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Agency banking feedback ‘positive’

Published:Thursday | November 26, 2015 | 12:15 PMMcPherse Thompson
Bank of Jamaica building, Nethersole Place, Kingston.
Bank of Jamaica headquarters at Nethersole Place in Kingston.

The Bank of Jamaica (BOJ) is assessing comments provided by stakeholders on a consultation paper for the development of an agency banking model before moving to the next step of finalising instructions for the drafting of regulations by the Chief Parliamentary Counsel.

Under agent banking, deposit-taking institutions can appoint third-party companies as agents to deliver banking services. The new policy will define the nature of the relationships between banks, agents and banking customers.

According to the consultation paper on which the central bank asked bankers and the public to comment, agents must be "legally incorporated entities with large, wide-reaching and dispersed networks", for example, chain retailers, franchises, supermarkets, pharmacies and microfinance institutions.

The Jamaica Bankers' Association (JBA) is still not saying what its contribution to the discussions has been.

Asked if deposit takers had countered anything in the consultation paper or otherwise mentioned anything which they would like to be incorporated in the regulations, JBA Executive Director Richard Murray said the group had not got feedback from the BOJ. "So, we would not wish to make any comments without having their take on the comments we provided," he said.

The BOJ told Sunday Business that the feedback "so far has been positive and broadly in line with the positions outlined in the consultation paper", and that the drafting instructions to the Chief Parliamentary Counsel would be informed by the industry comments.

However, the central bank also indicated that consultations were ongoing with deposit takers.

"While the feedback from deposit-taking institutions has been positive, details as to how they propose to proceed will be the subject of submissions pursuant to the regulations to be issued," said the BOJ.

The central bank expects the regulations to be in place by the end of March 2016.

The agency banking model is predominantly meant to reach the unbanked and the under-banked by offering services at the community level and contact points, such as grocery stores and post offices, that people normally frequent.

As such, the central bank proposes not to put limits on where an agent can operate and has urged the banks not to tie their agents to exclusive contracts so that an interconnected banking system can evolve at the agency level. The paper encourages deposit-taking institutions to implement interoperable systems to facilitate interbank communication.

The push for interconnection has seen some movement even ahead of agency banking. Two weeks ago, Jamaica's second largest commercial bank, Scotiabank, began offering cross-banking services. First Global Bank and Sagicor Bank Jamaica already give their clients the option through their online platforms.

The central bank's preference for non-exclusivity, notwithstanding the agency model being developed, will allow banks to develop, either exclusive contracts, which, would tie the agent to the delivery of services to that bank's customers only, or non-exclusive partnerships, under which customers of one bank may access the services of another bank as long as the transaction is allowed under the agency banking regulations.

The agent banking model is also meant to increase access to banking services. The most current data on banking penetration in Jamaica dates back to 2011 from the World Bank, which estimates that 71 per cent of the population 15 years and older had at least a basic savings account at a formal financial institution.

Notwithstanding the relatively high level of penetration, the study highlighted significant under-utilisation of banking services, prompting a look at how the services can be delivered to far-flung places.

"Hence the objective of agent banking in Jamaica is not only to promote greater access to banking services, but also greater utilisation," the central bank said.