How can agency banking deepen financial inclusion in South Africa?

This paper examines the potential of agency banking to deepen financial inclusion in South Africa. Using the three-stage least squares and logistic estimation techniques on three samples of adults drawn from the 2015 and 2023 FinScope surveys, and the 2021 Global Findex, our results show a positive and significant role played by agency banking in increasing the frequency of the use of credit, savings and bank transaction services. The associated demand for agency banking is driven by demographic, geographic and behavioural factors. Furthermore, our study identifies poverty, know-your-customer restrictions and a lack of trust in financial institutions as significant factors influencing the demand for agency banking services. However, the overall effect of agency banking on financial inclusion seems to be dissipating. Our nuanced analysis of demographic variations shows the need for a strategic approach to policy interventions that address specific barriers faced by different segments of South Africa’s population in accessing financial services.