Effect of Agency Banking Operation on Profitability of Commercial Banks: A Case Of Selected Commercial Banks in Nairobi County
Jagongo, A. O.
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Purpose: The purpose of this study was to establish the effects of agency banking operation on profitability of commercial banks. Materials and methods: The research design used for this study was descriptive design. The target population will be all eleven commercial banks offering agency banking. The study will conduct a census for all the banks. Data will be collected by use of a questionnaire and secondary data. Data will be analyzed mainly by use of descriptive and inferential statistics. Descriptive statistics will include mean and standard deviation. Data will also be presented by use of graphs, pie charts and tables.Multiple regression models will be useful to find out the virtual importance of each of the four variables. Results: From the study finding agency banking branch networking is negative and a statistically insignificant factor of bank profitability. Effect of agency banking withdrawal transaction is positive and statistically significant. Agency banking deposit transactions is statistically significant. Agency banking accounts opening services is also a statistically significant factor, Commercial banks performance indicators is a statistically significant factor of bank profitability. It is possible to conclude that banks do obtain economies of scale and scope when they expand their activities, mainly by mergers and acquisitions. Therefore,expanded product array and potential for cross selling result from larger size and depth of product offering. Recommendations: The study recommends that for all the commercial banks to earn more profit they ought to increase the number of customers and for their businesses to grow further they have to invest more as well as embrace the adoption of market innovative strategies.The study also recommends that the banks should emphasize on cross-selling as they can be useful marketing tools for banks to reach segments of the population that do not yet use traditional banking services.