Kenya legitimized agency banking act 2009 to enable central bank of kenya to license banking agents for commercial banks. The challenges facing the implementation of agency banking in kenya a case study of kcb. Cooperative bank is regulated by the central bank of kenya. A key factor to equity bank s success was in reaching the mass market for deposits with its pioneering and expertise in agency banking. Agency banking financial innovation was propelled in kenya in the year 2010 and despite the success stories in other countries it has been found that only a. Mno agents in kenya location fsp maps shows 83% of bank agents and 76% of mno agents are. Assessment of factors influencing adoption of agency. Ghana, agency banking was introduced in 2008 allowing for bank based model of branchless banking using nonbank retail agents mckay, 2011. As per the 2009 national financial access survey, 32% kenyas. Agency banking to be specific has been very successful in propelling the performance of banks in many developing countries.
In eldoret kenya, most financial institutions have adopted agency banking to provide fundamental banking services to customers. Mauricio and maudrile 2008 did a study on a new agent model for agency banking in colombia. Kenya takes a different approach, requiring agents to be forprofit actors and regulating banking agents no. Agency banking and financial performance of commercial banks in embu county, kenya irene njoki mbugua master of business administration finance option, kenyatta university, kenya dr. Coop kwa jirani is a service of cooperative bank of kenya. The population for this study was 16 commercial banks that have embraced agency banking. Agency banking is an emerging trend in the banking sector where the banking institution and management enter into contracts with selected agents to provide banking services for a commission.
The study used secondary data and was collected from previously collected data, general. Pdf an evaluation of the agency banking model adopted by. However, even with current 45,500 agents offering financial services, the penetration rate is still a challenge, for many banks have not embraced the model. The operations of banks in kenya are regulated by the banking act cap 488, companies act cap 486, and the central bank of kenya. Agency banking has been practiced in a number of countries such as. International journal of social sciences and entrepreneurship, 1 5, 243256. Rise of agency banking in kenya mahindra comviva blog. Role of agency banking on the perfomance of banking agent entrepreneurs. Oct 31, 2017 agency banking outlets extend banking services in kenya. The problem to be investigated was how agency banking has influenced customer satisfaction in kenya. In february 2011, the central bank of kenya released regulations allowing banks to. A case study of cooperative bank coop jirani in kibera, nairobi. In addition to the objective of financial inclusion, banks has used the agency banking to reduce their operational costs. However, in kenya, how the utilization of agency banking has contributed to the performance of these banks is not documented.
They should also adopted modern technology in their operations. Agency banking offers the potential to increase and deepen financial inclusion across uganda. The relationship between agency banking and financial. Agent banking operations as a competitive strategy of. Agent refers to any third party acting on behalf of a bank in pursuant to an agency agreement. The potential, power of agency banking the standard. Investigation on importance of agency banking in provision. A recently conducted survey revealed that only 30% of the bankable population in kenya can access financial services. Agency banking co op kwa jirani this is a convenient and simple banking model to suit your lifestyle as well as offer you convenience. The researcher also identified some of the factors hindering the well functioning of agent banking despite mounting financial literacy training to equity bank clients. This highly participative and comprehensive aztech agency banking training course will help you to understand the benefits of agency banking, especially in an emerging economy context and the practical implementation of the principles in order to unlock the benefit of the model. As part of enhancing the bank s footprint in kenya, kcb mtaani is aimed at improving accessibility of bank services and tapping into the unbanked population through the use of agents to deliver certain financial services.
Descriptive analytical evidence from tanzania article pdf available april 2016 with 5,836 reads how we measure reads. Effect of agency banking on financial inclusion in kenya. Become a coop agent attract new customers into your business premises by offering coop bank services. Kenya, but one thing that agency banking has failed to do in kenya is to. A case of commercial banks ruth mary vutsengwa student, jomo kenyatta university of agriculture and technology dr. The role of agency banking in promoting financial inclusion. This research examined the challenges of sustainability of agency banking in nigeria a study of selected commercial banks. Agency banking in kenya is the new way that banking in kenya is using to take banking services to the unbanked and under banked at a cheaper rate.
