?
Wha
t ar
e o
ther
ag
ent
elig
ibili
ty
req
uire
men
ts?
Wha
t ca
n an
ag
ent
do
?R
estr
icti
ons
on
fees
ch
arg
ed b
y ag
ents
?C
an a
n ag
ent
sub
cont
ract
?Is
ag
ent
excl
usiv
ity
per
mit
ted
?P
rinc
ipal
liab
ility
fo
r ag
ents
Bra
zil
(Res
olu
tio
n C
MN
31
10, J
uly
2003
, as
am
end
ed b
y R
eso
luti
on
CM
N
3156
, Dec
emb
er
2003
; Res
olu
tio
n C
MN
365
4,
Dec
emb
er 2
008
and
R
eso
luti
on
CM
N
3954
, Feb
ruar
y 20
11)
“Onl
y en
trep
rene
uria
l co
mp
anie
s an
d
asso
ciat
ions
(as
def
ined
by
Law
10
,406
of
2002
) and
p
rovi
der
s o
f no
tary
an
d r
egis
try
serv
ices
(a
s d
efin
ed b
y La
w
8,93
5 o
f 19
94) c
an
be
hire
d a
s ag
ents
.”
(Res
olu
tio
n C
MN
39
54, A
rt. 3
).
Fina
ncia
l ins
titu
tio
ns
and
oth
er in
stit
utio
ns
that
are
par
t o
f th
e na
tio
nal f
inan
cial
sy
stem
can
be
hire
d
as a
gen
ts. (
Res
olu
tio
n C
MN
395
4, A
rt. 3
, III)
Exc
ept
for
acti
viti
es
such
as
(i) r
ecei
ving
an
d f
orw
ard
ing
p
rop
osa
ls f
or
cred
it
and
(ii)
pay
men
ts a
nd
elec
tro
nic
tran
sfer
, it
is p
rohi
bit
ed
to h
ire
an e
ntit
y w
hose
pri
ncip
al o
r so
le a
ctiv
ity
is t
he
pro
visi
on
of
agen
t se
rvic
es.
No
te: I
ndiv
idua
ls m
ay
not
act
as a
gen
ts.
In t
he c
ase
of
agen
ts
who
off
er c
red
it
op
erat
ions
, the
y m
ust
pas
s a
cert
ifica
tio
n ex
amin
atio
n ca
rrie
d
out
by
a re
cog
nize
d
enti
ty w
ith
the
tech
nica
l cap
acit
y.
(Res
olu
tio
n C
MN
39
54, A
rt. 1
2) T
he
cert
ifica
tio
n m
ust
incl
ude
tech
nica
l as
pec
ts o
f o
per
atio
ns,
app
licab
le r
egul
atio
n,
cons
umer
pro
tect
ion,
et
hics
, and
aud
itin
g.
(Res
olu
tio
n C
MN
39
54, A
rt. 1
2, II
)
Cas
h-in
/Cas
h-o
ut: A
gen
ts m
ay
per
form
dep
osi
ts a
nd
wit
hdra
wal
s an
d b
ill
pay
men
ts. (
Res
olu
tio
n C
MN
311
0, A
rt. 1
)
Ver
ify
Cus
tom
er
Iden
tity
fo
r A
cco
unt
Op
enin
g P
urp
ose
s:
Co
rres
po
nden
ts m
ay
rece
ive
and
fo
rwar
d
acco
unt
op
enin
g
app
licat
ions
.
Oth
er: A
gen
ts
may
, int
er a
lia, (
i)
rece
ive
and
fo
rwar
d
app
licat
ions
fo
r cr
edit
/ cr
edit
car
ds,
(ii
) han
dle
rec
eip
ts,
pay
men
ts, a
nd
elec
tro
nic
tran
sfer
s fo
r cr
edit
or
deb
it
to c
usto
mer
dep
osi
t ac
coun
ts, a
nd
(iii)
ext
raju
dic
ial
colle
ctio
n se
rvic
es.
(Res
olu
tio
n C
MN
39
54, A
rt. 8
)
Ag
ents
are
pro
hib
ited
fr
om
“ch
arg
ing
, on
its
ow
n in
itia
tive
, any
fe
e co
nnec
ted
wit
h th
e p
rovi
sio
n o
f th
e se
rvic
es t
o w
hich
th
e co
ntra
ct r
efer
s.”
(Res
olu
tio
n C
MN
31
10, A
rt. 4
, IV
(c)
and
Res
olu
tio
n C
MN
39
54, A
rt. 1
7)
Sub
cont
ract
ing
is
per
mis
sib
le w
ith
pre
vio
us c
ons
ent
of
the
finan
cial
in
stit
utio
n.
(Res
olu
tio
n C
MN
31
10, A
rt. 4
, III)
Onl
y o
ne le
vel o
f su
bco
ntra
ctin
g
is a
llow
ed if
co
ntra
ct a
llow
s fo
r th
is p
oss
ibili
ty.
(Res
olu
tio
n C
MN
39
54, A
rt. 7
)
No
t ex
plic
itly
m
enti
one
d in
the
re
gul
atio
n, b
ut in
p
ract
ice,
exc
lusi
ve
arra
ngem
ents
do
ex
ist.
“The
pri
ncip
al is
ful
ly
resp
ons
ible
fo
r th
e se
rvic
es r
end
ered
b
y it
s ag
ents
.”
(Res
olu
tio
n C
MN
31
10, A
rt. 3
)
“An
agen
t ac
ts
for
and
und
er t
he
gui
del
ines
of
the
hiri
ng in
stit
utio
n,
whi
ch a
ssum
es f
ull
resp
ons
ibili
ty f
or
the
serv
ices
pro
vid
ed
to c
lient
s an
d
user
s th
roug
h th
e ag
ent,
and
whi
ch
shal
l gua
rant
ee
the
inte
gri
ty,
relia
bili
ty, s
ecur
ity
and
co
nfid
enti
alit
y o
f th
e tr
ansa
ctio
ns
cond
ucte
d t
hro
ugh
the
Ag
ent…
.”
(Res
olu
tio
n C
MN
39
54, A
rt. 2
) (co
ntin
ues)
12
Co
untr
y W
ho c
an b
e an
ag
ent?
Wha
t ar
e o
ther
ag
ent
elig
ibili
ty
req
uire
men
ts?
