IOSR Journal of Economics and Finance (IOSR-JEF) e-ISSN: 2321-5933, p-ISSN: 2321-5925.Volume 11, Issue 3 Ser. V (May – June 2020), PP 13-20 www.iosrjournals.org DOI: 10.9790/5933-1103051320 www.iosrjournals.org 13 | Page The Impact of Agent Banking on Financial Performance of Commercial Banks in Bangladesh Md. Mahbub Alam 1 , Dipti Bhowmik 2 ,Diponkar Bhowmik 3 1. MSS Student, Department of Economics, MawlanaBhashani Science & Technology University, Tangail, Bangladesh. 2. Lecturer, Department of Economics, MawlanaBhashani Science & Technology University, Tangail, Bangladesh. 3. MBA Student, Institute of Business Administration, Jahangirnagar University, Savar, Dhaka,Bangladesh. Abstract: Agent banking is receiving much attention all over the world owing to its associated benefits. The adoption of agent banking in Bangladesh is mainly geared to improve on market share by attracting and retaining their customers, improving their financial performance and create variety of services. This study aims to investigate the impact of agent banking on the financial performance of commercial banks in Bangladesh. Financial performance of commercial banks that is measured by Return on Equity (ROE).This study is quantitative in nature and to get the result 19 commercial banks in Bangladesh has been taken as sample of the study. Secondary data has been used which is collected from balance sheets and income statements of the sample banks and also from the central bank of Bangladesh, covering the period of 2016-2019.The multiple regression model are used to analyze data on financial performance. The study finds that the number of agents and volume of deposits have a positive and significant impact onthe financial performance whereas the volume of withdrawals and volume of loan disbursement negatively impact on the financial performance of commercial banks in Bangladesh although the volume of loan disbursement is statistically insignificant. Therefore, the study recommends that Commercial banks in Bangladesh should invest more resources towards increasing their number of agents to increase financial performance and develop deposit mobilization and loan disbursement strategies through agent banking to ensure that their clients use agency-banking services. Key Words: Agent Banking, Financial Performance, Commercial Banks. --------------------------------------------------------------------------------------------------------------------------------------- Date of Submission: 18-05-2020 Date of Acceptance: 03-06-2020 --------------------------------------------------------------------------------------------------------------------------------------- I. Introduction Developing countries including Bangladesh are increasingly embracing branchless banking as a means of delivering banking services to many unreached people especially low-income households. Globally, it is estimated that near to 400 million people currently don’t have a bank account in a formal way (Cetorelli& Goldberg, 2012). The Bangladesh Bureau of Statistic Report (2013) indicates that more than 6 million adults rural Bangladeshi are either under-banked or unbanked. This is partly because of the high cost of maintaining the bank branches and the low nature of business transactions in rural Bangladesh. In order to avoid such financial fragility and vulnerability, agent banking is one of the most promising, secured, and quick services that the Bangladeshi bank can offer to the people. Ultimately, banks have adopted branchless banking such as automatic teller machines (ATMs), point-of-sale (POS) devices, internet banking, and mobile banking among others (Burgessy& Wong, 2005, Laukkanen&Pasanen, 2007). This has the effect of reducing banking costs. Indeed early experiences have shown that branchless banking through agencies can significantly alleviate set-up and delivery costs, providing cash-in/cash-out operations only or a broader range of financial services to customers who usually feel easier banking at their local merchants than at traditional bank branches (Lozano &Mandrile, 2009).Bangladesh Bank, the central bank of Bangladesh, issued a specific set of guidelines, forms and set of regulations (Bangladesh Bank, 2013) for introducing agent banking for interested Banks. Agent banking is the form of banking that includes the limited scale of banking and financial service through persons or agents under a valid agency agreement across the country, especially in remote areas. It is a retail outlet contracted by a financial institution or a mobile network operator to process bank clients’ transactions (Mbugua & Omagwa, 2017). Agents banking may include pharmacies, supermarkets, convenience stores, lottery outlets, and post offices (CGAP, 2010).The trend of agent banking is apparent in many nations all over the world, such as in Australia where post offices operate as bank agents, France utilizing corner stores, Brazil where lottery outlets are used to offer financial services pioneering the mobile financial services, Nigeria, South Africa and the Philippines (Siedek, 2008).