According to the Pew Trusts, some proponents of Governments’ regulations argue that it protects the environment, workers, and consumers and often lead to innovation, increased productivity, new businesses and jobs. They admit, that opposing arguments are sometimes made, that the cost of complying with regulations is too high, that the societal benefits do not justify the investment, or that job losses will result, yet they insist that its benefits outweigh any temporary defects.
Compliance and regulatory requirements in Nigeria appear to be nascent, some Regulators are largely understaffed and underfunded, with little or no capacity to enforce compliance – compliance is good for the consumer and the economy – while industry players are more inclined to comply on need basis or in limited sense, as a box ticking measure.
The Nigerian agency banking sub-sector of our financial services is fast becoming a multi-billion naira industry with capacity to attract local and foreign investment in the financial technology space. Some agency banking service providers process more than N1billion monthly, on largely cash out and fund transfer transactions.
The boom associated with agency banking services accords with the Nigerian Governments’ drive for financial inclusion – accessible and affordable (remote) banking services in its urban and rural areas. The Central Bank of Nigeria (the “CBN”) pursuant to its statutory function to issue guidelines that ensure delivery of adequate and reasonable financial services to the public, issued Guidelines for the Regulation of Agent Banking and Agent Banking Relationships (the “Guidelines”).
SANEF (Shared Agent Network Expansion Facilities Limited) is the CBN’s only child firmly breastfed by Nigerian Banks, Nigerian Inter-Bank Settlement Systems (NIBBS) and mobile money operators or shared agents with the mandate to drive and widen financial access points and services and increase financial inclusion up to 80% in this year 2020.
It is noteworthy that SANEF who is a registered company in Nigeria is empowered to deepen financial inclusion in Nigeria through a robust ecosystem with strong regulatory oversight, consumer protection and interoperable system. SANEF’s objectives flow from the Guidelines which seek to increase financial inclusion in Nigeria through agency banking network.
In a broad term, agency banking services include cash out or withdrawal, cash transfers or deposits, payment of utility bills but exclude cheques deposit or withdrawal from an agent of any bank or mobile money operator. The Guidelines categorize agents (who are generally entities) into super-agents, that is, entities contracted by banks or mobile money operators to render banking services to its customers and may sub-contract to a sub-agent or; sub-agents who may be entities or individuals engaged by the super-agents to render agency banking services or; sole agents who are engaged by banks or mobile money operators to render agency banking service and they cannot sub-contract any of the services.
The Guidelines prohibit any agents from directly charging fees to the customers. It appears the prohibition is not a criminalized act given the absence of any punishment for violators under the Guidelines – perhaps, if established, it discredits the moral rectitude of the agents, which is also a criterion for being an agent. – The Guidelines leaves this to the discretions of the principals even though there should be a national data base of all agents in Nigeria.
The fee model instituted by the Guidelines require Banks or mobile money operators (here referred to as the “principals”) to pay the agents a pre-agreed fee for each transaction. It is to be noted that Agents are not employees of their principals or as the case may be, the Super-agents and, are not entitled to any remuneration other than commissions based on actual transactions carried out.
The Guidelines’ apparently do not take into account the level of infrastructure available to the agents across States in Nigeria. Agents, especially sub-agents who are individuals – who constitute majority of agents in Nigeria – generate electricity to charge their devices that include mobile phones and mPOS or POS, bear costs of internet data, oftentimes prolonged telephone calls during incessant system failures and, costs arising from agents’ arrest by Nigerian Police at the instance of customers for ‘debits not reflected’. Transaction costs for agents are high in view of infrastructure deficits in Nigeria.
Some principals charge agents as much as N15, 700.00 as on boarding fees even though no clear infrastructure is provided to the agent. We note that the agent does not own the POS devices rather it is the property of the principals while the mobile phone is that of the agent. The on boarding fee is an added cost on the agents, which simple economics require him to off load on the customer yet the Guidelines arm-twists the agents, who should be protected by it as a weaker party.
SANEF and other stakeholders have to formulate more competitive agent remuneration models aimed at allowing agents to directly charge fees to the customer. Alternatively, SANEF should put a ceiling on fees a principal may charge and allow consumers (the market) to shape fees principals may pay to the agents. In our view, this will increase competition and drive innovations in agency banking sector. – There is a need for less stricter but livelier regulation of agents’ remuneration under the Guidelines.
A competitive agency fee model will enable principals to use pricing to attract or retain customers thereby allowing customers liberty to shop from one agency banking service provider to the other. Perhaps it is time for the CBN to mandate banks to allow for transfer of customers’ accounts from Bank A to Bank B instead of closure of accounts as presently required, when a Bank’s customer no longer requires his Bank’s services.
Some agents across Nigeria breach the Guidelines in order to make up for high transaction costs while others are seemingly motivated by profits at the expense of people. SANEF appears not to have the capacity to traverse Nigerian landscape in search of defaulters and we are not certain that SANEF has the competence to sanction any such agents neither are principals more willing to graciously inform SANEF or the CBN of agents who breach the Guidelines or commit any other frauds.
In Conclusion, we urge SANEF and all stakeholders to work towards a more competitive agency remuneration model in order to offer the industry a more robust and attractive agency banking services. Agents’ remuneration model we posit in this article is to allow agents to directly charge customers fees within a set roof. Our views on the capacities of a more robust agency remuneration framework to further deepen competition and innovations align with the assertions of the Pew Trusts above.