Wha
t ca
n an
ag
ent
do
?R
estr
icti
ons
on
fees
ch
arg
ed b
y ag
ents
?C
an a
n ag
ent
sub
cont
ract
?Is
ag
ent
excl
usiv
ity
per
mit
ted
?P
rinc
ipal
liab
ility
fo
r ag
ents
Co
lom
bia
Dec
ree
2233
(Jul
y 20
06),
Dec
ree
1121
(M
arch
200
9)
Any
typ
e o
f le
gal
en-
tity
, inc
lud
ing
sav
ing
s an
d c
red
it c
oo
per
a-ti
ves,
may
wit
h p
rio
r Su
per
inte
nden
cia
Fina
ncie
ra d
e C
olo
m-
bia
aut
hori
zati
on
act
as a
co
rres
po
nden
t.
Ind
ivid
uals
may
als
o
act
as a
gen
ts, p
ro-
vid
ed t
hat
they
co
n-d
uct
som
e b
usin
ess
acti
vity
in a
fix
ed e
s-ta
blis
hmen
t. (D
ecre
e 22
33, A
rt. 5
)
The
finan
cial
inst
i-tu
tio
n is
req
uire
d
to a
sses
s th
e co
r-re
spo
nden
t’s m
ora
l in
teg
rity
, phy
sica
l an
d t
echn
ical
infr
a-st
ruct
ure,
and
hum
an
reso
urce
s.(D
ecre
e 22
33, A
rt. 5
)
Cas
h-in
/Cas
h-o
ut:
Ag
ent
may
per
form
ca
sh d
epo
sits
and
w
ithd
raw
als
for
chec
king
, sav
ing
s,
or
tim
e d
epo
sits
as
wel
l acc
ept
cash
loan
p
aym
ents
and
dis
-b
urse
loan
am
oun
ts.
Ag
ents
may
als
o a
c-ce
pt
pay
men
ts.
Ver
ify
Cus
tom
er
Iden
tity
fo
r A
cco
unt
Op
enin
g P
urp
ose
s:
”Co
rres
po
nden
ts
may
act
as
auth
o-
rize
d t
hird
par
ties
fo
r ca
rryi
ng o
utth
e ne
cess
ary
pro
-ce
dur
es […
], su
ch
as t
he in
terv
iew
s re
qui
red
fo
r ac
cep
-ta
nce
of
clie
nts.
” (D
ecre
e 11
21, T
hird
p
arag
rap
h)
Oth
er: B
alan
ce in
qui
-ri
es a
nd s
tate
men
ts
for
chec
king
/sav
ing
s ac
coun
ts.
Co
llect
ion
and
su
bm
issi
on
of
do
cu-
men
ts.
Pro
mo
tio
n an
d a
d-
vert
isin
g o
f se
rvic
es.
Do
mes
tic
mo
ney
tran
sfer
s in
Co
lom
-b
ian
curr
ency
wit
hin
the
nati
ona
l ter
rito
ry.
(Dec
ree
2233
, Art
. 2)
Co
rres
po
nden
ts c
an-
not
char
ge
extr
a fe
es
(Dec
ree
2233
, Art
. 3,
3)
Sub
cont
ract
ing
is
per
mis
sib
le w
ith
pre
-vi
ous
co
nsen
t o
f th
e fin
anci
al in
stit
utio
n.
No
t ex
plic
itly
men
-ti
one
d in
the
reg
ula-
tio
n b
ut in
pra
ctic
e,
excl
usiv
e ar
rang
e-m
ents
do
exi
st.
The
finan
cial
inst
i-tu
tio
n is
“d
irect
ly
resp
ons
ible
fo
r p
rovi
din
g s
ervi
ces
thro
ugh
the
corr
e-sp
ond
ent”
(Dec
ree
2233
, Art
. 3, 1
).
Tab
le 1
: Ag
ency
Reg
ulat
ions
: Glo
bal
Ap
pro
ache
s (c
ont
inue
d)
13
Ind
iaB
C C
ircul
ars
and
am
end
men
ts (J
anu-
ary
2006
, Mar
ch
2006
, Ap
ril 2
008,
A
pri
l 200
9, N
ove
m-
ber
200
9, S
epte
mb
er
2010
)
”NG
Os/
MFI
s se
t up
un
der
So
ciet
ies/
Trus
t A
cts,
So
ciet
ies
reg
is-
tere
d u
nder
Mut
ually
A
ided
Co
op
erat
ive
Soci
etie
s A
cts
or
the
Co
op
erat
ive
Soci
et-
ies
Act
s o
f St
ates
, se
ctio
n 25
co
mp
a-ni
es,
… a
nd P
ost
Of-
fices
” (J
anua
ry 2
006,
Se
ctio
n 3.
1)
Late
r ad
ded
: “re
tire
d
ban
k em
plo
yees
, ex
-ser
vice
men
and
re
tire
d g
ove
rnm
ent
emp
loye
es.”
(Ap
ril
2008
)
Late
r ad
ded
:“(
i) in
div
idua
l kir
ana/
med
ical
/fai
r p
rice
sh
op
ow
ners
(ii)
A
gen
ts o
f Sm
all S
av-
ing
s sc
hem
es o
f G
ov-
ernm
ent
of
Ind
ia/
Insu
ranc
e C
om
pan
ies
(iv) i
ndiv
idua
ls w
ho
ow
n P
etro
l Pum
ps
(v) R
etire
d t
each
ers
and
(vi)
Aut
hori
zed
fu
ncti
ona
ries
of
wel
l ru
n Se
lf H
elp
Gro
ups
(SH
Gs)
link
ed t
o
ban
ks.”
(Sec
tio
n 2,
N
ove
mb
er 2
009)
Loca
tio
n: “
The
dis
-ta
nce
bet
wee
n th
e p
lace
of
bus
ines
s o
f a
BC
and
the
bas
e b
ranc
h, o
rdin
arily
, sh
oul
d n
ot
exce
ed
15 K
ms
in r
ural
, sem
i-ur
ban
and
urb
an
area
s. In
met
rop
oli-
tan
cent
res,
the
dis
-ta
nce
coul
d b
e up
to
5
kms.
” (A
pri
l 200
8)
Late
r ex
pan
ded
: BC
p
lace
of
bus
ines
s m
ust
be
wit
hin
30
kilo
met
ers
of
the
“bas
e b
ranc
h” o
f th
e b
ank.
(Ap
ril 2
009)
Due
dili
gen
ce m
ay
be
carr
ied
out
on
po
-te
ntia
l BC
s. S
uch
due
d
ilig
ence
exe
rcis
e m
ay in
clud
e as
pec
ts
such
as
“(i)
rep
uta-
tio
n/m
arke
t st
and
ing
, (ii
) fin
anci
al s
oun
d-
ness
, (iii
) man
age-
men
t an
d c
orp
ora
te
go
vern
ance
, (iv
) cas
h ha
ndlin
g a
bili
ty a
nd
(v) a
bili
ty t
o im
ple
-m
ent
tech
nolo
gy
so-
luti
ons
in r
end
erin
g
finan
cial
ser
vice
s.”
