Amajor obstacle to financial inclusion is cost—not 

only the cost incurred by banks in servicing lowvalue 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 cashout 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, forprofit 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. 68

March 2011 focus note

Michael Tarazi 

and Paul Breloff

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

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 amend
2

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.

5 Resolution CMN 3110/03, Article 1 (July 2003), as amended by Resolution CMN 3156/03 (December 20

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 

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 (201

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 fitand-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 timeconsuming, 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 financia

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 antimoney 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 (2010

14 FATF 40 Recommendations, Recommendatio

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/cashout 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 lowtransactional, 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 

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, Recommendatio

17 FATF Consultation Paper, The Review of the Standards—Preparation for the 4th Round of Mutual Evaluations, p. 9. (Octo

18 Ibid.

19 Bangko Sentral Ng Pilipinas, Circular 471, Series of 2005. It should be noted that such RAs are licensed financial services provid

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 200
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 wellmeaning 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 Novemer  20

22 State Bank of Pakistan, Branchless Banking Regulations, Section 6.1 (March 200

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 Safari

25 RBI/2010-11/217 DBOD.No.BL.BC.43/22.01.009/2010-11, Art. 3 (28 September 20
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(

30 State Bank of Pakistan, Branchless Banking Regulations, Section 5 (March 200

31 The practice in Brazil and other Latin American countries is to rely on indemnification by ANMs or sometimes even insuran

32 The question of what act or omission is related to the provision of financial services will ultimately be based on the facts and circumstance

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 testand-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 su

Safaricom (an MNO), banks are held liable for their agents under the Banking Agent Guidelines. Some have justified this differential treatment

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.

34 Banque de la République d’Haïti, Lignes Directrices Relatives à La Banque à Distances, Section 5.1 (September 201

35 First coined by the GSM Association, the term “test and learn” was later adopted by the G-20 in its “Principles for Innovative Financ

Inclusion” (Toronto, 27 June 2010)

36 See Tarazi (201

(continued on page 20)
11

Table 1: Agency Regulations: Global Approaches

Country Who can be an agent? What are other agent eligibility requirements? What can an agent do? Restrictions on fees charged by agents? Can an agent subcontract? Is agent exclusivity permitted? Principal liability for agents

Brazil(Resolution CMN 3110, July 2003, as amended by Resolution CMN 3156, December 2003; Resolution CMN 3654, December 2008 and Resolution CMN 3954, February 2011)

“Only entrepreneurial companies and associations (as defined by Law 10,406 of 2002) and providers of notary and registry services (as defined by Law 8,935 of 1994) can be hired as agents.” (Resolution CMN 3954, Art. 3).Financial institutions and other institutions that are part of the national financial system can be hired as agents. (Resolution CMN 3954, Art. 3, III)Except for activities such as (i) receiving and forwarding proposals for credit and (ii) payments and electronic transfer, it is prohibited to hire an entity whose principal or sole activity is the provision of agent services. Note: Individuals may not act as agents.

In the case of agents who offer credit operations, they must pass a certification examination carried out by a recognized entity with the technical capacity. (Resolution CMN 3954, Art. 12) The certification must include technical aspects of operations, applicable regulation, consumer protection, ethics, and auditing. (Resolution CMN 3954, Art. 12, II)

Cash-in/Cashout: Agents may perform deposits and withdrawals and bill payments. (Resolution CMN 3110, Art. 1)Verify Customer Identity for Account Opening Purposes: Correspondents may receive and forward account opening applications.Other: Agents may, inter alia, (i) receive and forward applications for credit/ credit cards, (ii) handle receipts, payments, and electronic transfers for credit or debit to customer deposit accounts, and (iii) extrajudicial collection services. (Resolution CMN 3954, Art. 8) 

Agents are prohibited from “charging, on its own initiative, any fee connected with the provision of the services to which the contract refers.” (Resolution CMN 3110, Art. 4, IV(c) and Resolution CMN 3954, Art. 17)

Subcontracting is permissible with previous consent of the financial institution. (Resolution CMN 3110, Art. 4, III) Only one level of subcontracting is allowed if contract allows for this possibility. (Resolution CMN 3954, Art. 7)

Not explicitly mentioned in the regulation, but in practice, exclusive arrangements do exist.

