In particular, mobile banking provides an instantaneous and traceable record of transactions that were otherwise anonymous and unverifiable through cash. Upon successful application, vetting and approval, these agents are authorized to offer selected products and services on behalf of the bank. In united states, agency banking model is used by foreign banks to. In this regard, we merge a new dataset on bank branch penetration of all the large banks across all parts of kenya with nationally representative household surveys of financial usage conducted by financial sector deepening trust kenya fsd kenya in 2006 and 2009. Jan 17, 2018 government to merge 6 banks into 1 by miriam musyoki on 17 january 2018 9. Agent, agent banking business, costs, financial inclusion. Agency banking in kenya requirement agents must also through the banks that sponsor them apply to run agency banking in kenya business. Pdf role of agent banking services in promotion of financial. For instance, colombias 2006 decree on agent banking permits any type of legal entity, including savings and credit cooperatives, to be a banking agent. Kenyas banking sector overview kenya currently has 43 commercial banks, all regulated by the central bank of kenya 20 12 20 in kenya there are a total of 43 commercial banks, 10 microfinance banks and 1 mortgage finance institution all banks are regulated by the central bank of 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. The staff of the bank supervision division central bank of kenya for their assistance in. Agalla 2014 sought to establish challenges facing implementation of agency banking at kenya commercial bank, with an objective of establishing whether risks associated with agency banking, policies and procedures governing agency banking.
Pdf competitive strategies adopted by bank of india kenya. Cbk to support kenyan banks with liquidity problems. The banking industry in kenya has also involved itself in automation, moving from the traditional banking to better meet the growing complex needs of their customer and globalization challenges. Kenyan mergers and acquisitions of 2015 quantum economics. The objective of the study is to establish if security, liquidity, regulation and accessibility affects the performance of kcb agents which eventually has a ripple effect on the banks performance. Financial institutions are constantly looking at new ways to reach the unbanked and serve existing customers better. As per the 2009 national financial access survey, 32% kenya. Agent banking operations as a competitive strategy of. 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 general objective of this study was to establish the factors influencing the uptake of agency banking services by customers in commercial banks in kenya. Investigation on factors facilitating accessibility of. Providing services through agents grant banks access to an untapped market potential. 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. Bankers upbeat as mutebile releases agency banking guidelines. 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. The financial agencies to be merged include the kenya. Discussions with afi commenced in june 2009 with formal request for short term grant submitted in late june 2009. Premised on the analysis above, the authority approved the proposed merger between commercial bank of africa limited and nic group plc on condition that none of the 1,872 employees of the merged entity are declared redundant for a period of 12 months from the date of closing of the transaction in kenya. Oct 31, 2017 agency banking outlets extend banking services in kenya. The six institutions are kenya industrial estates, development bank of kenya, industrial development bank of kenya, uwezo fund, youth enterprise development fund and the women enterprise development fund. State to merge six financial agencies to form mega.
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. Agents, typically small shop owners, pharmacies or grocery stores, will be able to offer many of the common services such as balance inquiries, cash. Please practice handwashing and social distancing, and check out our resources for adapting to these times. Jan 16, 2018 the institutions that will be merged to form the mega development finance institution include the kenya industrial estates, development bank of kenya, industrial development bank of kenya, uwezo. The model aimed at improving financial inclusion in the country. An interagency task force tasked with merging the functions of existing organisations that run parallel roles has been established. The relationship between agency banking and financial. Banks must first apply to central bank of kenya to get approval to conduct agency banking business. Increased income through commission bank agents are usually awarded commissions whenever they perform transactions on behalf of the bank.
Kenyan banks recorded significant improvement in agency banking introduced six years ago. Banking agents and the bank itself coordination influences the growth of agency banking in kenya. The rise of agency banking in kenya published on july 1, 2015 july 1, 2015 15 likes 4 comments. Investigation on importance of agency banking in provision of banking services in kenya. The main objective is to increase financial services outreach and to promote financial inclusion to the unbanked and underbanked population without risking the safety and soundness of the banking system. Cash withdrawals from coop account sacco account fethalink cash deposits to coop account sacco account fethalink. The ugandan financial sector is awaiting the final changes in a regulation that will allow the banking sector to propel into agency banking. In terms of branchless banking, kenya is probably best known for nonbankbased models, specifically those launched by mnos. The kenyan banking sector is composed of 52 institutions, including 43 commercial banks, 1 mortgage finance company and 8 deposittaking microfinance institutions. The regulation, design, and implementation of agent banking vary across countries.
This relationship creates an agency banking business. Can agency banking improve financial inclusion in south. Eye on kenya, kenya, east africa, agency banking, financial services. Challenges associated with adoption of agency banking and. Investigation on importance of agency banking in provision of. The agency banking network approval requires some conditions to be met together with completing the agency banking network application form.