(Sep
tem
ber
201
0)
Cas
h-in
/Cas
h-o
ut:
BC
s m
ay e
ngag
e in
(i) d
isb
ursa
l of
smal
l-val
ue c
red
it, (
ii)
reco
very
of
pri
ncip
al/
colle
ctio
n o
f in
ter-
est,
and
(iii)
rec
eip
t an
d d
eliv
ery
of
smal
l va
lue
rem
itta
nces
/o
ther
pay
men
t in
-st
rum
ents
.”(J
anua
ry 2
006,
Sec
-ti
on
3.2)
Ver
ify
Cus
tom
er
Iden
tity
fo
r A
cco
unt
Op
enin
g P
urp
ose
s:
“The
ban
ks m
ay, i
f ne
cess
ary,
use
the
se
rvic
es o
f th
e B
C
for
pre
limin
ary
wo
rk
rela
ting
to
acc
oun
t o
pen
ing
fo
rmal
itie
s.
Ho
wev
er, e
nsur
ing
co
mp
lianc
e w
ith
KY
C a
nd A
ML
norm
s un
der
the
BC
mo
del
co
ntin
ues
to b
e th
e re
spo
nsib
ility
of
ban
ks.”
(Sep
tem
ber
20
10, S
ecti
on
5)
Oth
er: B
Cs
may
als
o
eng
age,
inte
r al
ia, i
n (i
) id
enti
ficat
ion
of
bo
rro
wer
s, (i
i) c
olle
c-ti
on
and
pre
limin
ary
“The
ban
ks m
ay p
ay
reas
ona
ble
co
m-
mis
sio
n/fe
e to
the
B
C, t
he r
ate
and
q
uant
um o
f w
hich
m
ay b
e re
view
ed
per
iod
ical
ly. T
he
agre
emen
t w
ith
the
BC
sho
uld
sp
ecifi
-ca
lly p
rohi
bit
the
m
fro
m c
harg
ing
any
fe
e to
the
cus
tom
ers
dire
ctly
fo
r se
rvic
es
rend
ered
by
them
on
beh
alf
of
the
ban
k.
The
ban
ks (a
nd n
ot
BC
s) a
re p
erm
itte
d
to c
olle
ct r
easo
nab
le
serv
ice
char
ges
fro
m
the
cust
om
ers
in a
tr
ansp
aren
t m
anne
r”
(Jan
uary
200
6, a
s re
stat
ed S
epte
mb
er
2010
)
Per
mit
ted
by
imp
lica-
tio
n an
d r
efer
ence
d
in P
arag
rap
h 3
of
Sep
tem
ber
201
0 ci
rcul
ar. S
ee c
olu
mn
to r
ight
.
“Whi
le a
BC
can
be
a B
C f
or
mo
re t
han
one
ban
k, a
t th
e p
oin
t o
f cu
sto
mer
in
terf
ace,
a r
etai
l out
-le
t o
r a
sub
-ag
ent
of
a B
C s
hall
rep
rese
nt
and
pro
vid
e b
anki
ng
serv
ices
of
onl
y o
ne
ban
k.”
(Sep
tem
ber
20
10, P
ara.
3)
“[A
]ll a
gre
emen
ts/
cont
ract
s w
ith
the
cust
om
er s
hall
clea
rly
spec
ify t
hat
the
ban
k is
res
po
nsib
le
to t
he c
usto
mer
fo
r ac
ts o
f o
mis
sio
n an
d
com
mis
sio
n o
f th
e B
usin
ess
Faci
litat
or/
C
orr
esp
ond
ent.
” (J
anua
ry 2
006,
as
rest
ated
Sep
tem
ber
20
10, S
ecti
on
10(iv
))
”The
out
sour
c-in
g o
f an
y ac
tivi
ty
by
ban
k d
oes
no
t d
imin
ish
its
ob
liga-
tio
ns, a
nd t
hose
of
its
Bo
ard
and
sen
ior
man
agem
ent,
who
ha
ve t
he u
ltim
ate
resp
ons
ibili
ty f
or
the
out
sour
ced
act
iv-
ity“
(Gui
del
ines
on
Man
agin
g R
isks
and
C
od
e o
f C
ond
uct
in O
utso
urci
ng o
f Fi
nanc
ial S
ervi
ces
by
Ban
ks, A
nnex
, 4.)
(co
ntin
ues)
14
Tab
le 1
: Ag
ency
Reg
ulat
ions
: Glo
bal
Ap
pro
ache
s (c
ont
inue
d)
Co
untr
y W
ho c
an b
e an
ag
ent?
Wha
t ar
e o
ther
ag
ent
elig
ibili
ty
req
uire
men
ts?
Wha
t ca
n an
ag
ent
do
?R
estr
icti
ons
on
fees
ch
arg
ed b
y ag
ents
?C
an a
n ag
ent
sub
cont
ract
?Is
ag
ent
excl
usiv
ity
per
mit
ted
?P
rinc
ipal
liab
ility
fo
r ag
ents
Ind
iaB
C C
ircul
ars
and
am
end
men
ts (J
anu-
ary
2006
, Mar
ch
2006
, Ap
ril 2
008,
A
pri
l 200
9, N
ove
m-
ber
200
9, S
epte
mb
er
2010
)
Late
r ad
ded
:“a
ny o
ther
ind
ivid
ual
incl
udin
g t
hose
op
-er
atin
g C
om
mo
n Se
rvic
e C
entr
es”
an
d “
Co
mp
anie
s re
gis
tere
d u
nder
the
In
dia
n C
om
pan
ies
Act
,195
6 w
ith
larg
e an
d w
ides
pre
ad r
e-ta
il o
utle
ts, e
xclu
din
g
No
n B
anki
ng F
inan
-ci
al C
om
pan
ies.
”
(Sep
tem
ber
201
0)
pro
cess
ing
of
loan
ap
plic
atio
ns in
clud
-in
g v
erifi
cati
on
of
pri
mar
y in
form
atio
n/
dat
a, (i
ii) c
reat
ing
aw
aren
ess
abo
ut
savi
ngs
and
oth
er
pro
duc
ts a
nd e
duc
a-ti
on
and
ad
vice
on
man
agin
g m
one
y an
d d
ebt
coun
selin
g,
(iv) p
roce
ssin
g a
nd
sub
mis
sio
n o
f ap
pli-
cati
ons
to
ban
ks, a
nd
(v) s
ale
of
mic
ro in
-su
ranc
e/m
utua
l fun
d
pro
duc
ts/p
ensi
on
pro
duc
ts/o
ther
thi
rd
par
ty p
rod
ucts
.
