Prudential Supervision for Deposits and Payments: Supervising Agents

Prudential Supervision for Deposits and Payments: Supervising Agents

Number of replies: 16

The use of agents to deliver Digital Financial Services is developing rapidly across a range of financial products. The table below demonstrates the various jurisdictions and the percentage that allow agents to undertake various financial activities. 

Use of Agents by Institutional Category 2022

Percentage of reporting jurisdictions allowing agents to undertake each activity.

Activity Commercial Banks Other Banks Financial COOPs ODTIs CCPs NBEMIs
Identify and/or verify the identity of the customer 68% 32% 36% 24% 34% 53%
Receive/submit to the institution a transaction or e-money account application 65% 29% 36% 24% 10% 48%
Open a customer account following the institution’s policies 48% 21% 26% 22% 12% 42%
Receive/submit to the institution a loan application 68% 30% 39% 29% 31% 12%
Analyse and approve a loan following the institution’s policies and limits 28% 12% 20% 13% 15% 5%
Receive deposits 57% 28% 27% 30% 4% 24%
Disburse loans 49% 23% 28% 23% 18% 10%
Cash-in/cash-out 61% 29% 28% 27% 15% 57%

*Note that the number of responding jurisdictions varies for each option and institutional type. The highest number of responses for any given question or institution type is 115.
Source: World Bank Group, The Global State of Financial Inclusion & Consumer Protection, 2023

Agent-based service distribution supports digital financial inclusion by providing access to people in remote areas to a wider set of products, or simply making it easier to sign up for any given product. Supervisors need to keep abreast of the evolution of agent services, the increasing reliance on these agents—especially with vulnerable populations—and the risks these services may pose for both prudential and consumer protection. 
In the video that follows, we explore the prudential supervision of agents and identify four ways to achieve proportional and effective supervision. 

 

 

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Additional Reading:

The following sources were consulted in preparing this video. We suggest that you include these as additional reading as you proceed through this course.

  1. AFI, 2020, Regional Policy Framework to Strengthen Agent Networks for Digital Financial Services. https://www.afi-global.org/sites/default/files/publications/2020-10/AFI_AfPI_agent%20networks_framework_AW3.pdf
  2. Kerse, M., Meagher, P. and Staschen, S., 2020, The Use of Agents by Digital Financial Services Providers. CGAP Publication. https://www.cgap.org/research/publication/use-of-agents-digital-financial-services-providers

Reflection Questions for Discussion

Please post your response using the forum functionality, to share your insights and thoughts with your fellow students. 

  1. Why is it important for supervisors to focus on digital FSPs’ management of agents rather than directly supervising individual agents?
  2. How can high-quality granular data improve the effectiveness of agent supervision and contribute to financial inclusion goals?
In reply to First post

Re: Prudential Supervision for Deposits and Payments: Supervising Agents

by Erah, Dominic Ose Erah - Group 1
1. Supervisors focus on digital FSPs' management of agents rather than supervising individual agents because the risk agents create operational, liquidity and conduct are ultimately borne by the FSP which is responsible for controlling, monitoring and mitigating them at scale.
2. High quality granular data strengthens agent supervision and supports financial inclusion by enabling supervisors to identify risk patterns, geographic or demographic service gaps and early warning signals that guide proportionate, targeted regulatory interventions
In reply to Erah, Dominic Ose Erah

Re: Prudential Supervision for Deposits and Payments: Supervising Agents

by Usman Bayero - Group 1
1. Supervisors focus on digital FSPs because agents operate under the responsibility of the licensed FSPs. It would be in efficient and impractical for regulators to directly supervise thousands of individual agents. By supervising how FSPs recruit, train, monitor and manage their agents, the regulator can ensure proper oversight and accountability across the entire agent network.
2. High quality granualr data helps supervisors better monitor agent performance, identify riks such as fraud or liquidity shortages adn detect the underserved locations. This data will allow regulators to make informed decisions, make supervision stronger and encourage the expansion of agent networks in underserved locations.
In reply to First post

Re: Prudential Supervision for Deposits and Payments: Supervising Agents

by Sarim Ali - Group 5
1. Supervising each individual agent would be inefficient given the large scale of agent networks. Instead, supervisors should ensure that DFS providers have strong due diligence, monitoring, and risk management processes, since agents operate on behalf of the provider and the provider remains responsible for their actions.
2. Granular data on agent locations, transaction volumes, complaints, and demographics helps supervisors identify risk patterns and underserved areas. This allows them to monitor agent network performance and support policies that expand access to financial services in underserved communities.
In reply to First post