“The principal is fully responsible for the services rendered by its agents.” (Resolution CMN 3110, Art. 3)“An agent acts for and under the guidelines of the hiring institution, which assumes full responsibility for the services provided to clients and users through the agent, and which shall guarantee the integrity, reliability, security and confidentiality of the transactions conducted through the Agent....” (Resolution CMN 3954, Art. 2) 

(continues)
12

Country Who can be an agent? What are other agent eligibility requirements? What can an agent do? Restrictions on fees charged by agents? Can an agent subcontract? Is agent exclusivity permitted? Principal liability for agents

ColombiaDecree 2233 (July 2006), Decree 1121 (March 2009)

Any type of legal entity, including savings and credit cooperatives, may with prior Superintendencia Financiera de Colombia authorization act as a correspondent. Individuals may also act as agents, provided that they conduct some business activity in a fixed establishment. (Decree 2233, Art. 5)

The financial institution is required to assess the correspondent’s moral integrity, physical and technical infrastructure, and human resources.(Decree 2233, Art. 5)

Cash-in/Cash-out: Agent may perform cash deposits and withdrawals for checking, savings, or time deposits as well accept cash loan payments and disburse loan amounts. Agents may also accept payments.Verify Customer Identity for Account Opening Purposes: ”Correspondents may act as authorized third parties for carrying outthe necessary procedures [...], such as the interviews required for acceptance of clients.” (Decree 1121, Third paragraph)Other: Balance inquiries and statements for checking/savings accounts.Collection and submission of documents.Promotion and advertising of services. Domestic money transfers in Colombian currency within the national territory. (Decree 2233, Art. 2)

Correspondents cannot charge extra fees (Decree 2233, Art. 3, 3)

Subcontracting is permissible with previous consent of the financial institution. 

Not explicitly mentioned in the regulation but in practice, exclusive arrangements do exist.

The financial institution is “directly responsible for providing services through the correspondent” (Decree 2233, Art. 3, 1).

Table 1: Agency Regulations: Global Approaches (continued)
13

IndiaBC Circulars and amendments (January 2006, March 2006, April 2008, April 2009, November 2009, September 2010)

”NGOs/MFIs set up under Societies/Trust Acts, Societies registered under Mutually Aided Cooperative Societies Acts or the Cooperative Societies Acts of States, section 25 companies, ... and Post Offices” (January 2006, Section 3.1)Later added: “retired bank employees, ex-servicemen and retired government employees.” (April 2008)Later added:“(i) individual kirana/medical/fair price shop owners (ii) Agents of Small Savings schemes of Government of India/Insurance Companies (iv) individuals who own Petrol Pumps (v) Retired teachers and (vi) Authorized functionaries of well run Self Help Groups (SHGs) linked to banks.” (Section 2, November 2009)

Location: “The distance between the place of business of a BC and the base branch, ordinarily, should not exceed 15 Kms in rural, semiurban and urban areas. In metropolitan centres, the distance could be up to 5 kms.” (April 2008)Later expanded: BC place of business must be within 30 kilometers of the “base branch” of the bank. (April 2009)Due diligence may be carried out on potential BCs. Such due diligence exercise may include aspects such as “(i) reputation/market standing, (ii) financial soundness, (iii) management and corporate governance, (iv) cash handling ability and (v) ability to implement technology solutions in rendering financial services.” (September 2010)

Cash-in/Cash-out: BCs may engage in (i) disbursal of small-value credit, (ii) recovery of principal/collection of interest, and (iii) receipt and delivery of small value remittances /other payment instruments.”(January 2006, Section 3.2) Verify Customer Identity for Account Opening Purposes: “The banks may, if necessary, use the services of the BC for preliminary work relating to account opening formalities. However, ensuring compliance with KYC and AML norms under the BC model continues to be the responsibility of banks.” (September 2010, Section 5)Other: BCs may also engage, inter alia, in (i) identification of borrowers, (ii) collection and preliminary 

“The banks may pay reasonable commission/fee to the BC, the rate and quantum of which may be reviewed periodically. The agreement with the BC should specifically prohibit them from charging any fee to the customers directly for services rendered by them on behalf of the bank. The banks (and not BCs) are permitted to collect reasonable service charges from the customers in a transparent manner” (January 2006, as restated September 2010)

Permitted by implication and referenced in Paragraph 3 of September 2010 circular. See column to right. 