Ken
yaG
uid
elin
e o
n A
gen
t B
anki
ng—
CB
K/
PG
/15
(May
201
0)
Larg
e ra
nge
of e
nti-
ties:
lim
ited
liab
ility
p
artn
ersh
ips,
sol
e p
rop
rieto
rshi
ps,
par
t-ne
rshi
ps,
soc
ietie
s,
coop
erat
ive
soci
etie
s,
stat
e co
rpor
atio
ns,
trus
ts, p
ublic
ent
ities
, an
d a
ny o
ther
ent
ity
whi
ch t
he C
entr
al
Ban
k m
ay p
resc
ribe.
(S
ectio
n 4.
2.3)
A p
rinc
ipal
inst
itu-
tio
n m
ust
esta
blis
h th
at a
po
tent
ial
agen
t ha
s “
exis
ting
wel
l est
ab-
lishe
d c
om
mer
cial
ac
tivi
ty w
hich
has
b
een
op
erat
iona
l fo
r at
leas
t ei
ght
een
mo
nths
… h
as n
ot
bee
n cl
as-
sifie
d a
s a
def
icie
nt,
do
ubtf
ul, o
r no
n-p
er-
form
ing
bo
rro
wer
by
an in
stit
utio
n in
the
la
st 1
8 m
ont
hs…
Cas
h-in
/Cas
h-ou
t:
Perm
issi
ble
activ
ities
in
clud
e ca
sh d
epos
it an
d ca
sh w
ithdr
awal
, ca
sh d
isbu
rsem
ent
and
cash
repa
ymen
t of
loan
s, c
ash
paym
ent
of b
ills,
cas
h pa
ymen
t of
retir
emen
t and
so
cial
ben
efits
, cas
h pa
ymen
t of s
alar
ies,
tr
ansf
er o
f fun
ds.
Veri
fy C
usto
mer
Id
enti
ty f
or A
ccou
nt
Op
enin
g P
urp
oses
: A
gen
ts m
ay c
olle
ct
and
forw
ard
cus
tom
er
doc
umen
ts in
rela
tion
to a
ccou
nt o
pen
ing
.
Ag
ents
sha
ll no
t
“[c]
harg
e an
y fe
es d
i-re
ctly
to
cus
tom
ers.
” (S
ecti
on
4.4.
1(iii
))
An
agen
t sh
all n
ot
“sub
cont
ract
ano
ther
en
tity
to
car
ry o
ut
agen
t b
anki
ng o
n it
s b
ehal
f.”
(Sec
tio
n 4.
4.1
(xiv
))
“No
co
ntra
ct b
e-tw
een
an in
stit
utio
n an
d a
n ag
ent
shal
l b
e ex
clus
ive.
An
agen
t m
ay p
rovi
de
serv
ices
fo
r ag
ent
ban
king
to
mul
tip
le
inst
itut
ions
pro
vid
ed
that
the
ag
ent
has
sep
arat
e co
ntra
cts
for
the
pro
visi
on
of
such
ser
vice
s w
ith
each
inst
itut
ion
and
p
rovi
ded
fur
ther
tha
t th
e ag
ent
has
the
ca-
pac
ity
to m
anag
e th
e tr
ansa
ctio
ns f
or
the
diff
eren
t in
stit
utio
ns”
(Sec
tio
n 6.
1)
“The
inst
itut
ion
is
who
lly r
esp
ons
ible
an
d li
able
fo
r al
l ac-
tio
ns o
r o
mis
sio
ns o
f th
e ag
ent.
Thi
s re
-sp
ons
ibili
ty e
xten
ds
to a
ctio
ns o
f th
e ag
ent
even
if n
ot
au-
tho
rize
d in
the
co
n-tr
act
so lo
ng a
s th
ey
rela
te t
o b
anki
ng s
er-
vice
s o
r m
atte
rs c
on-
nect
ed t
here
wit
h.”
(Sec
tio
n 5.
1.1)
15
The
follo
win
g c
anno
t b
e ag
ents
: ent
ities
th
at a
re fa
ith-b
ased
or
non
pro
fit, n
ong
ov-
ernm
enta
l org
aniz
a-tio
ns, e
duc
atio
nal
inst
itutio
ns, f
orei
gn
exch
ang
e b
urea
us,
and
any
oth
er e
nti-
ties
not
per
mitt
ed
to c
arry
on
for-
pro
fit
activ
ities
. (Se
ctio
n 4.
2.4)
Ind
ivid
uals
are
no
t ex
pre
ssly
per
mit
ted
to
act
as
agen
ts b
ut
are
oft
en a
pp
rove
d
as in
form
al s
ole
pro
-p
riet
ors
hip
s (S
ecti
ons
4.
2.3
(ii),
in c
oo
rdi-
nati
on
wit
h Se
ctio
n 3.
27).
and
po
sses
ses
ap-
pro
pri
ate
phy
sica
l in
fras
truc
ture
and
hu
man
res
our
ces
to
be
able
to
pro
vid
e th
e se
rvic
es w
ith
the
nece
ssar
y d
egre
e o
f ef
ficie
ncy
and
sec
u-ri
ty.”
(Sec
tio
n 3.
1.1)
A p
rinc
ipal
inst
itu-
tio
n m
ust
also
ass
ess
the
mo
ral,
bus
ines
s an
d p
rofe
ssio
nal
suit
abili
ty o
f th
e so
le p
rop
riet
or
or
par
tner
s (a
nd in
the
ca
se o
f co
rpo
rati
ons
, th
e C
EO
and
off
icer
re
spo
nsib
le f
or
agen
t o
per
atio
ns) o
f an
y p
ote
ntia
l ag
ent.
In
eval
uati
ng s
uch
suit
-ab
ility
, the
fo
llow
ing
w
ill b
e co
nsid
ered
: cr
edit
his
tory
, cri
mi-
nal r
eco
rds,
rep
uta-
tio
n (a
s ev
iden
ced
b
y tw
o r
efer
ence
s),
bus
ines
s ex
per
ienc
e,
sour
ces
of
fund
s,
bus
ines
s re
cord
, and
“a
ny o
ther
mat
ter
whi
ch n
egat
ivel
y o
r p
osi
tive
ly im
pac
ts o
n th
e p
erso
n”. (
Sect
ion
3.2.