These differences are evident in the variety of services offered by agents, the types of businesses. May 21, 2015 cooperative bank of kenya agency bankingcoop kwa jirani may 21, 2015 cooperative bank of kenya agency bankingcoop kwa jirani stay safe and healthy. 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. Overview of the banking industry in kenya stephenson harwood llp to view this article you need a pdf viewer such as adobe reader.
Determinants of banking distress and merger as strategic policy to resolve distress. In united states, agency banking model is used by foreign banks to enter the market. There are few african countries that have taken up agency banking. The institutions that will be merged to form the mega development finance institution include the kenya industrial estates, development bank of.
If you cant read this pdf, you can view its text here. 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. Pdf the effect of branchless banking strategy on the financial. The atm penetration of thes e countries was even lower ranging from 1. Among the recommendations are regulatory engagement to address the. The central bank of kenya cbk yesterday announced that it will from today avail a facility to any commercial or microfinance bank which will experience liquidity pressures arising from no fault of its own. A case of equity bank in kitui central district, kitui county, kenya. Both the primary and secondary data collected was merged into. Among the recommendations are regulatory engagement to address the barriers to. With agency banking a third party, an agent, can provide bank services outside of bank offices. Job omagwa department of accounting and finance, school of business, kenyatta university, kenya 2017. A further feature of mobile banking is the way in which it facilitates the development of relations of trust where previously there was no basis for it.
Investigation on importance of agency banking in provision. The study recommends further research on customer satisfaction and how it influences the growth of agency banking in kenya. Agency banking aka branchless banking is quickly emerging as a way to offer services to those without banking access. At the moment, three banks have been placed under receivership with only one having recovered and back to operations. After the chase bank debacle which led to the placing of the institution into receivership last week. Kenyan banks record growth in agency banking model. Agency banking coop kwa jirani cooperative bank of kenya. As a retail banking option, this model is flexible and can meet local needs. The majority of those that have had notable positive developments, have opted for agency banking. Agent liquidity management solutions observed as part of study. Branchless banking which involves the use of agency banking and electronic banking. Brazil and colombia identified as champions in agent banking.
Agency banking rollout in kenya was meant to address the low financial inclusion in kenya. Data was collected from kcb mtaani agents operating within nairobi and its environs through semistructured questionnaires. Agency banking is a model that is aimed at enhancing financial inclusion by reaching out to millions of people in need of financial services. Agency banking and financial performance of commercial banks in kenya 99 as correspondence banking can be traced to brazil in 1999 exponentially growing from 1,600 agents in 2000 to 170,000 agents in 2010 mckay, 2011. The operations of banks in kenya are regulated by the banking act cap 488, companies act cap 486, and the central bank of kenya. A read is counted each time someone views a publication summary such as the title, abstract, and list of authors, clicks on a figure, or views or downloads the fulltext. Jul 01, 2015 the rise of agency banking in kenya published on july 1, 2015 july 1, 2015 15 likes 4 comments. The banks are training agents who will engage in banking services on behalf of the banks. 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. According to safaricom 2011,financial inclusion is a big challenge in kenya,only 22. Despite the numerous economic challenges that have been witnessed within the sector, the industry remains strong and vibrant.
What services are available at a coop kwa jirani agent. Agency banking solution agency banking services jmr infotech. 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. However, in kenya, how the utilization of agency banking has contributed to the performance of these banks is not documented.
The paper concludes that addressing the barriers to agency banking will be necessary, but not sufficient, to improve financial inclusion. There has been increased competition from local banks as well as international banks, some of which are new players in the country. To investigate the role of agency banking in facilitating accessibility of banking services through agency banking in kenya. Job omagwa department of accounting and finance, school of. These commissions are mainly awarded when somebody deposits cash, withdraws cash, and when somebody opens a bank account through the agent. Mauricio and maudrile 2008 did a study on a new agent model for agency banking in colombia. Kenya listed commercial banks cytonn q1 banking sector. There are two ways in which the banks have managed this. Benefits of agent banking to agents retail outlets 1. Government to merge six agencies to form mega development bank. The challenges facing the implementation of agency banking. There are, however, more than 45,500 agents offering financial services. The study focused on selected commercial banks in nyeri county, kenya and was.
Jul 07, 2015 kenyas competition authority approved the acquisition by fortune hotels of paradise safari park and 85% of paradise investments and development kenya held by paradise company. Operational challenges of agent banking systems page 3 of 3 managing the channel agents will not provide quality service to customers without ongoing, onsite supervision and instore training to ensure the agents are liquid, consistently branded, and following the prescribed business processes. The challenges facing the implementation of agency banking in. Agency banking is a type of branchless banking where third parties are involved in performing some of the activities that are traditionally performed in banking halls by bank personnel. 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. It has been used very well in latin america and asia. 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. The potential, power of agency banking the standard. Objectives the objectives of the guidelines are to. As of december 31st, 2010, the country included 1,063 bank.