Five branches of continental lender, Ecobank Rwanda, will be closed next month, bringing the number to 11 outlets phased out by the financial institution within a year. Announcing the closures, last week, Ecobank officials said the branches will be replaced by agency and digital banking.

More banks are increasingly embracing e-banking and agency banking to cut operational costs. However, how will such a move deepen financial inclusion or boost access to credite?

Are the days of the traditional bank branches numbered with digital push? Alice Kilonzo-Zulu, the managing director of Ecobank Rwanda, said banks have no choice but to go ‘branchless’ with the growing digitisation of the sector.

Speaking in an interview with Business Times, Kilonzo-Zulu said financial institutions need to leverage technology and "add value to what they are selling to customers” and ease access to services. Kilonzo said tapping the opportunities presented by technology through agency and digital banking will ensure efficiency and offer customers more convenience.

"We have invested heavily in technology to be able to deliver our products through digital and agency banking and enhance efficiency and convenience. These approaches will, eventually, make the brick and mortal traditional banking obsolete,” said Kilonzo-Zulu. She is confident that the concept ‘branchless’ banks will help banks to tap into the unbanked market and support efforts aimed at achieving financial inclusion in the country. The government is promoting adoption of electronic facilities in the financial sector to deepen financial inclusion and drive the cashless economy agenda.

As part of these efforts, the central bank, last week, concluded a four-week awareness campaign aimed at promoting e-payments among different sectors of the economy and the private sector.

Why branchless is for the future

According to Kilonzo, agency and electronic banking enable financial institutions to extend their reach without ‘breaking the bank’.

"More than 80 per cent of the adult population in sub-Saharan Africa is unbanked. This presents the sector a huge opportunities, and need for banks to use agents and mobile banking initiatives to reach the financially excluded,” she added.

Maurice Toroitich, the managing director BPR, said agency and the other new banking options "have the means to penetrate underserved areas, increase access and availability of financial products and services without having to invest in bricks and mortar bank branch infrastructure.”

Toroitich, who also chairs the Rwanda Bankers Association, added that new technology-based innovations are now a must-have for businesses, including banks, adding that they enable service providers to distinguish themselves in the digital space with unique product offerings. According to him, technology has now "become familiar” to most individuals, to an extent that it influences their lifestyle.

Jean d’Amour Nishimwe, a Kigali-based financial analyst, said the agents have the capacity to offer many bank services, such as registering customers, taking deposits, dispensing withdrawals, fund transfers, and processing payments like utility bills.

Nishimwe vouches for agency banking, saying it is a good example of a "concrete strategy that has the potential to enable customers to carry out transactions in their communities the same way as they would have at their local bank branch”.

He added that banking electronically helps customers and financial institutions to reduce costs. "However, banks need to balance efficiency against the cross-selling opportunities branch networks bring,” he noted.

According to Nishimwe, banks have started to realise that they are no longer holding "all the strings” in their hands, and digital and agency banking have a lot to offer clients, particularly those that have embraced the digital lifestyle and the masses in the rural areas.

Growth of mobile financial services

According to central bank figures, mobile technology continues to play a significant role in enhancing electronic payments and deepening an "inclusive cashless society”.

Last financial year, the number of active users of mobile financial services increased by 13 per cent, from over 2.98 million to more than 3.37 million subscribers, figures show. With regard to access points, the penetration rate of mobile agents rose by 60 per cent, from 52,081 to 83,550 agents over the reporting period. Similarly, the registered mobile financial services accounts were up by 3 per cent to 8.6 million, from 8.3 million and the volume of transactions increased by 26 per cent from 94 million to 119 million, while value inched up by 33 per cent from Rwf469 billion to Rwf622 billion.

The growth of these facilities leave financial market players with no choice, but to go with the trend, which is embracing digital facilities in their operations and service delivery, Clemence Havugimana, a Kigali-based economist, said. According to Havugimana, more bank customers and Rwandans are adopting mobile and digital platforms, a development that challenges banks to innovate to stay relevant, as well as boost service delivery.

More investments required

Kenneth Agutamba, the Bank of Kigali communications manager, said banks must invest more in infrastructure and agents to tap the opportunities offered by technology. He said agents play a big role in helping communities to transact by offering them cash - both e-money and paper cash. He added that, through products like Push&Pull, customers are able to transfer money from the mobile wallets to their bank accounts.

He said Bank of Kigali considers agency banking as one of its key service delivery channels.

"For instance, we have a network of 80 branches. Though this is an expansive network, it is not enough to enable us serve all our customers in every part of the country. So, agency banking helps us fill those gaps by serving people in areas where we don’t have branches,” he said.

"Currently, we have over 1,300 agents across the country, including in some of the remotest parts of Rwanda. These have helped us serve Rwandans almost everywhere. Therefore, from a national perspective, we think agency banking is a sure way of enhancing access to formal financial services and allow Rwandans to conduct business with commercial banks,” said Agutamba.