5)
Oth
er:
Perm
issi
ble
ac
tiviti
es in
clud
e b
al-
ance
enq
uiry
; gen
-er
atio
n an
d is
suan
ce
of m
ini b
ank
stat
e-m
ents
; col
lect
ion
of
doc
umen
ts in
rel
atio
n to
loan
ap
plic
atio
ns,
cred
it an
d d
ebit
card
co
llect
ion,
col
lect
ion
of d
ebit
and
cre
dit
card
s; a
gen
t m
obile
b
anki
ng s
ervi
ces;
ch
eck
boo
k re
que
st
and
col
lect
ion
by
cus-
tom
ers;
col
lect
ion
of
ban
k m
ail/
cor
resp
on-
den
ce fo
r cu
stom
ers;
an
y ot
her
activ
ity
pre
scrib
ed b
y C
entr
al
Ban
k. (
Sect
ion
4.4.
1)
Exp
ress
ly P
rohi
bit
ed
Act
ivit
ies:
Ag
ents
sh
all n
ot,
inte
r al
ia,
op
en a
cco
unts
, gra
nt
loan
s, o
r ca
rry
out
an
y ap
pra
isal
fun
c-ti
on
for
pur
po
ses
of
op
enin
g a
n ac
coun
t o
r g
rant
ing
of
a lo
an
or
any
oth
er f
acili
ty,
und
erta
ke c
heck
de-
po
sit
or
enca
shm
ent
of
chec
ks, t
rans
act
in f
ore
ign
curr
ency
; p
rovi
de
cash
ad
-va
nces
. (Se
ctio
n 4.
4.1(
ix)-
(xii)
)
(co
ntin
ues)
16
Tab
le 1
: Ag
ency
Reg
ulat
ions
: Glo
bal
Ap
pro
ache
s (c
ont
inue
d)
Co
untr
y W
ho c
an b
e an
ag
ent?
Wha
t ar
e o
ther
ag
ent
elig
ibili
ty
req
uire
men
ts?
Wha
t ca
n an
ag
ent
do
?R
estr
icti
ons
on
fees
ch
arg
ed b
y ag
ents
?C
an a
n ag
ent
sub
cont
ract
?Is
ag
ent
excl
usiv
ity
per
mit
ted
?P
rinc
ipal
liab
ility
fo
r ag
ents
Mex
ico
(Ban
king
Circ
ular
, 12
/200
9 an
d a
men
d-
men
ts; L
aw o
n C
red
it
Inst
itut
ions
, 199
9 an
d
amen
dm
ents
)
Any
leg
al e
ntit
y, e
x-ce
pt
finan
cial
inst
itu-
tio
ns w
hose
exc
lusi
ve
bus
ines
s is
co
nduc
t-in
g a
uxili
ary
cred
it
acti
viti
es a
s d
efin
ed
in la
w (L
aw o
f A
uxil-
iary
Cre
dit
Act
ivit
ies
and
Org
aniz
atio
ns,
1985
and
am
end
-m
ents
), su
ch a
s b
roke
rs a
nd d
eale
rs.
Fina
ncia
l ins
titu
tio
ns
can
be
agen
ts o
nly
if al
low
ed b
y th
eir
ow
n b
ylaw
s, a
nd
exch
ang
e ho
uses
can
b
e ag
ents
fo
r ce
rtai
n ty
pes
of
serv
ices
. P
awnb
roke
rs a
nd
sim
ilar
enti
ties
can
-no
t b
e ag
ents
. (B
ank-
ing
Circ
ular
, Cha
pte
r X
I, Se
ctio
n 2,
art
icle
32
5).
Ind
ivid
uals
can
be
agen
ts o
nly
if th
ey
have
a b
usin
ess
and
a
per
man
ent
esta
b-
lishm
ent
whe
re t
hey
cond
uct
such
bus
i-ne
ss. (
Ban
king
Circ
u-la
r, A
nnex
57,
3)
Ag
ents
sho
uld
(i)
have
a p
erm
anen
t es
tab
lishm
ent
and
su
ffic
ient
cap
acit
y to
pro
per
ly o
per
ate
elec
tro
nic
dev
ices
, (ii
) hav
e th
e ne
ces-
sary
infr
astr
uctu
re
to p
roce
ss b
anki
ng
op
erat
ions
, and
(iii)
d
emo
nstr
ate
go
od
re
put
atio
n an
d c
red
it
hist
ory
, inc
lud
ing
la
ck o
f p
revi
ous
civ
il an
d c
rim
inal
co
n-d
emna
tio
n an
d in
-ve
stig
atio
ns f
rom
the
B
anki
ng C
om
mis
sio
n.
The
req
uire
men
ts
of
go
od
cre
dit
his
-to
ry a
nd p
erm
anen
t es
tab
lishm
ent
can
be
wai
ved
if a
n A
NM
fu
lfils
the
m. (
Ban
king
C
ircul
ar, A
nnex
57)
.
Ag
ents
sho
uld
hav
e a
dep
osi
t ac
coun
t w
ith
the
cont
ract
ing
b
ank
agai
nst
whi
ch
all t
rans
acti
on
will
be
cond
ucte
d, e
xcep
t w
hen
a ne
two
rk
man
ager
is u
sed
. (B
anki
ng C
ircul
ar,
Cha
pte
r X
I, Se
ctio
n 2,
Art
icle
322
, I)
Cas
h-in
/Cas
h-o
ut:
wit
hdra
wal
s an
d d
e-p
osi
ts f
rom
/to
ban
k ac
coun
ts b
y th
e ac
-co
unt
hold
er
Ver
ify
Cus
tom
er
Iden
tity
fo
r A
cco
unt
Op
enin
g P
urp
ose
s:
may
co
nduc
t C
DD
in
the
co
ntex
t o
f o
pen
ing
“lo
w t
rans
-ac
tio
nal”
and
“lo
w
risk
” ac
coun
ts—
ac-
coun
ts s
ubje
ct t
o
dep
osi
t an
d t
rans
ac-
tio
nal l
imit
s.
Oth
er: (
i) P
aym
ents
(in
clud
ing
loan
re-
pay
men
ts) u
sing
cr
edit
and
deb
it
card
s, c
heck
s, a
nd
cash
, (ii)
tra
nsfe
rs b
e-tw
een
ban
k ac
coun
ts
incl
udin
g o
f o
ther
b
anks
, (iii
) bal
ance
in
qui
ries
, (iv
)che
ck
cash
ing
, and
(v)
term
dep
osi
ts (o
nly
thro
ugh
exch
ang
e ho
uses
tha
t ha
ve a
ca
pit
al a
deq
uacy
ra
tio
of
at le
ast
12%
). (B
anki
ng C
ircul
ar,
Cha
pte
r X
I, Se
ctio
n 2,
art
icle
319
).
