Agency banking has been practiced in a number of countries such as brazil, columba, pakistan, south africa and indonesia. These differences are evident in the variety of services offered by agents, the types of businesses. The reason for the selection of equity bank was because. According to the central bank of kenyas guidelines on agent banking, a bank agent means an entity that has been contracted by an institution and approved by the central bank to provide. Kenyan banks recorded significant improvement in agency banking introduced six years ago. 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. The study found equity bank was the first bank to roll out agency banking in kenya and by june 2012 it has 5. In neighbouring countries such as tanzania, kenya and rwanda agency banking has already been successfully introduced, proving thousands of lowlevel income households access to financial services. The regulation, design, and implementation of agent banking vary across countries. Waithanji 2012 found out that there was a link between agency banking and financial deepening. The model aimed at improving financial inclusion in the country. Investigation on importance of agency banking in provision of banking services in kenya. A well recognized exception to this general rule is the concept of agency. It has been used very well in latin america and asia.
To investigate the role of agency banking in facilitating accessibility of banking services through 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. The agent banking model has been very successful in some countries in latin america. The challenges facing the implementation of agency banking in. Agency banking in kenya requirement agents must also through the banks that sponsor them apply to run agency banking in kenya business. Kenya has pioneered in sharia compliant banking in this region but other countries in the region are headed in that direction, with tanzania already having two fully sharia compliant banks. The board of directors of each banking institution interested in agency banking must make policies guidelines and procedures to be followed to ensure that. The banks agency network is processing 25% of all cash transactions for. A case of equity bank in kitui central district, kitui county, kenya. The study also sought to establish how security, liquidity availability, customers and awareness influence the uptake of agency banking by customers in commercial bank in kenya. In kenya, the relationship between an employer and employee is governed by the employment act 2007. Mauricio and maudrile 2008 did a study on a new agent model for agency banking in colombia.
This entity shall be equipped with the skills necessary to provide basic banking services according to standards set by the bank. Guidelines on agent banking for the banks 1 guidelines on agent banking for the banks 1. 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. Agency banking coop kwa jirani cooperative bank of kenya. 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. Central bank of kenya is the regulating authority with 45 banking institutions whereby. Agentassisted branchless banking is relatively new. There are, however, more than 45,500 agents offering financial services.
The operations of banks in kenya are regulated by the banking act cap 488, companies act cap 486, and the central bank of kenya. What services are available at a coop kwa jirani agent. Investigation on factors facilitating accessibility of. Electronic banking application form corporate banking. Banking agents and the bank itself coordination influences the growth of agency banking in kenya. Agent banking operations as a competitive strategy of. However, in kenya, how the utilization of agency banking has contributed to the performance of. Eye on kenya, kenya, east africa, agency banking, financial services. Our head of private equity real estate, shiv arora discussed kenyas banking sector and the roles of the cbk on citizen tv. Kcb targets agency banking to cement market position. The study recommends further research on customer satisfaction and how it influences the growth of agency banking in kenya.
The potential, power of agency banking the standard. Objectives the objectives of the guidelines are to. The relationship between agency banking and financial. The study found that the move by the central bank to regulate agency banking had a positive influence on the. The majority of those that have had notable positive developments, have opted for agency banking. Among the countries studied, the phenomenon ranges in age from only a few months in the case of kenya, to a few years in the case of brazil and some services in india. Developing countries are accepting agency banking as a means of banking the unbanked population. 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. Agency banking has a broad range of financial services outside convectional bank branches and involves agents. The impact of agency banking financial innovation on market. 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. Outside of brazil and the philippines, branchless banking through retail agents reaches relatively few customers with a lim. Agency banking is defined as the process where a private entity has been contracted by a commercial bank, subject to specific legislation, to provide specific services on behalf of the bank. The theory regarding financial intermediation was developed in the 60s, the starting point being the work of gurley and shaw.
In spite of the great advancement and success in agency banking in kenya, there have been challenges facing it where security measures have not been put in place leading to it being less popular among investors. Oct 31, 2017 agency banking outlets extend banking services in kenya. Cash withdrawals from coop account sacco account fethalink cash deposits to coop account sacco account fethalink. 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. The employment act 2007 also known as the chapter 226 of the laws of kenya repealed the former employment act and the regulation of wages and conditions of employment act chapter 229 of the laws of kenya. If you have any feedback or complaint, please talk to us on. Banks must first apply to central bank of kenya to get approval to conduct agency banking business.
