The Business Correspondent (BC) model has been a game-changer for financial inclusion. In countries like India, Kenya, and Bangladesh, BC agents have become the face of banking for millions who live far from any formal financial institution. These agents offer critical services—deposits, withdrawals, loans, remittances, and more—right in the heart of underserved communities. However, as this model expands, so does the need for regulation. And while regulation is necessary, it is also proving to be a double-edged sword.
Why Regulation Matters
As BC agents handle increasingly sensitive financial transactions, risks such as fraud, identity theft, and misuse of funds are becoming more common. Regulatory frameworks—such as Know Your Customer (KYC), anti-money laundering (AML) policies, and regular audits—play a vital role in keeping the system safe and trustworthy.
Customers need to trust that their money is secure, and financial institutions need to know that their agents are following proper procedures. Without regulation, the entire model could collapse under the weight of misuse and fraud.
When Rules Meet Realities
Still, strict compliance can be hard to implement on the ground.
Take the example of India’s Jan Dhan Yojana (JDY). It successfully aimed to provide every household with access to a bank account, relying heavily on BC agents. But the rigid KYC requirements made it difficult for many people to open accounts. In rural areas, identity documents are often unavailable or incomplete. BC agents were caught in the middle—trying to enforce rules while keeping customers engaged.
Similar stories have emerged from Kenya’s M-Pesa. As regulatory authorities introduced stronger AML checks, the process of verifying customers became slower and more complicated. Agents faced delays, and customers grew frustrated with longer wait times.
Operational Challenges Stack Up
Many BC agents work with more than one financial institution. Unfortunately, each one often has its own set of compliance requirements. This lack of standardization creates confusion, wastes time, and increases the likelihood of errors.
Another major issue is certification. In many areas, there are not enough training programs or available certification slots. Aspiring BC agents must wait weeks or even months to get certified. This slows down financial inclusion at the grassroots level, especially in places where banking access is already limited.
Moving Toward Smarter Compliance
There are solutions, and some are already showing results:
- Standardizing compliance requirements across institutions would greatly reduce confusion.
- Digital tools such as e-KYC and biometric verification can make identity checks faster and more accurate.
- Ongoing training programs can help BC agents stay current with regulations.
- A centralized portal of regulatory guidelines would allow agents to access accurate information easily.
Regulation should not become a barrier to service. Instead, it should be a foundation for safe, efficient, and inclusive growth. As the BC sector continues to evolve, it is essential that compliance processes evolve with it—smart, streamlined, and ready for scale.
