The introduction of the Central Bank of Nigeria Guidelines For The Regulation of Agent Banking & Agent Banking Relationships in Nigeria was designed as a very effective method of position disruption in Nigeria’s Banking & Finance sector aimed at :-
– the provision of minimum standards and operation requirements for agency banking operations as a simplistic but effective tool of extending the reach of banking services in Nigeria;
– the enhancement of Financial inclusion in Nigeria;
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– the proper provision of agency banking as a cost-effective banking platform.
Agency Banking as a concept has successfully led to very high levels of financial inclusion & financial literacy as well as an overwhelming level of convenient banking services leveraging on the nature of communal living in Nigeria and Financial technology, giving rise to another type of value stakeholder in the Finance Industry – the Super-Agent, a rather new Fintech offering that will be the focus of this article which will be looking at:-
– The definition of Agency Banking as a concept & the categories of Banking agents in Nigeria.
– The Regulatory Framework governing Agency Banking in Nigeria.
– The licensing requirements for Super Agents in Nigeria.
– The permissible and non-permissible activities for Super-Agents in Nigeria.
– A basic idea of the operational guidelines for Super Agents in Nigeria.
What is Agent Banking?
Agency Banking involves the provision mainly via Financial Technology of banking services to customers on behalf of a licensed deposit taking Financial Institution or Mobile Money Operator(known as “The Principal”) by a 3rd party known as “The Agent”.
What is the Regulatory Framework governing Agency Banking in Nigeria?
Agent Banking is regulated mainly by the Central Bank of Nigeria (CBN) through Banks and Other Financial Institutions Act (BOFIA) and The Guidelines For The Regulation of Agent Banking & Agent Banking Relationships in Nigeria (or ‘The Guidelines’).
What are the categories of Banking Agents allowed under the Guidelines?
The categories of Banking agents allowed under the Guidelines are :-
- The Super Agent :- This is an agent contracted by an MMO or Financial Institution (Principal) who may subcontract other agents in a network over a wide geographical area and retaining overall responsibility for the operation of the agency relationship.
- The Sub– Agent :- A person to whom some or all aspects of the agent banking service delivery have been delegated by a Super-Agent.
- The Sole Agent :- An agent who does not delegate agency operation powers to other agents but assumes agency by himself.
Who is in charge of licensing Super Agents?
Super Agent licensing falls under the jurisdiction of the Central Bank of Nigeria through the Regulatory Framework for licensing Super Agents in Nigeria even though it is set in motion by an Agency agreement with either a Financial Institution or Mobile Money Operator.
What are the requirements for Super Agent licensing in Nigeria?
The requirements for a Super Agent license in Nigeria are :-
– Being a registered company with a minimum shareholders fund of 50 Million Naira unimpaired by losses.
– Sending an application as a registered company through your lawyer for a Super Agent license to the Central Bank of Nigeria through the Director, Banking & Payments System Department.
– Evidence that the company has been a company with an existing business operational for at least 12 months before the application.
– A Certificate of Incorporation of the applicant company along with its Memorandum & Articles of Association.
– A documented referral from a Financial Institution/Mobile Money Operator.
– Proof of having at least 50 agents.
– A copy of the company’s board resolution approving its Super Agent application.
– The company’s profile and functional contact emails, telephone numbers, office and postal addresses.
– A documented shareholding structure of the company.
– A Feasibility report.
– An organogram of the company.
– The IT policy of the company.
– An Enterprise Risk Management Framework.
– A Contingency & Disaster Recovery Plan.
– A documented outline or the company’s shared agent network including current and potential engagements, geographical spread and benefits to be derived.
– Qualifying criteria for engaging agents.
– Draft SLAs (Service Level Agreements) with sub-agents and Financial Institution/Mobile Money Operator Agent Banking contract.
– An Anti-Money Laundering/Combating the Financing of Terrorism/Know-Your-Customer (AML/CFT/KYC) Compliance Policy.
– Fraud detection plan.
– Risk Management policy.
– Consumer Protection Policy & Policy.
Can a Super-Agent have agency contracts with more than 1 Financial Institution or Mobile Money Operator?
Yes, the Guidelines prohibit exclusivity of agent banking relationships, putting Super Agents at the liberty to have agency Agreements with several Financial Institutions and Mobile Money Operators.
What are some of the post-operating Compliance requirements/ permissible and non-permissible activities for Super Agents?
Permissible Activities
– Super Agents can accept Monetary deposits and withdrawals from customers.
– Utility Bills payment services.
– Salary payment services.
– Local money value transfer services.
– Balance Enquiry services.
– Mini-statement generation & issuance services.
– Collection and submission of account opening & other related documentations.
– Agent Mobile payments / Banking services.
– Cash disbursement & Cash repayment of loans
– Collection of Bank mail/Correspondence for customers.
– Any other activity as the Central Bank of Nigeria may from time to time prescribe.
Non-Permissible Activities
– Charging the customer any fee.
– Giving any guarantees.
– Carrying out transactions where a receipt or acknowledgement cannot be generated.
– Offering Banking services of its own accord.
– Carrying out a transaction when there’s communication failure with the Financial Institution ( The Principal).
– Continuing with the agency business when it has a proven criminal record involving fraud, dishonesty, integrity or any Financial impropriety.
– Rendering Banking services not specifically mentioned in its Agency Banking contract.
– Undertaking cheque deposits & encashment of cheques.
– Providing cash advances.
– Being run or managed by a Financial Institution’s employee or associate.
– Transacting in Foreign currency.
– Subcontracting another agent to operate on its behalf without being a licensed Super Agent.
Conclusion :- While the above write-up is definitely not exhaustive, it can be seen regardless that Agency Banking is a potentially very lucrative Fintech offering that can be leveraged on to provide positively disruptive Financial Inclusion services despite its rather strict Regulatory Framework. It is thus advised that anyone seeking to go into Agency Banking should further consult with his Solicitor going forward.