Release of Agent Network Accelerator Bangladesh Research Report 10 th November, 2014 1
Health and Profitability of Agent Networks in Bangladesh November, 2014 Presenter: Denny George, Senior Manager - Digital Financial Services Contact: Denny@MicroSave.net 2
Project Description Through the financial support of the Bill & Melinda Gates Foundation, MicroSave i s conducting a four-year research project in the following eight focus countries as part of the Agent Network Accelerator (ANA) Project: Africa Asia Kenya Bangladesh Nigeria India Tanzania Indonesia Uganda Pakistan Research findings are disseminated through The Helix Institute of Digital Finance . Helix is a world-class institution providing operational training for digital finance practitioners . 3
The Research Is Based On 2,490 Nationally Representative Agent Interviews Data was collected Achieved Sample between March and April 2014 employing a Village random route 4% methodology based on agent census data Metro presented on the map Thana 23% Head Red points represent a Quarters census of agents 35% conducted by Brand District Fusion in September Head 2013. Quarters Blue points are the agents 38% interviewed for this research in March 2014 . Sample Profile* Location Exclusivity Dedication Total Sample Size District Thana Non- Non- Metro Village Exclusive Dedicated Exclusive Dedicated HQ HQ 576 958 1082 97 859 1408 2393 97 2,490 23% 38% 35% 4% 43% 4% 96% 57% *This table summarises agent demographics. Due to the different structure in urban and rural definitions and localities in Bangladesh, 4 this sample is not comparable to Helix's earlier surveys in East Africa.
Bangladesh Overview Unique systems for agent network management yielding world class results especially with regards to liquidity management. However, transaction volumes and profits are low compared to East Africa and support structures are still developing. Transaction volumes are very low compared to East Africa, but very low operational costs keep the majority of agents profitable. Most agents have rebalancing done for them at their outlets, and report rarely having to deny a transaction for lack of it. Almost all agents are non-dedicated, and while bKash is the dominant provider, other providers seem to be quickly building their networks on top of bKash’s , meaning the majority of agents are now non-exclusive. 5
Providers’ Market Share * Of National Agent Network bKash accounts for half of the market, followed Market Share by DBBL (28%). 6% 2% bKash New providers like UCash are rapidly 14% DBBL expanding across Bangladesh – especially 50% UCash in the urban areas. mCash 28% Others Metro District HQ Thana HQ Village 3% 2% 6% 1% 6% 2% 5% 2% 9% 13% bKash bKash 13% bKash bKash DBBL DBBL DBBL DBBL 20% 47% UCash UCash UCash UCash 51% 51% 54% 32% mCash mCash 28% mCash 33% mCash 22% Others Others Others Others *Agent market share is defined as the proportion of cash-in/cash-out (CICO) agents by provider. Numbers here are provided on a till basis not on the outlet level. 6 Hence, if an agent serves three providers it is counted three times. This method therefore discounts smaller exclusive networks.
Digital Finance is Non-Exclusive and Extremely Non-Dedicated Exclusive vs. Non-Exclusive Dedicated Vs. Non- Dedicated 100% 96% Notably high when compared to other 100% 96% 90% countries. 90% 80% 72% 71% 80% Percentage of Respondents 70% Percentage of Respondents 70% 70% 60% 56% 60% 56% 54% 50% 50% 44% 46% 44% 40% 40% 30% 29% 28% 30% 30% 20% 20% 10% 10% 4% 4% 0% 0% Bangladesh Kenya Tanzania Uganda Bangladesh Kenya Tanzania Uganda Dedicated Non-Dedicated 7 Exclusive Non-Exclusive
Agents Are Profitable, But Most Earn Low Profits Profit Per Month (US$) Median Profitability per 45% Month (current prices) 41% Metro $59 40% District HQ $51 75% of agents earn less than 35% $100 per month. Thana HQ $51 $38 Village Percentage of Respondents 29% 30% Overall, a fewer Country $51 percentage of Highest in Metros and 25% agents are not low in villages, primarily profitable as due to the difference in 20% compared to ANA median number of research 15% transactions per day. countries 14% 10% 7% 5% 3% 2% 2% 1% 1% 0% Making Loss Breaking Even >0-50 >50-100 >100-150 >150-200 >200-250 >250-300 >300 Profitability (US$) 8 * Is calculated by subtracting expenses from total earnings from all the providers served. Only agents that reported both earnings and expenses are included here. There is a possibility that these figures are under-reported since most agents did not respond to questions on OTC.
