The next three slides compare the two leading bank networks to the two leading telecom networks. Is the quality of agents a factor in the adoption of agency banking in kenya. Investigation on importance of agency banking in provision of. The stakeholders should be drawn from both the public and private sectors.
They should also adopted modern technology in their operations. Nov 23, 2016 kenya is said to be an overbanked economy with more banks per head than any african country. The study used secondary data and was collected from previously collected data, general. Agents are audited on an ongoing basis to ensure that.
The population of the study was 9 commercial banks offering agency banking in kenya. The population of the study was forty branch managers of selected branches in nairobi. Dr penelope hawkins feasibility pty ltd and, for the purposes of this paper, finmark trust final paper for the african development finance paper abstract financial inclusion, as measured by the percentage of consumers using. Agency banking in kenya requirement agents must also through the banks that sponsor them apply to run agency banking in kenya business. As time progressed, the changing landscape of banking began to note the entrance of fully indigenous banks. Oct 16, 2014 the kenyan banking sector is composed of 52 institutions, including 43 commercial banks, 1 mortgage finance company and 8 deposittaking microfinance institutions. The objective of this study was to determine the effect of mobile banking on the financial performance of commercial banks in kenya the study applied descriptive research design. Central bank, their contracts and the banking policy. The banking sector was liberalised in 1995 and exchange controls lifted. Agency banking as an expansion strategy for kenya commercial. Annual report 2012 bank of africa kenya bank of africa group celebrates its 30th anniversary this year we are celebrating our groups 30th anniversary. Pdf the factor that affects the effectiveness of agent banking.
The study recommends further research on customer satisfaction and how it influences the growth of agency banking in kenya. The bank of the future is one that offers a secure banking environment, as well as flexible and personalised banking services for its customers. Investigation on importance of agency banking in provision. It does not take into account the presence of cooperatives or other unregulated financial institutions. The potential, power of agency banking the standard. Sep 19, 2016 kenyan banks recorded significant improvement in agency banking. The study sought to establish the effect of agency banking on financial performance of commercial banks in kenya. The central bank of kenya was established by an act of parliament of march 24, 1966 and opened its doors to the public on september 14, 1966. This study was guided by the following specific objectives. Kenya, by contrast, regulators reportedly felt that acting. Discussions with afi commenced in june 2009 with formal request for short term grant submitted in late june 2009.
Agency banking solution agency banking services jmr infotech. Kenyan banks recorded significant improvement in agency banking introduced six. 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 rollout in kenya was meant to address the low financial inclusion in kenya. The challenges facing the implementation of agency banking in kenya a case study of kcb. The ottoman bank and the commercial bank of africa were established in 1955. During the 1960s, the banking sector in kenya experienced a new surge of energy change and in 1968, the cooperative bank of kenya opened its doors. The agency banking model introduced in 2010 after the amendment of the banking act is turning out to be the favoured weapon in this fight. Cooperative bank of kenya or are in the process of acquiring or establishing one inhouse e.
Section 6 draws together the ways in which agency banking can address financial inclusion and section 7 makes some recommendations. The banking industry in kenya is governed by the companies act, the banking act, the central bank of kenya act and the various prudential guidelines issued by the central bank of kenya cbk. The companies act, the central bank of kenya cbk act and the banking act are the main regulators and governors of banking industry in kenya. The rise of agency banking in kenya published on july 1, 2015 july 1, 2015 15 likes 4 comments.
However, in kenya, how the utilization of agency banking has contributed to the performance of these banks is not documented. The board of directors of each banking institution interested in agency banking must make policies guidelines and procedures to be followed to ensure that. Internet banking, that is also known as online banking. Agency banking and branchless banking internationally, the concepts of agency banking and branchless banking appear to be closely aligned or even synonymous. Challenges of agent banking experiences in kenya request pdf. As at june 30, 2015, central bank of kenya had authorized 17 commercial banks to offer banking services through third parties agents. Central bank of kenya is the regulating authority with 45 banking institutions whereby 44 are commercial banks and 1 is a mortgage finance company. 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 study sought to determine the impact of mobile and internetbanking on performance of financial institutions in kenya where the survey was conducted on financial institutions in nairobi. Mauricio and maudrile 2008 did a study on a new agent model for agency banking in colombia.
