Agency Banking “El Dorado” in Uganda – what to expect?

The game is on. The legislation needed to enable agency banking in Uganda has been passed and so now, banks in the country are preparing to roll out their agency banking strategies. To acquire new customers, especially in the rural areas of the country.

Although most banks in Uganda have implemented mobile banking, agency banking will be a real game changer for the Ugandan market since it will allow end-to-end ownership of the distribution channel, without relying on the Mobile Network Operator’s (MNOs) other than for their communication services. This opens the door for increased competition, mainly on pricing and quality of service provided.

Within this context, UNCDF is supporting several Ugandan banks in their preparations to launch and roll out agency banking solutions. “We foresee a number of players to go live before the end of the year, with many others to follow early next year. As of now there is room for everyone. That’s how big the opportunities are. However, the competition will become fierce and not only amongst banks. The first pain will be felt in the fight for scarce resources to manage a network of agents in the Ugandan market; working capital of agents as well as experienced staff to manage this distribution channel. This is a space to watch, as it will certainly reshape the DFS landscape in Uganda”, says Bram Peters, UNCDF’s Country Technical Specialist – Digital Finance.

As Michael Nuwagaba – Agent Banking Manager at Centenary Bank – highlights, “Agent Banking is an efficient model that will help us in driving our Financial Inclusion strategy of reaching the unbaked, majority of whom are located in rural areas. The channel shall enhance customer service experience by bringing banking to the neighborhoods of the customers we serve. With this increased outreach, customers shall conveniently access financial services through duly appointed agents near them without feeling the need to visit a Bank branch.”

Exploring the best entry strategy

The partnering banks are indeed eager to start and their strategies to do so are varied; some are betting on a first mover advantage, while others are hedging their bet on a delayed market entry while observing and learning from their competitors’ successes and failures.

“Leveraging on our experience in the East African markets, we have our robust and secure technology already customized to suite the Ugandan market and Central Bank Guidelines, our well trained and experienced staff are ready to train and handhold both agents and customers and take this exciting journey towards real social economic transformation”, says Julius Musiime Apuuli, Head Agency Banking, Equity Bank Uganda.

Arthur Nuwagaba, Project Manager Agency Banking, talks about DFCU Bank’s approach: “Collaboration with existing fintechs that have established Agent Networks not only provides a quicker time to market and an opportunity to learn from the ANM’s agency and operation’s experience but also the opportunity to leverage their technology and infrastructure to achieve faster growth and footprint at a much lower cost as compared to setting up an agent network from scratch.”

The Bank of Uganda is very active in evaluating the banks’ applications and started providing approvals to engage in Agency Banking operations.

“On the 11^th of October 2017, KCB Bank got its letter of no objection from the central bank which officially allows us to rollout agency banking across the country. By all means, this was a great milestone for us however as we continue to do our homework in readiness for rollout. We have picked lessons and incorporated measures in our strategy and design in Uganda perspective; as KCB Bank we believe agents points should be treated as no less than our own branch extensions by ensuring that the bank’s core brand standards are preserved.” says Michael Ssekyondwa, Agency and Digital Finance Manager at KCB Bank Uganda

It is interesting and reassuring at the same time to see how many variables have been considered throughout the strategy definition, design and development phases conducted together so far. The workload is enormous and the pressure to deliver is high. The moment of truth is approaching as many of the banks will soon be moving into the pilot phase, where the theory will meet the practice.

Near Future

Richard Jabel, Head of Agency Banking at Stanbic Bank, has a very clear view on what’s coming next: “Successful pilot testing goes a long way in preparing banks for successful Agency Banking roll out, that achieves the intended objectives and decreases mistakes and the associated cost of those mistakes at go live. Pilot testing enables testing of the effectiveness of the bank and Agent Banking team structure in delivering Agent Banking services to customers. Testing systems and processes during pilot is critical as it contributes to ensuring that issues are identified and addressed before go-live. Risks are identified and mitigated appropriately throughout the pilot in a controlled environment, this limits bank, customer and agent exposure after go-live.”

If anything has been learned from other markets so far, there is no ‘too big to fail’, nor ‘too small to succeed’ when it comes to implementing agency banking. This alternative channel brings various players on a plain level. It will be a matter of consistency during implementation and roll out, as well as the ability to learn and adapt to make the difference in a context where banks strive to redefine themselves. This will not be a sprint, but rather a marathon. Only those with long term vision and commitment will prevail.