“While a BC can be a BC for more than one bank, at the point of customer interface, a retail outlet or a sub-agent of a BC shall represent and provide banking services of only one bank.” (September 2010, Para. 3)

“[A]ll agreements/contracts with the customer shall clearly specify that the bank is responsible to the customer for acts of omission and commission of the Business Facilitator/ Correspondent.” (January 2006, as restated September 2010, Section 10(iv))”The outsourcing of any activity by bank does not diminish its obligations, and those of its Board and senior management, who have the ultimate responsibility for the outsourced activity“ (Guidelines on Managing Risks and Code of Conduct in Outsourcing of Financial Services by Banks, Annex, 4.)

(continues)
14

Table 1: Agency Regulations: Global Approaches (continued)

Country Who can be an agent? What are other agent eligibility requirements? What can an agent do? Restrictions on fees charged by agents? Can an agent subcontract? Is agent exclusivity permitted? Principal liability for agents

IndiaBC Circulars and amendments (January 2006, March 2006, April 2008, April 2009, November 2009, September 2010)

Later added:“any other individual including those operating Common Service Centres” and “Companies registered under the Indian Companies Act,1956 with large and widespread retail outlets, excluding Non Banking Financial Companies.” (September 2010)

processing of loan applications including verification of primary information/ data, (iii) creating awareness about savings and other products and education and advice on managing money and debt counseling, (iv) processing and submission of applications to banks, and (v) sale of micro insurance/mutual fund products/pension products/other third party products.

KenyaGuideline on Agent Banking— CBK/PG/15 (May 2010)

Large range of entities: limited liability partnerships, sole proprietorships, partnerships, societies, cooperative societies, state corporations, trusts, public entities, and any other entity which the Central Bank may prescribe. (Section 4.2.3)

 A principal institution must establish that a potential agent has “existing well established commercial activity which has been operational for at least eighteen months... has not been classified as a deficient, doubtful, or non-performing borrower by an institution in the last 18 months...

Cash-in/Cash-out: Permissible activities include cash deposit and cash withdrawal, cash disbursement and cash repayment of loans, cash payment of bills, cash payment of retirement and social benefits, cash payment of salaries, transfer of funds.Verify Customer Identity for Account Opening Purposes: Agents may collect and forward customer documents in relation to account opening. 

Agents shall not “[c]harge any fees directly to customers.” (Section 4.4.1(iii))

An agent shall not “subcontract another entity to carry out agent banking on its behalf.” (Section 4.4.1 (xiv))

“No contract between an institution and an agent shall be exclusive. An agent may provide services for agent banking to multiple institutions provided that the agent has separate contracts for the provision of such services with each institution and provided further that the agent has the capacity to manage the transactions for the different institutions” (Section 6.1)

“The institution is wholly responsible and liable for all actions or omissions of the agent. This responsibility extends to actions of the agent even if not authorized in the contract so long as they relate to banking services or matters connected therewith.” (Section 5.1.1)
15

The following cannot be agents: entities that are faith-based or nonprofit, nongovernmental organizations, educational institutions, foreign exchange bureaus, and any other entities not permitted to carry on for-profit activities. (Section 4.2.4)Individuals are not expressly permitted to act as agents but are often approved as informal sole proprietorships (Sections 4.2.3 (ii), in coordination with Section 3.27). 

and possesses appropriate physical infrastructure and human resources to be able to provide the services with the necessary degree of efficiency and security.” (Section 3.1.1)A principal institution must also assess the moral, business and professional suitability of the sole proprietor or partners (and in the case of corporations, the CEO and officer responsible for agent operations) of any potential agent. In evaluating such suitability, the following will be considered: credit history, criminal records, reputation (as evidenced by two references), business experience, sources of funds, business record, and “any other matter which negatively or positively impacts on the person”. (Section 3.2.5)

Other: Permissible activities include balance enquiry; generation and issuance of mini bank statements; collection of documents in relation to loan applications, credit and debit card collection, collection of debit and credit cards; agent mobile banking services; check book request and collection by customers; collection of bank mail/ correspondence for customers; any other activity prescribed by Central Bank. (Section 4.4.1)Expressly Prohibited Activities: Agents shall not, inter alia, open accounts, grant loans, or carry out any appraisal function for purposes of opening an account or granting of a loan or any other facility, undertake check deposit or encashment of checks, transact in foreign currency; provide cash advances. (Section 4.4.1(ix)-(xii))

