Supervision of Banks and Nonbanks Operating through Agents: Practice in Nine Countries and Insights for Supervisors

To date, limited research has been undertaken about how providers identify, classify, and manage risks related to the use of agents and how supervisors assess providers for that matter. Further, this is an area that continues to develop rapidly alongside the dynamic path of evolution of financial inclusion through digital means and the increasing types of institutions for which supervisors are becoming responsible. At the same time, supervisory resources are a constraint in many developing countries where agents are being used in increasing scale. This paper therefore provides an early attempt to help supervisors implement an effective risk-based approach to agent supervision that considers the linkages among the main policy objectives of financial inclusion, stability, integrity, and consumer protection.

This paper draws from research conducted on a sample of nine “leading” countries, defined as having large, diverse agent networks that continue to grow rapidly and where business models are evolving fast (Brazil, Colombia, Kenya, Mexico, Pakistan, Peru, the Philippines, Tanzania, and Uganda). While the paper describes aspects of the supervisory practices in these countries, it also draws from review of literature about other markets (including developed economies when relevant), international guidance, and standards for financial supervision (e.g., those set forth by the Basel Committee on Banking Supervision, the Joint Forum, the Financial Stability Board, and the Committee on Payments and Market Infrastructures).