Banking in the Comfort Zone

At first glance, there were no surprises in the initial findings from a recent study on banking agents in Zambia: customers were enthusiastic about the benefits of reduced travel and more convenient operating hours, but frustrated by network downtime and malfunctioning devices. Digging deeper, however, we got a glimpse into another dimension of agency banking that hasn’t gotten a lot of attention. Customers said they feel more comfortable conducting very small transactions at agents, which improves their financial discipline.

These views were expressed by early adopters of FINCA’s new agency banking services in eastern Zambia, which were launched with support from UK-based Comic Relief. We interviewed 30 clients new to agency banking and four agents, intentionally sampling from those with the highest levels of activity. Feedback was elicited using a Most Significant Change methodology which, as its name suggests, asks people to describe the most significant change that they have experienced in using banking agents and why it matters to them. 

Bridging a cultural divide

In talking to customers over the years, we have often heard them say that banks – including FINCA and other MFIs – are not for people like them. They describe feeling at a disadvantage in dealing with the bank, with its complicated forms, hidden fees and unexplained deductions. Reinforcing this disconnect, many physical aspects of the branch – like the video cameras, teller lines, back offices, vault and well-dressed staff – are designed to create distance between the bank and the public, while projecting an image of wealth and status. 

People we interviewed, often poor and uneducated, find this environment unwelcoming and even alienating. More pointedly, the formality of a banking hall feels out of sync with the kinds of financial activities they are carrying out. Clients said they feel self-conscious when depositing a few dollars through a plate glass window, and they are embarrassed asking for help with deposit slips for very small amounts. 

I trust the agents with my money.  In case I find the network is down, I can leave my money with the agent, and they will deposit on my behalf. 
- Client, Kabwe

One does not need to fill in the deposit slip.
- Agent, Chipata

By contrast, banking agents are already trusted in their community. The only complaints we heard among the early adopters we spoke to in Zambia were related to interruptions in service. And even in such instances, some clients felt comfortable leaving their money with the agent or even sending it with their children, confident that the transaction would be completed correctly.

Agents offer a familiar environment that is well-suited to the client’s financial activities.  Customers are already accustomed to doing business in tiny increments at corner shops and kiosks, so they don’t feel embarrassed to make even the smallest of deposits.  There’s no confusing paperwork, and no shame in asking for help. 

Promoting financial discipline and poverty outreach 

I save more than before and  have become financially disciplined.
- Client, Mazabuka

The agents are helping me in paying back the loan.  I make small deposits daily or weekly before the loan payment due date.
- Client, Kabwe

I am saving more than before, which I am using for investment.
- Client, Sinda

In the context of daily life, it’s hard for customers – especially women – to accumulate large enough sums to justify going to the bank. But with an agent nearby, it is easy and natural to slip small deposits into their savings or loan  account, where it is safe from temptation.  These small deposits add up over  time, not only in value but in the formation of new savings habits. Clients describe this increased frequency of usage as an improvement in their financial self-discipline.

While agents are impactful in helping customers build financial discipline through small, frequent transactions (including loan payments), the lower overheads also help expand the bank’s outreach to these very customers. Since expanding its network of agents, FINCA Zambia’s poverty outreach (using 150% of the national poverty line) has grown from 12% to 16% (with half of customers classified as poor or low-income according to the international poverty line). Poverty outreach is a very hard key performance indicator (KPI) to improve, given the financial pressures and borrowing costs imposed by the bank’s funders and the fixed nature of its operations.

This change is a welcome sign that agency banking can help steer the organization towards harder-to-reach customers living on lower incomes, while promoting better financial discipline through a service that promotes good financial habits.