(continues)
16

Table 1: Agency Regulations: Global Approaches (continued)

Country Who can be an agent? What are other agent eligibility requirements? What can an agent do? Restrictions on fees charged by agents? Can an agent subcontract? Is agent exclusivity permitted? Principal liability for agents

Mexico(Banking Circular, 12/2009 and amendments; Law on Credit Institutions, 1999 and amendments)

Any legal entity, except financial institutions whose exclusive business is conducting auxiliary credit activities as defined in law (Law of Auxiliary Credit Activities and Organizations, 1985 and amendments), such as brokers and dealers. Financial institutions can be agents only if allowed by their own bylaws, and exchange houses can be agents for certain types of services. Pawnbrokers and similar entities cannot be agents. (Banking Circular, Chapter XI, Section 2, article 325).Individuals can be agents only if they have a business and a permanent establishment where they conduct such business. (Banking Circular, Annex 57, 3)

Agents should (i) have a permanent establishment and sufficient capacity to properly operate electronic devices, (ii) have the necessary infrastructure to process banking operations, and (iii) demonstrate good reputation and credit history, including lack of previous civil and criminal condemnation and investigations from the Banking Commission. The requirements of good credit history and permanent establishment can be waived if an ANM fulfils them. (Banking Circular, Annex 57). Agents should have a deposit account with the contracting bank against which all transaction will be conducted, except when a network manager is used. (Banking Circular, Chapter XI, Section 2, Article 322, I)

Cash-in/Cash-out: withdrawals and deposits from/to bank accounts by the account holderVerify Customer Identity for Account Opening Purposes: may conduct CDD in the context of opening “low transactional” and “low risk” accounts—accounts subject to deposit and transactional limits.Other: (i) Payments (including loan repayments) using credit and debit cards, checks, and cash, (ii) transfers between bank accounts including of other banks, (iii) balance inquiries, (iv)check cashing, and (v) term deposits (only through exchange houses that have a capital adequacy ratio of at least 12%). (Banking Circular, Chapter XI, Section 2, article 319).

Agents are prohibited from charging additional fees that were not previously set between bank and the client ... (Banking Circular, Chapter X, Section 2, article 324, VIII).

Agents cannot subcontract to third parties (Banking Circular, Chapter X, Section 2, article 324, VIII(d)). Banks can nonetheless hire agents through agent network managers. (Banking Circular, Chapter X, Section 2, article 322, I).

Banks cannot hire entities that have been acting as exclusive agents to another bank in the past 12 months and agents cannot sign exclusive agency agreements to conduct payments of nonbank services and credit card payments (Banking Circular, Chapter XI, Section 2, Article 324).

Using agents does not exempt the bank, their managers, employees, and legal representatives from complying with the provisions of the Law on Credit Institutions. Agents are subject to administrative, civil and criminal charges for infringing applicable legislation. (Law on Credit Institutions, 1999 and amendments, Articles 46 Bis 1 and 2, and Banking Circular, Chapter XI, Section 2, Articles 329-331)Banks legally responsible for the acts of their agents (Law on Credit Institutions, Article 46 Bis 1, §2).
17

Check cashing and withdrawals are limited to 1,500 UDIs per client per day. Deposits are limited to 10,000 UDIs per client per day, and per agent to 25% of the average monthly gross deposits of the bank, as observed in the last 12 months. (Banking Circular, Chapter XI, Section 2, Article 323)

Nigeria(Regulatory Framework for Mobile Payment Systems in Nigeria, 2009)

May be individuals or legal entities. (Sections 5.2.1.3 and 5.2.1.4 by implication.)