Ag
ents
are
pro
hib
-it
ed f
rom
cha
rgin
g
add
itio
nal f
ees
that
w
ere
not
pre
vio
usly
se
t b
etw
een
ban
k an
d t
he c
lient
…
(Ban
king
Circ
ular
, C
hap
ter
X, S
ecti
on
2,
arti
cle
324,
VIII
).
Ag
ents
can
not
sub
-co
ntra
ct t
o t
hird
par
-ti
es (B
anki
ng C
ircul
ar,
Cha
pte
r X
, Sec
tio
n 2,
ar
ticl
e 32
4, V
III(d
)).
Ban
ks c
an n
one
the-
less
hire
ag
ents
th
roug
h ag
ent
netw
ork
man
ager
s.
(Ban
king
Circ
ular
, C
hap
ter
X, S
ecti
on
2,
arti
cle
322,
I).
Ban
ks c
anno
t hi
re e
n-ti
ties
tha
t ha
ve b
een
acti
ng a
s ex
clus
ive
agen
ts t
o a
noth
er
ban
k in
the
pas
t 12
m
ont
hs a
nd a
gen
ts
cann
ot
sig
n ex
clus
ive
agen
cy a
gre
emen
ts
to c
ond
uct
pay
men
ts
of
nonb
ank
serv
ices
an
d c
red
it c
ard
p
aym
ents
(Ban
king
C
ircul
ar, C
hap
ter
XI,
Sect
ion
2, A
rtic
le
324)
.
Usi
ng a
gen
ts d
oes
no
t ex
emp
t th
e b
ank,
the
ir m
anag
-er
s, e
mp
loye
es, a
nd
leg
al r
epre
sent
ativ
es
fro
m c
om
ply
ing
wit
h th
e p
rovi
sio
ns o
f th
e La
w o
n C
red
it
Inst
itut
ions
. Ag
ents
ar
e su
bje
ct t
o a
d-
min
istr
ativ
e, c
ivil
and
cr
imin
al c
harg
es f
or
infr
ing
ing
ap
plic
able
le
gis
lati
on.
(Law
on
Cre
dit
In-
stit
utio
ns, 1
999
and
am
end
men
ts, A
r-ti
cles
46
Bis
1 a
nd 2
, an
d B
anki
ng C
ircul
ar,
Cha
pte
r X
I, Se
ctio
n 2,
Art
icle
s 32
9-33
1)
Ban
ks le
gal
ly r
esp
on-
sib
le f
or
the
acts
of
thei
r ag
ents
(Law
on
Cre
dit
Inst
itut
ions
, A
rtic
le 4
6 B
is 1
, §2)
.
17
Che
ck c
ashi
ng a
nd
wit
hdra
wal
s ar
e lim
-it
ed t
o 1
,500
UD
Is
per
clie
nt p
er d
ay.
Dep
osi
ts a
re li
mit
ed
to 1
0,00
0 U
DIs
per
cl
ient
per
day
, and
p
er a
gen
t to
25%
of
the
aver
age
mo
nthl
y g
ross
dep
osi
ts o
f th
e b
ank,
as
ob
serv
ed in
th
e la
st 1
2 m
ont
hs.
(Ban
king
Circ
ular
, C
hap
ter
XI,
Sect
ion
2, A
rtic
le 3
23)
Nig
eria
(Reg
ulat
ory
Fra
me-
wo
rk f
or
Mo
bile
P
aym
ent
Syst
ems
in
Nig
eria
, 200
9)
May
be
ind
ivid
u-al
s o
r le
gal
ent
itie
s.
(Sec
tio
ns 5
.2.1
.3 a
nd
5.2.
1.4
by
imp
lica-
tio
n.)
Serv
ice
pro
vid
er
mus
t ca
rry
out
ag
ent
due
dili
gen
ce
mea
sure
s, in
clud
ing
fin
ger
pri
ntin
g (i
n th
e ca
se o
f in
div
idua
ls)
and
ver
ifyin
g r
egis
-tr
atio
n (in
the
cas
e o
f le
gal
ent
itie
s). (
Sec-
tio
n 5.
2.1.
2)
Ag
ents
mus
t no
t m
aint
ain
a ti
ll ex
-ce
edin
g N
100,
000
(ap
pro
x $6
55).
(Sec
-ti
on
5.2.
2)
Cas
h-in
/Cas
h-o
ut:
Serv
ice
pro
vid
ers
may
ap
po
int
agen
ts
to f
acili
tate
“d
epo
sit
and
wit
hdra
wal
/ca
sh-o
ut.”
(Sec
tio
n 5.
2.1.
1)
Ver
ify
Cus
tom
er
Iden
tity
fo
r A
cco
unt
Op
enin
g P
urp
ose
s:
Serv
ice
pro
vid
ers
may
ap
po
int
agen
ts
to f
acili
tate
“en
rol-
men
t o
f cu
sto
mer
s”
tho
ugh
uncl
ear
to
wha
t ex
tent
thi
s p
er-
mit
s ag
ents
to
ver
ify
iden
tity
fo
r ac
coun
t o
pen
ing
pur
po
ses.
(S
ecti
on
5.2.
1.1)
Uns
tate
dE
-mo
ney
issu
ers
may
ap
po
int
agen
ts a
nd
sub
agen
ts. (
Sect
ion
5.1.
1)
The
“ag
ents
are
no
t re
stri
cted
to
any
one
sc
hem
e o
per
ato
r (t
hey
can
serv
e as
ag
ents
to
mul
tip
le
op
erat
ors
).” (2
009,
Se
ctio
n 5.
2.26
)
No
t cl
earl
y sp
ecifi
ed
but
co
mm
on
law
as-
sum
pti
on
of
liab
ility
fo
r ag
ent
whe
n ac
t-in
g u
nder
the
au-
tho
rity
of
its
agen
cy
agre
emen
t. (co
ntin
ues)
18
Tab
le 1
: Ag
ency
Reg
ulat
ions
: Glo
bal
Ap
pro
ache
s (c
ont
inue
d)
Co
untr
y W
ho c
an b
e an
ag
ent?
Wha
t ar
e o
ther
ag
ent
elig
ibili
ty
req
uire
men
ts?