Investigation on factors facilitating accessibility o f banking services through agency banking in kenya. The effect of agency banking on the financial performance of. First of all there was national bank of india in kenya in 1896 after the establishment of the british in the region. Bank of africa was established at a time when the west african banking sector experienced serious difficulties. Agency banking, commercial bank, financial innovation, online banking. Overview of the banking industry in kenya stephenson harwood llp to view this article you need a pdf viewer such as adobe reader. The kenyan banking sector is composed of 52 institutions, including 43 commercial banks, 1 mortgage finance company and 8 deposittaking microfinance institutions. First community bank driven by ethics and the brand proposition to be the home of shariah compliant banking, delivering innovative shariah compliant financial products, services and solutions to. Part ii refers to the formation of banks, giving guidelines for the settling of bank charters, including principles for sound bank management. The bank led model is a general agency arrangement where only a bank may act as a principal in forming agent banking relationships.
The competitive nature of the banking industry in kenya means that for one to succeed, it must turn into use of new technologies with more personalized experiences. Investigation on factors facilitating accessibility of. Protect that which matters to you with a cover that meets your needs. 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. Kcb targets agency banking to cement market position. Challenges associated with adoption of agency banking and.
The banks are training agents who will engage in banking services on behalf of the banks. Spare a thought for the smallscale miner and dress maker. The agency banking network approval requires some conditions to be met together with completing the agency banking network application form. An evaluation of the role of agency banking in the performance of commercial banks in kenya author. 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. We released our fy15 banking report, analysing the 11 listed banks from both a franchise value and intrinsic value perspective. In kenya, agency banking has continued to take shape thanks to increased competition, innovation. If you cant read this pdf, you can view its text here. Oct 07, 2015 overview of the banking industry in kenya stephenson harwood llp to view this article you need a pdf viewer such as adobe reader. National bank of kenya nbk, also known as national bank, is a commercial bank in kenya, the largest economy in the east african community. Mwega which have spread to neighbouring countries, foreign banks and development this case study investigates the potential tradeoffs between regulations and stability of kenya s financial sector and their implications for inclusive growth. Request pdf on aug 23, 20, fred gichana atandi and others published challenges of agent banking experiences in kenya find, read. Balancing inclusive growth with financial stability francis m.
A history of failed it implementations, limited budgets, and regulatory. The power of agency banking is massive and it helps reduce financial and economic exclusion. In support of vision 2030, kenya s financial sector is expected to explore and implement innovative growth. 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. History african development bank building today, a. In addition to the objective of financial inclusion, banks has used the agency banking to reduce their operational costs.
Can agency banking improve financial inclusion in south africa. 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. According to the central bank of kenya s 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 services of the institution on behalf of the institution, institution usually being a bank. The study targeted banks that offer agency banking services in kenya. Introduction the 20 economic report on africa, a joint publication of the economic commission for africa eca and the african union commission auc, states that following two decades of near stagnation, africas growth performance has improved hugely since the start of the 21st.
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. The challenges facing the implementation of agency banking in. The study selected 4 senior managers from each bank thus forming a sample size of 36 respondents who was used in this study. The banking act of kenya this law provides basic principles and framework to form, settle, govern and regulate banking institutions. Pdf competitive strategies adopted by bank of india kenya. Agent banking services national agent banking is a business partnership whereby third parties are vetted, approved under the cbk regulations and contracted by national bank to provide banking services on behalf of the bank, under specified conditions and regulations. Financial regulation in kenya overseas development institute. Kenya listed commercial banks cytonn q1 banking sector report. There are, however, more than 45,500 agents offering financial services. Investigation on importance of agency banking in provision of banking services in kenya. These acts are used together with the prudential guidelines which central bank of kenya issues from time to time. The mandate of the bank is to formulate and implement monetary policy that promotes price stability, fosters liquidity. Kenya, that sells excess shipping capacity in trucks through an uberlike app.
Digitization of banking and financial services in kenya. Banking agents and the bank itself coordination influences the growth of agency banking in kenya. Delegation comprised of 6 representatives of central bank of kenya, kenya bankers association and the ministry of finance. Cic 20 annual report page 69 and 70 archived 20140726 at the wayback machine. The number of banks offering agency banking were four. According to safaricom 2011,financial inclusion is a big challenge in kenya,only 22. 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. While agency banking is now offering savings services, not a great enough percentage of agents are involved to showup here.
Regression analysis showed that atm, mobile banking, use of credit and debit cards, internet banking and agency banking all have positive significant influence on commercial banks performance in kenya. An evaluation of the role of agency banking in the. Financial institutions are constantly looking at new ways to reach the unbanked and serve existing customers better. Effect of agency banking on financial inclusion in kenya. Agency banking is a model that is aimed at enhancing financial inclusion by reaching out to millions of people in need of financial services. The study also concludes that agency bankers should enhance customer information confidentiality because it leads to an improvement in growth of agency banking in kenya. Commercial banks in kenya have adopted agency banking as part of financial inclusion initiatives aimed at reaching the poor and unbanked population, which is thought to alleviate poverty levels. In a report released by central bank of kenya, the value of banking. The challenges facing the implementation of agency banking. It served the needs of growing farming communities and started operations in 1968. An agent application form is also sent to central bank for approval before the agent can start transacting on behalf of the bank. The sector is dominated by multinational banks such as standard chartered, barclays, etc. Brazil and colombia identified as champions in agent banking.