Select online platform eazzybiz eazzynet eazzychama self service portal eazzy remmittance eazzyfx. Agency banking is a model that is aimed at enhancing financial inclusion by reaching out to millions of people in need of financial services. One way is to integrate with a mobile money service provider and make use of their existing agents, thereby decongesting the banking halls, at the same time providing service conveniently to. According to safaricom 2011,financial inclusion is a big challenge in kenya,only 22. 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. Agency banking is then seen to bring the services closer to the customers and now days people in remote areas do not need to travel to towns to get financial services. The lack of offerings means potential for product innovation 79% agents are contributing to client growth in contrast to tanzania 36% or uganda 33%. However, in kenya, how the utilization of agency banking has contributed to the performance of these banks is not documented. 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. Kenya battle among financial players has intensified as commercial banks reach out to potential customers in the lowend market. Empowering a continent by creating better livelihoods. Central bank, their contracts and the banking policy. We released our fy15 banking report, analysing the 11 listed banks from both a franchise value and intrinsic value perspective. Contribution of agency banking on financial performance of.
The purpose of this study was to establish the effects of agency banking on bank performance with a focus of equity bank meru branch, kenya. This research sought to examine constraints hindering operation of financial services on banking agency in kenya, a case of national bank of kenya ltd 2. In the past recent years, the kenyan financial sector has been experiencing a significant change. Kenyan banks record growth in agency banking model. Factors influencing the adoption of internet banking in kenya. T he bot 2014 report identifies 3,431agency b anks countrywide with crdb bank. Pdf the role of agency banking in promoting financial. Get employment act 2007 pdf corporate staffing kenya. The challenges facing the implementation of agency. Data was collected from kcb mtaani agents operating within nairobi and its environs through semistructured questionnaires.
The agency banking in kenya guidelines were enacted in 2010. Kariuki john gikonyo student, master of science in finance. While agency banking is now offering savings services, not a great enough percentage of agents are involved to showup here. There are few african countries that have taken up agency banking.
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. 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. Stay up to date on the latest news and equity products. Agency banking may eventually lead to financial inclusion in the countries where it has been adopted. Agents, typically small shop owners such as pharmacies or grocery stores, will be able to offer many of the common services currently provided at. The study sought to evaluate the impact of agency banking, a form of financial innovation, on market capitalization of listed commercial banks in kenya. The research is financed by the institute of finance management abstract the objective of this paper was to assess the leverage provided by agency banking in promoting the financial inclusion in. Quite a number of financial products have been made using new efficient processes. Investigation on importance of agency banking in provision.
Somalia is another country keen on modeling its emerging financial system predominantly along sharia compliance as it reconstructs. Increased income through commission bank agents are usually awarded commissions whenever they perform transactions on behalf of the bank. The population of the study was the 10 commercial banks in kenya that had adopted agency banking by the end of 2012 namely equity bank, cooperative bank, kcb bank, post bank, family bank, chase bank,consolidated bank, diamond trust bank, citibank and nic bank. There are two ways in which the banks have managed this. The impact of agency banking financial innovation on. However, agency banking is a fairly new concept in africa with it being highly implemented in kenya and south africa agalla, 2014. Challenges associated with adoption of agency banking and. These commissions are mainly awarded when somebody deposits cash, withdraws cash, and when somebody opens a bank account through the agent. Benefits of agent banking to agents retail outlets 1. The banking fees regulations, 1994 the banking increase of rate of banking and other charges regulations, 2006 exemptioncfc stanbic holdings limited1st june, 2008 the banking credit reference bureau regulations, 2008, repealed by ln5 of 2014 revocation.
Investigation on importance of agency banking in provision of. In terms of branchless banking, kenya is probably best known for nonbankbased models, specifically those launched by mnos. As per the 2009 national financial access survey, 32% kenya. Agency banking in latin america and brazil are the most developed hussain, 2014. The study selected 4 senior managers from each bank thus forming a sample size of 36 respondents who was used in this study. The general objective of this study was to establish the factors influencing the uptake of agency banking services by customers in commercial banks in kenya.
This research project seeks to improve the rare empirical knowledge on the adoption of internet banking in kenya. Agency banking rollout in kenya was meant to address the low financial inclusion in kenya. Agency banking co op kwa jirani this is a convenient and simple banking model to suit your lifestyle as well as offer you convenience. Jul 01, 2015 according to the central bank of kenyas guidelines on agent banking, a bank agent means an entity that has been contracted by an institution and approved by the central bank to provide. The banks are training agents who will engage in banking services on behalf of the banks. The agency banking network approval requires some conditions to be met together with completing the agency banking network application form. The bank must address the challenges that are posed by having agency banking while at the same time taking advantage of all the benefits of having this channel of banking. Jomo kenyatta university of agriculture and technology, kenya school of monetary studies. The future of sharia compliant banking and finance in kenya.
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