Wha
t ca
n an
ag
ent
do
?R
estr
icti
ons
on
fees
ch
arg
ed b
y ag
ents
?C
an a
n ag
ent
sub
cont
ract
?Is
ag
ent
excl
usiv
ity
per
mit
ted
?P
rinc
ipal
liab
ility
fo
r ag
ents
Pak
ista
nB
ranc
hles
s B
ank-
ing
Reg
ulat
ions
fo
r Fi
nanc
ial I
nsti
tuti
ons
D
esiro
us t
o U
n-d
erta
ke B
ranc
hles
s B
anki
ng (3
1 M
arch
20
08)
No
t sp
ecifi
ed. I
n p
ract
ice
may
be
leg
al
enti
ty o
r in
div
idua
l (p
rovi
ded
suc
h in
di-
vid
ual i
s th
e p
rop
ri-
eto
r o
r o
per
ates
a
bus
ines
s).
Fina
ncia
l ins
titu
tio
ns
“sho
uld
cle
arly
de-
fine
vari
ous
ag
ent
typ
es a
nd m
inim
um
agen
t se
lect
ion
cri-
teri
a fo
r ea
ch t
ypes
. [T
hey]
sho
uld
ens
ure
that
ag
ents
are
wel
l es
tab
lishe
d, e
njo
ying
g
oo
d r
eput
atio
n an
d
havi
ng c
onf
iden
ce
of
the
loca
l peo
ple
.”
(Sec
tio
n 6.
3)
Cas
h-in
/Cas
h-o
ut:
Ag
ents
may
eng
age
in c
ash-
in, c
ash-
out
serv
ices
, in
clud
ing
co
llect
ing
cas
h fo
r b
ill
pay
men
ts (i
nclu
din
g,
with
res
pec
t to
util
ity
pay
men
ts, f
rom
bot
h re
gis
tere
d a
nd w
alk-
in c
usto
mer
s) a
nd
loan
dis
bur
sem
ent
and
rep
aym
ent.
(Sec
-tio
n 6.
1)
Ver
ify C
usto
mer
Id
enti
ty f
or
Acc
oun
t O
pen
ing
Pur
po
ses:
Fo
r Le
vel 1
acc
ount
s (a
ccou
nts
held
by
ind
ivid
uals
sub
ject
to
b
alan
ce a
nd t
rans
ac-
tion
cap
s) a
gen
ts m
ay
faci
litat
e op
enin
g b
y co
llect
ing
pho
toco
py
of n
atio
nal I
D c
ard
, b
iom
etric
fing
erp
rint
scan
and
dig
ital
pho
to a
nd fo
rwar
din
g
such
doc
umen
tatio
n to
fina
ncia
l ins
titu-
tion.
(Sec
tion
4)
“Ag
ents
may
no
t al
ter/
chan
ge
char
ges
/fee
s st
ruc-
ture
pro
vid
ed b
y th
e b
ank
in a
ny w
ay. A
ll ch
arg
es h
ave
to b
e p
re-a
gre
ed b
etw
een
the
ban
k an
d t
he
agen
t an
d s
houl
d
be
clea
rly
com
mun
i-ca
ted
to
the
cus
tom
-er
s.”
(Sec
tio
n 6.
1)
Ag
ent
sub
cont
ract
-in
g a
llow
ed a
nd d
if-fe
rent
ag
ent
leve
ls
refe
renc
ed (S
uper
A
gen
ts, D
irect
A
gen
ts, a
nd S
ub
Ag
ents
.) (S
ecti
on
6.2)
“One
Ag
ent
can
pro
-vi
de
serv
ices
to
mul
-ti
ple
ban
ks p
rovi
ded
he
(the
ag
ent)
has
a
sep
arat
e se
rvic
e le
vel
agre
emen
t w
ith
each
b
ank.
” (S
ecti
on
6.1)
“The
ult
imat
e re
-sp
ons
ibili
ty f
or
bra
nchl
ess
ban
king
lie
s w
ith
the
Fina
ncia
l In
stit
utio
n. T
he F
I m
ay, h
ow
ever
, tak
e st
eps
it d
eem
s ne
c-es
sary
to
saf
egua
rd
itse
lf ag
ains
t lia
bili
-ti
es a
risi
ng o
ut o
f th
e ac
tio
ns o
f it
s ag
ents
, se
rvic
e p
rovi
der
s o
r p
artn
ers.
” (S
ecti
on
5)
“All
agre
emen
ts/
cont
ract
s w
ith
the
cust
om
er s
hall
clea
rly
spec
ify t
hat
the
ban
k is
res
po
nsib
le
to t
he c
usto
mer
fo
r ac
ts o
f o
mis
sio
n an
d
com
mis
sio
n o
f th
e ag
ent.
” (S
ecti
on
9.1)
19
Sout
h A
fric
a(B
anks
Act
No
. 94
of
1990
; Ban
ks A
ct
Gui
dan
ce N
ote
3/
2008
on
out
sour
c-in
g o
f fu
ncti
ons
w
ithi
n b
anks
)
Any
“p
erso
n” c
an
act
as a
ban
k ag
ent.
(B
anks
Act
). Th
ere
is
no p
rovi
sio
n re
stri
ct-
ing
oth
er t
hird
-par
ty
out
sour
ces
alth
oug
h th
e cl
ear
imp
licat
ion
of
Gui
dan
ce N
ote
3
(whi
ch c
ove
rs o
nly
out
sour
cing
arr
ang
e-m
ents
tha
t im
pac
t th
e ri
sk p
rofil
e o
f th
e b
ank,
aff
ect
the
ban
k›s
syst
ems
and
co
ntro
ls, a
re c
lass
i-fie
d b
y th
e b
ank›
s m
anag
emen
t as
of
stra
teg
ic im
po
rtan
ce
or
have
imp
licat
ions
fo
r SA
RB
›s s
uper
vi-
sio
n) is
tha
t th
e o
ut-
sour
cee
is a
bus
ines
s.
Ther
e ar
e no
elig
ibil-
ity
req
uire
men
ts f
or
agen
ts o
r o
utso
ur-
cees
. H
ow
ever
, the
b
ank
mus
t no
tify
SA
RB
in a
dva
nce
of
any
out
sour
cing
ar-
rang
emen
t co
vere
d
by
Gui
dan
ce N
ote
3.
In g
ener
al, b
anks
m
ay o
utso
urce
sp
ecifi
c se
rvic
es,
pro
vid
ed t
hat
such
se
rvic
es a
re c
on-
duc
ted
in a
cco
rdan
ce
wit
h th
e b
ank’
s in
ter-
nal p
olic
ies
and
sta
n-d
ard
s an
d m
oni
tore
d
by
the
ban
k.