Re: Prudential Supervision for Deposits and Payments: Supervising Agents

by AISHA UMARU HADEJIA - Group 1
1) Supervisors should concentrate on how digital financial service providers (FSPs) manage their agent networks rather than trying to oversee each agent directly, because agent networks are often vast and dispersed, making individual supervision impractical. By focusing on the FSPs’ governance, training, monitoring, and accountability systems, supervisors can ensure that consumer protection standards are consistently applied across the entire network.
2) High quality granular data helps supervisors see exactly how agents operate from transaction patterns to customer complaints so they can spot risks early and ensure fair treatment. This makes agent oversight more effective and supports financial inclusion by showing whether underserved groups are actually being reached and protected.
In reply to First post

Re: Prudential Supervision for Deposits and Payments: Supervising Agents

by Mariam Nansubuga - Group 4
1. Supervisors focus on DFS providers' management of agents rather than individual agents because direct supervision of hundreds of thousands of dispersed agents is operationally impossible for any regulatory authority. Instead, by holding the licensed provider accountable for agent recruitment, training, monitoring, and discipline, supervisors leverage the provider's own systems and contractual relationships to enforce compliance at scale. The provider bears ultimate legal liability for agent conduct, which creates strong incentives for robust internal oversight and supervisors can assess the entire network's risk profile through a single, auditable regulatory relationship.

2. High-quality granular data allows supervisors to shift from periodic blanket examinations to targeted, risk-based oversight flagging specific agents with suspicious transactions, liquidity stress, or high complaint rates for focused intervention. It also reveals geographic coverage gaps and whether agents are genuinely serving underserved populations, enabling both regulators and providers to direct network expansion where financial inclusion deficits are greatest.
In reply to First post

Re: Prudential Supervision for Deposits and Payments: Supervising Agents

by Faith Fxentirimam Envuladu - Group 1
1. Supervisors who concentrate on digital FSPs' agent management systems can achieve scalable oversight through their use of FSP systems which enable them to monitor compliance and manage risks throughout their vast agent networks.
2. Supervisors can improve their supervision work through specific data-based solutions which increase their ability to manage risks while supporting financial inclusion efforts. Data analysis techniques help organizations discover potential dangers which include both fraud and money laundering together with their most dangerous agents, thus enabling organizations to develop protective measures while remaining compliant with regulations. The team uses agent performance data together with customer behavior insights, to create financial inclusion access points which empower economic development through sustainable practices.
In reply to First post

Re: Prudential Supervision for Deposits and Payments: Supervising Agents

by Lucy Kihembo - Group 4
1. the principal-agent relationship requires the principal (DFS provider) to onboard, train, monitor and check any compliance requirements that this relationship is under. The agent acts on behalf of the principal provider and all governance arrangements are covered in their contracts. The DFS provider is accountable in this case for all risks posed by this relationship. It would be impossible for supervisors to effectively regulate agents who are in thousands and are distributed up to the remotest places in a country.
2. Granular data enables the application of a risk-based supervision through identification of agent performance across aspects such as products, gender, location, complaints filed, liquidity issues among others. Supervisors are able to identify operational risk aspects and consumer protection issues so as to allocate resources more efficiently. Also through particular data indicators such as geographical distribution, supervisors can identify underserved areas and recommend policies to address these gaps.
In reply to First post

Re: Prudential Supervision for Deposits and Payments: Supervising Agents

by Michael Sserwanga Sserwanga - Group 4
Supervisors focus on digital financial service providers (FSPs) because agent networks operate as outsourced distribution channels of the supervised financial institutions. The responsibility for the conduct of agents still ultimately rests with the FSP, which must ensure proper onboarding and training, and compliance monitoring across its network.

Hence it would be better for supervisors to assess the adequacy of the FSP’s internal controls over agents instead of directly supervising thousands of dispersed agents. This would be consistent with the risk based supervision, where supervisory resources are focused on institutions that generate systemic risks rather than individual operational points in the distribution network.

In the Uganda mobile money and agent banking networks have expanded rapidly across both urban and rural areas. We have found that the direct supervision of individual agents would be operationally unrealistic. Instead, the commercial banking department ensures that licensed providers maintain strong systems for monitoring agents conduct and managing operational risks within their networks.

High quality granular data enables supervisors to conduct detailed off site monitoring of the agent networks. Data on agent location, transaction patterns, complaint trends, and would allow regulators to identify emerging risks, monitor network performance, and detect unusual activities early (money laundering).

Also by analysing transaction activity and geographic distribution of agents, supervisors can identify areas where access to financial services remains limited and encourage providers to expand their networks accordingly. This allows supervisors not only to mitigate risks but also to ensure that digital financial services contribute meaningfully to expanding access to formal financial systems.
In reply to First post

Re: Prudential Supervision for Deposits and Payments: Supervising Agents

by KABIRU MUDASHIRU - Group 1
Given the large number of agents, supervising individual agents would be difficult; however, with effective regulations on the FSP's setup and adequate supervision, supervision becomes easier. However, depending on the agent's significance and the regulatory requirements of their network, their supervision might be required. For example, in Nigeria, we have a license category for Super agents. This agent has their minimum requirement and guideline to their operation, and to qualify as a super agent, you need to have a certain number of agents network outreach