Service provider must carry out agent due diligence measures, including fingerprinting (in the case of individuals) and verifying registration (in the case of legal entities). (Section 5.2.1.2)Agents must not maintain a till exceeding N100,000 (approx $655). (Section 5.2.2)

Cash-in/Cash-out: Service providers may appoint agents to facilitate “deposit and withdrawal/cash-out.” (Section 5.2.1.1)Verify Customer Identity for Account Opening Purposes: Service providers may appoint agents to facilitate “enrolment of customers” though unclear to what extent this permits agents to verify identity for account opening purposes. (Section 5.2.1.1)

Unstated E-money issuers may 

appoint agents and subagents. (Section 5.1.1)

The “agents are not restricted to any one scheme operator (they can serve as agents to multiple operators).” (2009, Section 5.2.26)

Not clearly specified but common law assumption of liability for agent when acting under the authority of its agency agreement.

(continues)
18

Table 1: Agency Regulations: Global Approaches (continued)

Country Who can be an agent? What are other agent eligibility requirements? What can an agent do? Restrictions on fees charged by agents? Can an agent subcontract? Is agent exclusivity permitted? Principal liability for agents

PakistanBranchless Banking Regulations for Financial Institutions Desirous to Undertake Branchless Banking (31 March 2008)

Not specified. In practice may be legal entity or individual (provided such individual is the proprietor or operates a business).

Financial institutions “should clearly define various agent types and minimum agent selection criteria for each types. [They] should ensure that agents are well established, enjoying good reputation and having confidence of the local people.” (Section 6.3)

Cash-in/Cash-out: Agents may engage in cash-in, cash-out services, including collecting cash for bill payments (including, with respect to utility payments, from both registered and walkin customers) and loan disbursement and repayment. (Section 6.1)Verify Customer Identity for Account Opening Purposes: For Level 1 accounts (accounts held by individuals subject to balance and transaction caps) agents may facilitate opening by collecting photocopy of national ID card, biometric fingerprint scan and digital photo and forwarding such documentation to financial institution. (Section 4)

“Agents may not alter/change charges/fees structure provided by the bank in any way. All charges have to be pre-agreed between the bank and the agent and should be clearly communicated to the customers.” (Section 6.1)

Agent subcontracting allowed and different agent levels referenced (Super Agents, Direct Agents, and Sub Agents.) (Section 6.2)

“One Agent can provide services to multiple banks provided he (the agent) has a separate service level agreement with each bank.” (Section 6.1)

“The ultimate responsibility for branchless banking lies with the Financial Institution. The FI may, however, take steps it deems necessary to safeguard itself against liabilities arising out of the actions of its agents, service providers or partners.” (Section 5)“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.” (Section 9.1)
19

South Africa(Banks Act No. 94 of 1990; Banks Act Guidance Note 3/2008 on outsourcing of functions within banks)

Any “person” can act as a bank agent. (Banks Act). There is no provision restricting other third-party outsources although the clear implication of Guidance Note 3 (which covers only outsourcing arrangements that impact the risk profile of the bank, affect the bank›s systems and controls, are classified by the bank›s management as of strategic importance or have implications for SARB›s supervision) is that the outsourcee is a business. 

There are no eligibility requirements for agents or outsourcees. However, the bank must notify SARB in advance of any outsourcing arrangement covered by Guidance Note 3.

In general, banks may outsource specific services, provided that such services are conducted in accordance with the bank’s internal policies and standards and monitored by the bank. Cash-in/Cash-out. A bank may contract agents ”to receive on its behalf from its clients any deposits, money due to it ... or to make payments to such clients on its behalf“ (Banks Act, Definition of “agency”). Verify Customer Identity for Account Opening Purposes. Not specifically addressed. Not expressly permitted or prohibited.Other: Agents may receive applications for loans or advances. (Banks Act, definition of “agency”) Aside from the definition of agency, there is no explicit statement regarding what agents may or may not do. 

There are no provisions restricting fees charged by agents, though this would typically be a topic of contractual agreement between principal and agent.

There is no statutory bar on subcontracting by agents. However, agents will be able to subcontract only if permitted under the agreement with the bank. If an agent or outsourcee does subcontract, the bank will need to ensure management of, and control over, the functions performed by the subagent/subcontractor.

There is no statutory restriction on agent exclusivity. However, any such arrangement will be subject to the competition law.

Common law renders the principal liable for acts of its agents (but not outsources, although a bank could be so liable pursuant to contract). 

*This Table is based in part on unofficial English translations of relevant regulation. It is not intended as legal guidance or opinion, and reference should always be made to the original text. 
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_Regulating_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-testand-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. 68

March 2011

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