The government’s campaign to deepen financial inclusion has suffered a setback after KCB, the first bank to introduce agency banking shelved the plan.

The KCB agency banking service named Iwacu was launched in 2012 and was meant to take banking services closer to the customers. Agency banking brings the bank’s services to customers’ neighbourhoods, meaning they don’t have to go the branches or use ATMs.

However, KCB was forced to stop the service, partly because the mobile phone technology deployed was not appreciated in the market.

The agents were using mobile phone technology to offer simple banking services like cash deposits and withdrawals; loan repayments; payment of bills and money transfers.

“The market did not appreciate the phone technology KCB was using to facilitate agency banking,” said Maurice Toroitich managing director of KCB Rwanda. The bank, which had close to 1,000 agents countrywide, has been forced to go back to the drawing board.

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Agency banking earns the agents commissions while saving banks money. Officials from Equity Bank and Bank of Kigali told Rwanda Today that it is “cheaper to set up agents as opposed to opening a branch, which increases costs because of staffing, rent and electricity.

Agency banking makes it easier for banks to roll out other products and services and reach underserved areas especially in the rural areas. This explains why KCB’s management has pumped in more money to roll out its agency banking using new technology.

“We have had to invest $500,000 in a new card-based technology and we plan to expand agency banking further to the rural areas,” said Mr Toroitich.

It is now apparent that the withdrawal of KCB — the pioneer in agency banking — has partly slowed down the campaign for formal financial inclusion in a country targeting 80 per cent of the population to be bankable or have access to a formal financial institution by 2017.

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The August 2014 Monetary Policy and Financial Statement of National Bank of Rwanda said that despite the significant development made in card-based payment system in the past two years, the number of cards and points of sale (POS) machines is still too low to boost the use of electronic payments.

Urban concentration

The statement also said that the existing payment terminals are concentrated in urban areas with 50 per cent of ATMs and 81 per cent of POS in Kigali.

Analysts look at mobile money services and agency banking as the biggest drivers of the country’s target to increase financial inclusion.

KCB has now deployed a card-based system to support its agency banking.

Rwandans trust POSs because they get receipts after depositing or withdrawing money compared with the phone technology, which only sends messages.

KCB, which plans to launch a better card-based service in November, is re-entering the market just as competition stiffens. But, KCB will have to invest heavily in getting back its customers from banks like Equity Bank, which has invested heavily in advertsing and branding its agency baking services across the country.

Bank of Kigali is also another player in agency banking and it has been aggressively recruiting agents countrywide. The commission the agents get depends on the number and amount of cash transactions they make. Bank of Kigali’s commission rates range between Rwf50-Rwf2,000.

Transactions of between Rwf100-Rwf 500,000 earn agents commissions of between Rwf100-Rwf3,000.

According to Bank of Kigali the attractive commissions have seen the bank signing 751 operational agents as of June. The bank transacted Rwf29.2 billion by the end of June this year.