2. Granular data allows the supervisor take informed decisions on financial inclusion
In reply to First post

Re: Prudential Supervision for Deposits and Payments: Supervising Agents

by Elsabet Getachew Mulugeta - Group 2
1, Legal accountability sits with the principal, Scale makes direct supervision of agents inefficient and incomplete , Risk based supervision works better at the system level, Stronger enforceability.
2, High quality granular data means data that is reliable, timely, complete, and readily accessible. This is crucial for effective risk identification and assessment, and supervisors in emerging markets are increasingly collecting more granular DFS data, supported by SupTech and RegTech trends.
In reply to First post

Re: Prudential Supervision for Deposits and Payments: Supervising Agents

by Aboo Badhasa Aboma - Group 2
1. Directly supervising millions of individual agents is logistically impossible for regulators, so focusing on the FSP’s oversight systems ensures that supervision remains scalable and efficient. By holding the FSP accountable, supervisors incentivize providers to build robust internal controls, ensuring the FSP takes full responsibility for the conduct and compliance of its entire network.

2. High-quality granular data allows supervisors to monitor real-time risks, such as liquidity shortages or fraudulent patterns at specific locations, rather than relying on delayed or misleading averages. This level of detail helps identify specific geographical gaps in service, enabling more targeted policies that encourage agent expansion into the most underserved or rural areas.
In reply to First post

Re: Prudential Supervision for Deposits and Payments: Supervising Agents

by Agaba Albert Busingye Agaba - Group 4
Supervisors should focus on digital FSPs' management of agents because the supervised DFS providers are required to onboard, understand, train and analyses the agent's operations, internal controls, compliance and data collection to meet the financial sector's objective for financial inclusion. The Regulator or Supervisor comes in to provide proportionate oversight and regulatory guidance to the DFS provider as the accountable entity for the agent's faults and breaches and risk management.

The high-quality granular data can improve the effectiveness of agent supervision through good quality and disaggregated data received from the DFS providers' agents and real-time analysis of the said data received. This helps the supervisors and regulators understand and assess the diverse agents' operations and services offered to provide proportionate risk-based approaches to identify high risk agents that the responsible DFS provider should put in place or implement measures to mitigate or help the agent mitigate the emerging risks for the comfort of the supervisors or regulators to provide oversight to the financial sector.
In reply to First post

Re: Prudential Supervision for Deposits and Payments: Supervising Agents

by Aisha Kabir Ahmed - Group 1
1. Supervisors should prioritize oversight of FSPs’ management of agent networks rather than individual agents. Reviewing governance, training, monitoring, and accountability helps ensure consistent consumer protection across dispersed networks.

2. Granular data on transactions and complaints allows supervisors to detect risks early, assess fair treatment, and verify that underserved groups are effectively reached.
In reply to First post

Re: Prudential Supervision for Deposits and Payments: Supervising Agents

by Elsabet Assefa - Group 2
1. Supervisors should focus on digital FSPs’ management of agents (due diligence, onboarding, ongoing monitoring, and risk controls) rather than directly supervising individual agents. This follows the third-party outsourcing principle: providers are fully responsible for agents’ actions. Direct agent visits or inspections are inefficient and should be limited to specific triggers (spikes in complaints). Provider-focused supervision keeps oversight proportional, supports scalable agent-network growth, and avoids disproportionate hurdles that could slow financial inclusion.
2. High-quality, standardized, granular data (on agent gender, locations, transaction volumes, types, values, shared agents, complaints, and underserved areas’ socio-economic profiles) enables rich off-site market monitoring and detailed analysis. This informs more targeted on-site inspections and thematic reviews, improves risk detection across the market and individual providers, and delivers actionable insights. By identifying high-growth areas, heavy investors in networks, underserved locations, and inclusion gaps, supervisors can apply proportional oversight that sustains agent expansion, lowers costs for unbanked and underbanked populations, and advances financial inclusion goals.
In reply to First post

Re: Prudential Supervision for Deposits and Payments: Supervising Agents

by Ahmed Jibrel Yeha - Group 2
Always supervisory tool decision should have to consider effectiveness and efficiency along with acceptability of risk level. As a result, for supervisory purpose agents are considered as a third party outsourcing activity in which the DFS provider is responsible to manage and monitor them. Yet, if necessary in an extraordinary cases agents might be subject for direct supervision. In particular a high quality and detailed data provided by DFS providers regarding agents enable even to apply offsite inspection as well as thematic analysis. Therefore, this approaches helps to achieve effective and efficient proportionate supervision.
In reply to First post

Re: Prudential Supervision for Deposits and Payments: Supervising Agents

by Aliyu Mohammed - Group 1
It is important for supervisors to focus on digital FSPs’ management of agents rather than directly supervising individual agents in order to endure propotionality in deployment of resources. Also, high quality granular data contributes to financial inclusion goals because it provides insights around gender, location, complaints etc that could shape financial inclusion policy.