In kenya agency banking started from mobile financial services such as kcb mtaani, equity agents and pesa pap irungu, 2010. The next three slides compare the two leading bank networks to the two leading telecom networks. Agency banking took effect in kenya in may 2010 after the publication of prudential guidelines by the central bank of kenya. This relationship creates an agency banking business. Assess whether convenience is affecting adoption of agency banking in kenya. Commercial banks in kenya have adopted agency banking as part of financial inclusion initiatives aimed at reaching the poor and unbanked population, which is thought to alleviate poverty levels. Aug 27, 2018 official data released last week shows this model has continued to gain traction in kenya. Waithanji 2012 found out that there was a link between agency banking. In this line, the current study sought to establish the challenges facing growth of agency banking in kenya. Upon successful application, vetting and approval, these agents are authorized to offer selected products and services on behalf of the bank. Job omagwa department of accounting and finance, school of business, kenyatta university, kenya. The population of the study was forty branch managers of selected branches in nairobi. The study also concludes that agency bankers should enhance customer information confidentiality because it leads to an improvement in growth of agency banking in kenya. Following the inauguration of mobile and agency banking in the financial sector, affordable and convenient banking products and services are accessible to the.
The agency banking network approval requires some conditions to be met together with completing the agency banking network application form. A study on the innovative factors that affect financial inclusion in the banking industry in kenya. The stakeholders should be drawn from both the public and private sectors. The bank led model is a general agency arrangement where only a bank may act as a principal in.
Growth in agency banking model signals deepening financial. Challenges facing growth of agency banking in kenya. The study selected 4 senior managers from each bank thus forming a sample size of 36 respondents who was used in this study. The study sought to establish the effect of agency banking on financial performance of commercial banks in kenya. Kenyan banks record growth in agency banking model.
Is the quality of agents a factor in the adoption of agency banking in kenya. Agency banking outlets extend banking services in kenya. The number of banks offering agency banking were four. Central bank, their contracts and the banking policy. Pdf role of agent banking services in promotion of financial. This comprises about 20 million kenyans who can maintain at least a single bank account. According to a helix digital finance special report on agency banking in kenya, agency banking has been the fastest growing in terms of agents share and equity bank. A study was carried out to establish the effect of agency banking strategy on customer service in kenya commercial bank limited. Agency banking has enabled bank customers to access the basic banking services, for example, cash deposit, cash withdrawal and bank balance inquiry conveniently or what would be termed as within the comfort of their neighborhood. It is observed that the involvement of key stakeholders in implementation of agency banking cannot be understated opm, 2011. To assess the factors that affect adoption of agency banking in kenya. Agency bankers should not change their system frequently. Following regulations passed in july 2017, banks in uganda can use agency banking an extension of services traditionally offered in bank. Agent banking is an alternative channel aimed at supporting the available channel network of branches and atms.
Effects of agency banking on the finanacial performance of commercial banks in kenya by simboley brenda chemutai a report submitted to the chandaria school of business in partial fulfillment of the requirement for the degree of masters in business administration mba united states international university africa spring 2017. The effect of agency banking on the financial performance of. The impact of agency banking financial innovation on. Abstract since 2010, there have been significant improvements in the banking. Pdf the role of agency banking in promoting financial.
The stakeholders should participate in rolling out of mobile financial. Job omagwa department of accounting and finance, school of business, kenyatta university, kenya 2017. The banking industry in kenya is governed by the companies act, the banking act, the central bank of kenya act and the various prudential guidelines issued by the central bank of kenya cbk. This may explain why in kenya, the banks with the largest physical branch presence, equity, cooperative and kenya commercial bank. Investigation on importance of agency banking in provision of. The effect of agency banking on the financial performance. The impact of agency banking financial innovation on market. Banking agents and the bank itself coordination influences the growth of agency banking in kenya. The study targeted banks that offer agency banking services in kenya. This is because over the last 6 years millions of people, most of whom were financially excluded, have been brought into the formal financial sector through successful rollout of innovative mobile phone financial services products mfs. The banks are training agents who will engage in banking services on behalf of the banks. Preamble in exercise of the powers conferred on the bank by section 2 d of the central bank of nigeria act, 2007 and section 57 2 of the banks and other financial institutions act.
