Growth in agency banking model signals deepening financial. Maudrile 2008 did a study on a new agent model for agency banking in colombia. Most of the individuals in kenya especially those living in rural or remote areas where infrastructural development is a problem,access to banking. 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. 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. Agent banking, the revolution in financial service sector of. Between 1993 and 1996, bbk divested its shares, selling 38% of its shares to the public in 1994. A corporate resolution to open a business bank account is a document that clearly shows the bank who has the authority to start an account on behalf of your corporation. The banking agent is an important part of the mobile banking business model since customer care, service quality, and cash management will depend on them. Despite the numerous economic challenges that have been witnessed within the sector, the industry remains strong and vibrant. Waithanji 2012 found out that there was a link between agency banking and financial deepening. Central bank of kenya is the regulating authority with 45 banking institutions whereby 44 are commercial banks and 1 is a mortgage finance company. Data was collected from kcb mtaani agents operating within nairobi and its environs through semistructured questionnaires.
The atm penetration of thes e countries was even lower ranging from 1. Objectives the objectives of the guidelines are to. In fact, when mobile money was launched nearly a decade ago, the agent distribution networks were disrupted in the world of. Based on the above premises this study therefore seeks to investigate agent banking operations as a competitive strategy for commercial banks in kisumu city kenya. Agency banking as an expansion strategy for kenya commercial. Full financial disclosure, transparency and accountability of the agent must be ensured. An application is renewable annually and the fees are payable yearly. These commissions are mainly awarded when somebody deposits cash, withdraws cash, and when somebody opens a bank account through the agent. Agency banking took effect in kenya in may 2010 after the publication of prudential guidelines by the central bank of kenya. Investigation on factors facilitating accessibility of. This study therefore, sort to analyse the utilization of agency banking on the performance of banks in kenya. In fact, when mobile money was launched nearly a decade ago, the agent distribution networks were disrupted in the world of finance. An agent application form is also sent to central bank for approval before the agent can start transacting on behalf of the bank.
Guidelines on agent banking for the banks 3 transactions as well. The challenges facing the implementation of agency banking in. By 2010, the central bank permitted agency banking, and equity immediately rolled out an ambitious agent network. Many telecoms will work through their local airtime resellers. Stay up to date on the latest news and equity products. Liability of an agent an agent may incur liability to. Agent banking operations as a competitive strategy of commercial. Agency banking outlets extend banking services in kenya.
Initially, mobile money was created to increase financial inclusion for the people who were financially excluded before. 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. 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. It does not take into account the presence of cooperatives or other unregulated financial institutions. Email facsimile authority doc size 879 kb download.
However, banks in colombia, brazil, peru, and other markets use pharmacies, bakeries, etc. Sep 19, 2016 in a report released by central bank of kenya, the value of banking transactions undertaken through agents increased from sh65. There she shows the agent her identity card and her cell phone, which displays a. In kenya the most basic version of agent banking is whereby a licensed financial institution typically a bank delivers financial services through a retail agent. Assessment of factors influencing adoption of agency banking in. South africa, branchless banking through retail agents is permitted only for licensed financial institutions. A case of equity bank in kitui central district, kitui county, kenya. A fee of kenya shillings of 1,000 per agent is required. Kenya, by contrast, regulators reportedly felt that acting as agents could steer. This alternative financial service has been growing in the developing countries for last.
The challenges facing the implementation of agency banking in kenya a case study of kcb. Agent banking in kenya in kenya large number of the population is excluded from access to financial services in the financial sector with the situation being worse in rural areas. At the moment, three banks have been placed under receivership with only one having recovered and back to operations. Nov 07, 2012 benefits of agent banking to agents retail outlets 1. A banking agent is a retail or postal outlet contracted by a financial institution or a mobile network operator to process clients transactions. The reason for the selection of equity bank was because. The bank develops financial products and services but distributes them through retail agents who handle most customer interaction. Kenya bankers association is the umbrella body of the financial institutions licensed under the banking act, cap 488, and the kenya post office savings bank act cap 493b. Free cheque book first cheque book competitive interest on deposits. Despite having an expansive network, it is still very much tethered to banking infrastructure for rebalancing. Free visa card which you can use at any visa point in the world.
Investigation on importance of agency banking in provision. The agents also have free association brand advertisement through the. Agent banking connects unbanked people to the mainstream financial system that reduces the economic, social and psychological challenges of financial exclusion. Demographics both models have similar metrics for agent gender, dedication, and exclusivity, but bank agents. The study also found that security of agent banks in kenya was bad.
