Agent banking in a highly under-developed financial sector: Evidence from Democratic Republic of Congo

The paper provides evidence on the number and volume of financial transactions undertaken by agents (local businesses that double as more convenient, lower cost alternatives to formal branches) of the largest microfinance institution operating in the Democratic Republic of Congo (DRC). To our knowledge, this is the first econometric study of the activities of agents in a country as underdeveloped as the DRC. More important than agents' personal characteristics, transactions are higher in low income, densely populated areas with high levels of commercial development, suggesting that the agent network has been best at supporting financial transactions among the urban poor. In addition, branding and effective liquidity management are strongly linked to agent activity. The results suggest that agents can be effective providers of basic financial services among the urban poor who lack suitable alternatives. But it remains to be seen how the agent banking model will play out in less densely populated areas of the DRC and other developing countries.