Low Commissions Are Driving Low Profit Levels Compared to Other Leading Countries Median Profitability - Comparison With East Africa Median Commissions from 238 250 all providers per Month (current prices) 195 200 175 170 Metro $76 Profit US$ District HQ 150 $64 PPP adjusted Thana HQ $64 95 100 Current prices 78 70 $57 Village 51 Country $64 50 0 Bangladesh Kenya Tanzania Uganda Median Monthly Commissions Non-exclusivity likely to become 300 the norm unless GNI per capita (PPP)-US$234 agent revenues 250 254 Commissions US$ go up 200 213 significantly. 150 169 Current Prices 100 PPP Adjusted 76 50 64 51 9 0 Total Exclusive Non Exclusive
Untapped Opportunities Abound Services Offered by Agents 100% 100% 100% 95% 90% Untapped opportunity. OTC Payments higher than in East 80% Annual African markets. The actual incidence 70% Percentage of Agents foreign could however, be much higher, since a 60% remittance large proportion of respondents chose flows in 2013- not to answer questions on OTC 50% 14 were US$ 37% 40% 142 Billion + . 30% High scope for product innovation. 20% 10% 3% 3% 1% 0% 0% 0% 0% + Data as per Bangladesh Bank 10
Transactions Are Low – But There Are Significant Variations Across Different Dimensions Median Transactions Median Median Transactions: Per Day Transactions: Years in Operation Metro 20 Dedicated vs. Non- District HQ 35 Dedicated 15 30 25 Thana HQ 15 30 Village 10 20 Country 15 25 24 20 Number of transactions Number of transactions 20 15 20 15 Quite low when compared to East 15 12 Africa – Kenya (46), 10 Tanzania (31), 10 Uganda (30). 5 5 0 0 Dedicated Non-Dedicated Less than a 1-2 years 2 - 3 years 3+ years year * Numbers represent transactions per day by selected provider, not overall volumes for the agency. There is a 11 possibility that these figures are under-reported since most agents did not respond to questions on OTC.
A Look At Transactions Highlights The Real Picture On What Products Are On Offer Median Transactions per Month These are easy 700 for agents to 609 conduct. 600 Number of Transactions per Agent 500 474 463 456 400 Lowest number of accounts are being 300 300 309 opened in financially excluded rural areas. 300 270 300 240 200 150 150 150 150 90 100 30 17 15 13 13 13 13 13 10 10 10 10 9 5 3 3 0 2 2 0 0 Total Cash-In/Savings Cash-Out Account Opening Bill Payment Airtime Top Up Foreign Remittance Deposit Receiving Country Metro District HQ Thana HQ Village * OTC transactions are included as part of Cash-in/out since most agents did not respond to the question on OTC and the 12 inclusion of the data obtained from a limited set of respondents could be misleading
OTC Transfers Are Prevalent Median number of OTC transactions stated per day are 5, or 33% of all transactions. Agents seem to be aware that OTC is not permitted. 68% of the respondents (100% in Metro) chose not to answer questions on OTC. “I have 25 accounts to conduct transfer. If they restrict it further, I’ll be Qualitative research points out that vast forced to add more accounts. They should majority of transactions in agent locations just allow transfers from are OTC. agent to agent.” Data from Intermedia survey of mobile money users in Bangladesh states that 22% of Bangladeshis use mobile money, but only 3% have mobile money accounts. 13
Why Agents Facilitate OTC Transactions? Need for co-operation between service providers and improved regulatory 70% supervision to implement the regulatory restrictions on OTC. 59% 60% Need for relaxed KYC and simplified account opening and usage processes. Customer education efforts are needed to convey the 50% benefits of account opening. Percentage of Responses 40% 36% “Providers have reduced the permitted 30% number of transfers from personal accounts. The biggest losers are poor people who need to make small transactions, as agents are 20% forced to refuse small value transactions for fear of exhausting their limits. ” 10% 2% 2% 1% 0% Customers shop for other As customers do not have a OTC is an accepted means of It is very profitable Other agents if I do not serve them mobile money account (or transfer immediately not registered), I have to make the transaction 14 * Quoted in Intermedia Mobile Money User and Non User Study and Consumer and Agent Experiences, 2014
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