Rapid development of information technology has made banking tasks more efficient and cheaper. Kenyas first fully locally owned commercial bank was the cooperative bank of kenya, which was initially a cooperative society. Agency banking aka branchless banking is quickly emerging as a way to offer services to those without banking access. Overview of the banking industry in kenya lexology. The research was a case study and involved use of primary data. Pages in category banking in kenya the following 4 pages are in this category, out of 4 total. Kenya, another country that implemented agent banking in. Keen to take advantage of the costsaving and accessibility brought about by the agency banking model, kenyan financial institutions have over the last one year embarked on an aggressive entry into this segment.
Guideline on agent banking issued by the central bank of kenya cbk and which became. Nonbank led model the nonbank led model of agent banking is a general agency arrangement where parties other than banks may act as principal in forming agent banking relationships. Mno agents in kenya location fsp maps shows 83% of bank agents and 76% of mno agents are. As a retail banking option, this model is flexible and can meet local needs. An application is renewable annually and the fees are payable yearly.
As per the 2009 national financial access survey, 32% kenya. Agent refers to any third party acting on behalf of a bank in pursuant to an agency agreement. Descriptive analytical evidence from tanzania article pdf available april 2016 with 5,836 reads how we measure reads. The internet banking use is popular to both the male and the younger generations. Pdf this study examined the factors that affect the effectiveness of agent characteristics on financial. 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. The results show that internet banking use in kenya is very low. Agency banking strategy and organizational performance in. A case of equity bank in kitui central district, kitui county, kenya. It was followed by standard bank of south africa in 1910.
A fee of kenya shillings of 1,000 per agent is required. Barclays bank of kenya has been in operation in kenya for 97 years, cfc stanbic bank has been up and kicking for the last 58 years, diamond trust bank kenya has been breathing the atmosphere in kenya for 70 years while equity group holdings ltd has been in existence for 32 years. Agency banking outlets extend banking services in kenya. Among the 31 locally owned banks, the government of kenya has a shareholding in three of them, 27 of them are commercial banks and one is a mortgage finance institution, known as housing finance. In terms of branchless banking, kenya is probably best known for nonbankbased models, specifically those launched by mnos. Eye on kenya, kenya, east africa, agency banking, financial services. Aug 14, 20 the construction of the kenya uganda railway attracted the first banks to east africa, hence breaking ground for international banks, and later african banks. Waithanji 2012 found out that there was a link between agency banking. The finance services, associated with internet, are being promoted due to the widespread use of internet.
The stakeholders should participate in rolling out of mobile financial. The origin of commercial banking in kenya related to commercial connections in east africa, which existed towards the end of the 19th century. Agency banking, bank agents, banking sector, economies of scale, financial. A well recognized exception to this general rule is the concept of agency. It is licensed by the central bank of kenya, the central bank, and national banking regulator. Assessment of factors influencing adoption of agency banking in. Kenyan banks record growth in agency banking model. 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. The increase in number and value of transactions underlines kenyans growing confidence and acceptability of the agency banking. The bank is now anchored in the constitution under article 231. Our head of private equity real estate, shiv arora discussed kenyas banking sector and the roles of the cbk on citizen tv. The role of agency banking in promoting financial inclusion. Can agency banking improve financial inclusion in south.
According to a helix digital finance special report on agency banking in kenya, agency banking has been the fastest growing in terms of agents share and. 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. Pdf the role of agency banking in promoting financial. The lack of offerings means potential for product innovation 79% agents are contributing to client growth in contrast to tanzania 36% or uganda 33%. Agency bankers should not change their system frequently. The good thing is, kenya is a world leader in mobile money solutions through mpesa. Banks are replacing pin numbers and passwords with biometric authentication, allowing customers to check balances 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. The population for this study was 16 commercial banks that have embraced agency banking. The history of the agency banking can be traced bank to 1999 when brazil became. The goals of agency banking as a strategy is to increase revenue from additional. It is observed that the involvement of key stakeholders in implementation of agency banking cannot be understated opm, 2011. Agency banking was introduced in kenya in 2010 according to opm 2011. In 1968 again, the business of ottoman was taken over by the national bank of kenya.
Effective september 2019, the bank is a wholly owned subsidiary of the kenya commercial bank group. Focus on agency banking in kenya metric comparison of bank vs. Spare a thought for the village welder, the potter in macheke, banana farmer in chimanimani and honde valley. This is despite the high rate of internet access recorded.
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