Agency Banking and Deposit Mobilization on Commercial Banks in Kenya, Nairobi City County Branches
Rono, Romanus Kipngetich
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Banking industry has been competitive in the past years. Kenyan Banks are exploring all strategies to remain competitive in lending and in ensuring that their clients are satisfied. They have diversified their products from lending to offering custodial and insurance services. Lending continuity mainly depends on the reserves or rather bank’s available deposits. As an initiative therefore, Kenyan commercial banks have employed various strategies to mobilize cheap and stable deposits, as is the game changer. In line with this, most banks have invested in technology and alternative banking channels. There has been an impressive uptake of agent banking model after Central Bank Implemented it in the year 2010. Some banks have leveraged on it and casted it wider to net more customers across the country particularly in the rural areas to fish out for the idle deposits and in the process promoting financial inclusion in the country. Tier 1 banks have benefited much on this alternative channels while Tier 2 banks are still struggling with their agency business. These banks are aggressively implementing various strategies to mobilize their deposits and one of the strategies is agency banking. Several studies have expounded on commercial banks’ deposit mobilization and lending. However, no study available has documented the role of agency banking in the banks’ deposit mobilization initiatives. This study therefore sought to determine the role of agent banking in deposit mobilization for the Commercial Banks in Kenya. The commercial banks under the study are Equity, KCB, Co-operative and Family Bank. All of these banks have branches and agents spread within Nairobi. The specific objectives of the study was to find out the effect of deposit transactions, account opening, institution payments and bill/utility payment and size of the agents on the banks’ deposit mobilization. The study was anchored on agency theory, financial intermediation banking theory and fractional reserve banking theory. Descriptive research was employed with the study targeting the branches within Nairobi County for the banks under the study. The target population of the study was 152 respondents including 4 branch managers, 8 agency banking officers and 140 bank agents. A sample size of 60 respondents was drawn from the population for study where primary data was mainly used. Primary data was collected through semi-structured questionnaire. The data collected was analysed by use of descriptive and inferential statistics thereafter presented by charts and frequency tables. The study findings revealed that there is a significant relationship between agent deposit transactions and deposit mobilization (p=0.000); there was a significant relationship between agent account opening and deposit mobilization (p=0.000); there was a significant relationship between bill/utility payments and deposit mobilization (p=0.000) and that there was a significant relationship between number of agents and deposit mobilization (p=0.000). The study concluded that an increase in the number of agents increases the deposit mobilization of commercial banks in Kenya and that a decrease in volume of deposits negatively affects the deposit mobilization of commercial banks. The study concluded that deposit mobilization by bank agents in Kenya need to be looked into more so as to mobilize more transactions made on agent banking thus Agency banking should be used as a tool by commercial banks to mobilize deposits in places where customers are far away from the bank. From the foregoing conclusion, there is need for Commercial banks in Kenya to leverage on expansion of agent network in order to improve their deposit mobilization drive.