Cas
h-in
/Cas
h-ou
t. A
b
ank
may
con
trac
t ag
ents
”to
rece
ive
on it
s b
ehal
f fro
m it
s cl
ient
s an
y d
epos
its,
mon
ey d
ue t
o it
… o
r to
mak
e p
aym
ents
to
su
ch c
lient
s on
its
be-
half“
(Ban
ks A
ct,
Def
-in
ition
of “
agen
cy”)
.
Ver
ify
Cus
tom
er
Iden
tity
fo
r A
cco
unt
Op
enin
g P
urp
ose
s.
No
t sp
ecifi
cally
ad
dre
ssed
. No
t ex
-p
ress
ly p
erm
itte
d o
r p
rohi
bit
ed.
Oth
er: A
gen
ts m
ay
rece
ive
app
lica-
tio
ns f
or
loan
s o
r ad
vanc
es. (
Ban
ks
Act
, def
init
ion
of
“ag
ency
”) A
sid
e fr
om
the
def
init
ion
of
agen
cy, t
here
is n
o
exp
licit
sta
tem
ent
re-
gar
din
g w
hat
agen
ts
may
or
may
no
t d
o.
Ther
e ar
e no
pro
vi-
sio
ns r
estr
icti
ng f
ees
char
ged
by
agen
ts,
tho
ugh
this
wo
uld
ty
pic
ally
be
a to
pic
o
f co
ntra
ctua
l ag
ree-
men
t b
etw
een
pri
nci-
pal
and
ag
ent.
Ther
e is
no
sta
tuto
ry
bar
on
sub
cont
ract
-in
g b
y ag
ents
. H
ow
-ev
er, a
gen
ts w
ill b
e ab
le t
o s
ubco
ntra
ct
onl
y if
per
mit
ted
un
der
the
ag
reem
ent
wit
h th
e b
ank.
If
an
agen
t o
r o
utso
urce
e d
oes
sub
cont
ract
, th
e b
ank
will
nee
d t
o
ensu
re m
anag
emen
t o
f, a
nd c
ont
rol o
ver,
the
func
tio
ns p
er-
form
ed b
y th
e su
b-
agen
t/su
bco
ntra
cto
r.
Ther
e is
no
sta
tuto
ry
rest
rict
ion
on
agen
t ex
clus
ivit
y. H
ow
ever
, an
y su
ch a
rran
ge-
men
t w
ill b
e su
bje
ct
to t
he c
om
pet
itio
n la
w.
Co
mm
on
law
ren
der
s th
e p
rinc
ipal
liab
le
for
acts
of
its
agen
ts
(but
no
t o
utso
urce
s,
alth
oug
h a
ban
k co
uld
be
so li
able
p
ursu
ant
to c
on-
trac
t).
*Thi
s Ta
ble
is b
ased
in p
art
on
uno
ffic
ial E
nglis
h tr
ansl
atio
ns o
f re
leva
nt r
egul
atio
n. It
is n
ot
inte
nded
as
leg
al g
uid
ance
or
op
inio
n, a
nd r
efer
ence
sho
uld
alw
ays
be
mad
e to
the
ori
gin
al t
ext.
should view this as an argument supporting a light
touch regulatory approach, not a presumption that
regulation is unnecessary.
Finally, new regulatory challenges to the use of agents
are emerging. Agent exclusivity is now beginning to
raise questions about how best to promote competition
while maximizing financial inclusion (see Box 2).
Questions are also emerging as to how agents can be
practically supervised—and in Egypt and Jordan for
example, the question is not just about how to regulate
agents, but also who should regulate them: Is it the
financial regulator or the telecommunications regulator?
Policy makers have endeavored to create fertile
contexts for experimentation and financial inclusion,
but the evolution of branchless banking remains a work
in progress. What is clear is that the business case for
agent banking depends significantly on the promise of
lower costs—both to service existing customers and
reach new segments and geographies. Cost savings in
turn depend on proportional regulations that address
the real risks of banking agents in the least burdensome
manner possible, enabling agent networks to scale
safely and sustainably and ultimately promoting access
to financial services for the world’s poor.
References
CGAP. 2010a. “Update on Regulation of Branchless
Banking in Colombia.” http://www.cgap.org/
gm/document-1.9.42397/Updated_Notes_On_
Regulating_Branchless_Banking_Colombia.pdf
CGAP. 2010b. “Update on Regulation of Branchless
Banking in Indonesia.” Sections 3.1.2 and 3.2. http://
www.cgap.org/gm/document-1.9.42399/Updated_
Notes_On_Regulat ing_Branchless_Banking_
Indonesia.pdf
Dias, Denise, and Katharine McKee 2010.
“Protecting Branchless Banking Consumers: Policy
Objectives and Regulatory Options.” Focus Note 64.
Washington D.C.: CGAP. http://www.cgap.org/gm/
document-1.9.47443/FN_64_Rev.pdf
Flaming, Mark, Claudia McKay, and Mark Pickens.
2011. “Agent Management Toolkit: Building a Viable
Network of Branchless Banking Agents.” Technical
Guide. Washington, D.C.: CGAP. http://www.cgap.org/
gm/document-1.9.49831/AgentManagement_TG.pdf
Ivatury, Gautam, and Ignacio Mas. 2008. “The Early
Experience with Branchless Banking.” Focus Note 46.
Washington, D.C.: CGAP. http://www.cgap.org/gm/
document-1.9.2640/FN46.pdf
Tarazi, Michael. 2010. “Branchless Banking: The Test
and See Approach.”Blog post. http://technology.
cgap.org/2010/02/09/branchless-banking-the-test-
and-see-approach/
The authors of this Focus Note are Michael Tarazi and Paul Breloff. The authors would like to thank the following for their review and commentary: Tilman Ehrbeck, Stephen Rasmussen, Timothy Lyman, Chris Bold, Kate Lauer, Yanina Seltzer, Denise Dias, Sarah Fathallah, Emiko Todoroki (World Bank Financial Integrity Team), and Paul
Leishman (GSMA). The Technology Program at CGAP works to expand financial services for the poor using mobile phones and other technologies and is co-funded by the Bill & Melinda Gates Foundation, CGAP, and the U.K. Department for International Development (DFID).
The suggested citation for this Focus Note is as follows:Tarazi, Michael, and Paul Breloff. 2011. “Regulating Banking Agents.” Focus Note 68. Washington, D.C.: CGAP, March.
No. 68March 2011
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