In march 2010, equity and safaricom surprised many by partnering to launch a mobile product called mkesho. Kenyan banks record growth in agency banking model. Challenges of agent banking experiences in kenya fred gichana atandi. It served the needs of growing farming communities and started operations in 1968. Challenges associated with adoption of agency banking and. 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. Internet banking application pdf size 340 kb download. Upon successful application, vetting and approval, these agents are authorized to offer selected products and services on behalf of the bank. Kenya the most basic version of agent banking is whereby a licensed financial institution. Agency banking is a model that is aimed at enhancing financial inclusion by reaching out to millions of people in need of financial services. Increased income through commission bank agents are usually awarded commissions whenever they perform transactions on behalf of the bank. Nic became a public company in 1971 and is currently quoted on the nairobi stock exchange with approximately 22,000 shareholders. 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.
The study found out that security, liquidity availability, customers and awareness influence the uptake of agency banking by customers in commercial bank in kenya. 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. Guideline on agent banking issued by the central bank of kenya cbk and which. 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. As per the 2009 national financial access survey, 32% kenya. In addition, most customers had experienced a transaction failure in agent banks kcb mtaani and lack of liquidity.
Agency banking rollout in kenya was meant to address the low financial inclusion in kenya. Aug 27, 2018 the banking supervision report of the central bank of kenya cbk reveals the number of transactions undertaken by agents went up from 104 million to 9 million in 2017, representing a 34 per. Demographics both models have similar metrics for agent gender, dedication, and. 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. The association promotes and develops sound and progressive banking principles and practices and contributes to the sectors development. Ann wanjiku walks up to a greenandwhite booth with an mpesa agent sign on it. Between 1993 and 1996, bbk divested its shares, selling 38% of its shares to the. There has been increased competition from local banks as well as international banks, some of which are new players in the country. A system with the potential to obliterate the historical hurdles of cost and free access which have for a long time stood in the way of willing partakers of banking. Agent banking guidelines issued in april 2010 to take effect from 1st may 2010. Agent, agent banking, financial literacy, rural kenya, micro and small enterprises introduction according to suoranta and mattila 2004, as technology continues to be an important element in financial service delivery, understanding the factors that influence the behavior of consumers towards using electronic banking technologies.
In kenya, banks are now also driving agent banking, and while they do seem to be adding value to the system they have yet to reach the scale of agents mobile money providers have on the. Agent banking, the revolution in financial service sector. Cash withdrawals from coop account sacco account fethalink cash deposits to coop account sacco account fethalink. Pdf diversity of global agent banking models and its. This is why banking agents are part of an increasingly.
Mkesho would allow equity bank customers to link their bank account with. Investigation on importance of agency banking in provision of. The bank develops financial products and services but distributes them. Benefits of agent banking to agents retail outlets 1. A fee of kenya shillings 1,000 per agent is required.
In kenya, these agents are increasingly utilized as important. The banks are training agents who will engage in banking services on behalf of the banks. 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. Agency banking co op kwa jirani this is a convenient and simple banking model to suit your lifestyle as well as offer you convenience. Banking in kenya, september 14th 2011 agency banking application form an agent application form is sent to central bank for approval before the agent can start transacting on behalf of the bank. The banking supervision report of the central bank of kenya cbk reveals the number of transactions undertaken by agents went up from 104 million to 9 million in 2017, representing a 34 per. As time progressed, the changing landscape of banking began to note the entrance of fully indigenous banks. Rather than a branch teller, it is the owner or an employee of the retail outlet who conducts the transaction and lets clients deposit, withdraw, transfer. Mno agents in kenya location fsp maps shows 83% of bank agents and 76% of mno agents are rural in kenya, while only 30% of tanzanian and 44% of ugandan mno agents are rural.
Kenya the most basic version of agent banking is whereby a licensed financial institution typically a bank delivers financial services through a retail agent. In order to speed up the development of the agent banking in kenya, the. Select online platform eazzybiz eazzynet eazzychama self service portal eazzy remmittance eazzyfx. However, in kenya, how the utilization of agency banking has contributed to the performance of these banks is not documented. In a report released by central bank of kenya, the value of banking transactions undertaken through agents increased from sh65. Kenyas first fully locally owned commercial bank was the cooperative bank of kenya, which was initially a cooperative society. Focus on agency banking in kenya metric comparison of bank vs. The challenges facing the implementation of agency. Agency banking coop kwa jirani cooperative bank of kenya. Oct 31, 2017 agency banking outlets extend banking services in kenya. Barclays bank of kenya limited acquired 51% of nics total shares through the acquisition of mercantile in the 1970s and standards shareholding in nic in the 1980s.
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 in store training to ensure the agents are liquid, consistently branded, and following the prescribed business processes. A system with the potential to obliterate the historical hurdles of cost and free access which have for a long time stood in the way of willing partakers of banking services. Agent banking in latin america 05 11 in this chapter, the term banking coverage is used to refer to bank branches or agents operated by commercial or stateowned financial institutions and mfis in countries where mfis are regulated and allowed to operate through agents. Pdf the purpose of this study was to establish the effects of agency banking on bank performance with a focus of equity bank meru.
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