An analysis of the utilization of agency banking on performance of selected banks in Nairobi county, Kenya
Musau, Salome Mwongeli
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Agency banking roll-out in Kenya was meant to address the low financial inclusion in Kenya. As per the 2009 National financial access survey, 32% Kenya‟s bankable population is still totally out of the financial services orbit. Difficulties in accessing financial services main drivers are; long distance to banking channels and relative high costs of accessing financial services. In a bid to bridge the financial access divide and improve its access among the most vulnerable sections of the society, the Kenya government through the central bank amended the finance Act 2009 to facilitate use of third parties by banks to provide banking services. Agency banking has proved to be a cost saving network as compared to the physical brick and mortal banking branches. Keen to take the agency banking advantages, Kenyan financial institutions since 2010 have embarked on an aggressive entry into this segment. However, how Kenyan banks have utilized agency banking on their performance is not known. The purpose of this study was to assess the utilization of agency banking on the performance of Kenyan banks. The specific objectives of the study were; to assess how policies and procedures governing agency banking affects the banks performance, determine the effects of agency costs on the banks performance, to assess how agency liquidity problems affect banks performance as well as the security risks involved in agency banking. The study adopted a descriptive research design .The study targeted banks that offer agency banking services in Kenya. The number of banks offering agency banking were four. The population of the study was forty branch managers of selected branches in Nairobi. Both quantitative and qualitative data was collected by use of questionnaire with both open and closed ended questions. Data was analysed and presented using descriptive statistical tools including frequencies, percentages, mean and standard deviation. In addition, advanced statistical technique (inferential statistics) was also used. SPSS (Statistical package for social sciences) model was also used in data analysis. The generated results were presented through tabulations, charts and graphs. Content analysis was used to analyse qualitative data obtained from open ended questions. The results were presented in a continuous prose form. The study showed that liquidity availability in the outlets affected banks performance in addition to leading to frustrated customers. The study also found out that some of the agency regulations included board of directors and executive management, accountability and quality control. The study also found out that agency infrastructure cost and security was a major influence to banks performance. The study therefore recommends that, banks should give more attention to security and find better ways of vetting their agents to ensure that large cash transaction are handled effectively. The study also recommends that agents should be more financially included to handle many transactions, like converting cheques into cash, deal with foreign currency exchange among others.