There are, however, more than 45,500 agents offering financial services. According to safaricom 2011,financial inclusion is a big challenge in kenya,only 22. Investigation on importance of agency banking in provision of banking services in kenya. According to bank supervision and annual report 2014, the banking sector in kenya comprise of the 44 banking institutions, 9 microfinance banks, 2 credit reference bureaus, 87. Assessment of factors influencing adoption of agency banking in. Agency banking has been very successful in countries like colombia, brazil, peru, and india kinyanjui, 2011. Empowering a continent by creating better livelihoods. The challenges facing the implementation of agency banking. According to central bank of kenya statistics on the distribution of agents, 87% are with 3 banks equity bank with 25,428 agents, kenya commercial bank with 12,883 and cooperative bank with 8,856 agents. According to a helix digital finance special report on agency banking in kenya, agency banking has been the fastest growing in terms of agents share and equity bank has even leapfrogged past airtel money kenya to become the second largest in terms of agent share at 11%. Agent, agent banking, financial literacy, rural kenya, micro and small enterprises introduction according to suoranta and mattila 2004, as technology continues to be an important element.
Agency banking model is a function of certain commercial banks in kenya and as regulated by central bank of kenya legislation that allows them to contract third party retail networks as banking agent. Agency banking strategy and organizational performance in. The banking supervision report of the central bank of kenya. However, agency banking is a fairly new concept in africa with it being highly implemented in kenya and south africa agalla, 2014. Agency banking was introduced in kenya in 2010 according to opm 2011. Agency banking rollout in kenya was meant to address the low financial inclusion in kenya. Determine whether quality of agents is affecting adoption of agency banking in. Following regulations passed in july 2017, banks in uganda can use agency bankingan extension of services traditionally offered in bank. Creation and termination of agency it is a general principle of contract law that only the parties to the contract acquire rights and liabilities under it. Waithanji 2012 found out that there was a link between agency banking and financial deepening. In recent years, agency banking has been adopted and implemented with varying degrees of success by a number of developing countries, particularly in.
Agency banking coop kwa jirani cooperative bank of kenya. In spite of the great advancement and success in agency banking in kenya, there have been challenges facing it where security. The research involved coming up with ways on how banks that use agent banking models were able to satisfy their customers needs fully and solve. The population of the study was 9 commercial banks offering agency banking in kenya. Agency banking is a model that is aimed at enhancing financial inclusion by reaching out to millions of people in need of financial services. Challenges of agent banking experiences in kenya hrmars. Investigation on factors facilitating accessibility o f banking services through agency banking in kenya. Investigation on factors facilitating accessibility of. The challenges facing the implementation of agency banking in. In kenya, agency banking is governed by the prudential guidelines on agent banking issued by the central bank of kenya cbk and which became operational on 1st may 2010. Kenyan banks recorded significant improvement in agency banking introduced six years ago. Investigate if customer service is affecting adoption of agency banking in kenya. In terms of branchless banking, kenya is probably best known for nonbankbased models, specifically those launched by mnos.
Growth in agency banking model signals deepening financial inclusion monday, august 27, 2018 21. Agalla 2014 sought to establish challenges facing implementation of agency banking at kenya commercial bank, with an objective of establishing whether risks associated with agency banking, policies and procedures governing agency banking. Karanja ngugi lecturer, jomo kenyatta university of agriculture and technology. Assessment of factors influencing adoption of agency banking.
Guideline on agent banking issued by the central bank of kenya cbk and which became. Coop kwa jirani enables customers to carry out all banking transactions through an agent appointed by the bank. Focus on agency banking in kenya metric comparison of bank vs. The model aimed at improving financial inclusion in the country. Closer to home, equity bank transformed itself from a struggling building society to a successful commercial bank in kenya at a time when most banks were closing their branches. A case of equity bank in kitui central district, kitui county, kenya. Cash withdrawals from coop account sacco account fethalink. In support of vision 2030, kenya s financial sector is expected to explore and implement innovative growth. A well recognized exception to this general rule is the concept of agency. Challenges associated with adoption of agency banking and. Central bank of kenya is the regulating authority with 45 banking institutions whereby. Agency banking in kenya requirement agents must also through the banks that sponsor them apply to run agency banking in kenya business. As per the 2009 national financial access survey, 32% kenya.
The commercial banking industry in kenya has been in a state of constant change that due to economic liberalization, competition has become stiff, forcing commercial banks to conform to the changing economic environment. If a customer of a bank wishes to transact his banking business through an agent, the. Mno agents in kenya location fsp maps shows 83% of bank agents and 76% of mno agents are rural in kenya, while only 30% of tanzanian and 44% of ugandan. The study recommends further research on customer satisfaction and how it influences the growth of agency banking in kenya. Select online platform eazzybiz eazzynet eazzychama self service portal eazzy remmittance eazzyfx.
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