Effect of agency banking on performance of selected banks in Kenya

Abstract

The growing popularity of agency banking is directly proportionate to the perceived benefits, however, firms entering these agreements must also be prepared for challenges they might encounter such as instability, poor performance, and may be dissolved .Dyer et a (2001) estimate that nearly half of all alliances fail. Hence the main objective of the study was to establish the effect of agency banking on performance of selected local banks in Kenya. The study focused on Post bank, Cooperative Bank, Kenya Commercial bank, Consolidated Bank and their selected agents. The research adopted a descriptive survey approach focusing on the commercial banks in Kenya that are currently operating agency banking model. The population of the study consisted of four (4) banks (Principals), with a target respondent of eight (8) staff members and twenty (48) agents, consisting of two per principal in six major cities and municipalities (Nairobi, Mombasa, Nakuru, Kisumu, Kakamega and Eldoret), that comprised the sample frame. Data was collected by use of questionnaire administered through 'drop and pick' technique by the researcher. Quantitative data was analyzed using descriptive statistics and correlation and regression statistical models, while descriptive data was analyzed using content analysis. Analyzed data is presented using tables and graphs. The study found out that there is a relationship between competition in the market, agents' compliance with legislation, organization culture, and resource base, access to technology and management skills and bank performance in Kenya. This study recommended that to enhance trust with the agents, banks need to ensure that agents and their staff sign secrecy documents to maintain confidentiality of all customer information and any other bank business information. This will also ensure that banks regard agents as business partners and not merely their employees.