The study used secondary data and was collected from previously collected data, general. However, in kenya, how the utilization of agency banking has contributed to the performance of these banks is not documented. Investigation on importance of agency banking in provision. 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. Benefits of agent banking to agents retail outlets 1. The sector is dominated by multinational banks such as standard chartered, barclays, etc.
The number of banks offering agency banking were four. In 1968 national bank of kenya took over the ottoman bank. The study revealed that lack of internet access force potential users to continue to use traditional banking. 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. Kenyan banks record growth in agency banking model branding voice. However, in kenya, how the utilization of agency banking has contributed to the. The study sought to establish the effect of agency banking on financial performance of commercial banks in kenya. In 1968 again, the business of ottoman was taken over by the national bank of kenya. The stakeholders should be drawn from both the public and private sectors. The number of banking transactions undertaken through bank agents increased from 10. Absa bank kenya plc is regulated by the central bank of kenya. 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. 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.
As of december 31st, 2010, the country included 1,063 bank. The population of the study was forty branch managers of selected branches in nairobi. Banking law and practice the students may refer to the given books and websites for further knowledge and study of the subject. Rapid development of information technology has made banking tasks more efficient and cheaper.
In an effort to bring down the cost of offering financial services to the kenyan public, central bank together with. Overview of the banking industry in kenya lexology. The board of directors of each banking institution interested in agency banking must make policies guidelines and procedures to be followed to ensure that. This is also the case in kenya as the banking industry is challenged by the low.
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 potential, power of agency banking the standard. Cooperative bank is regulated by the central bank of kenya. Upon successful application, vetting and approval, these agents are authorized to offer selected products and services on behalf of the bank. Kenyan banks recorded significant improvement in agency banking introduced six years ago. The population for this study was 16 commercial banks that have embraced agency banking. These commissions are mainly awarded when somebody deposits cash, withdraws cash, and when somebody opens a bank account through the agent. The agency banking in kenya guidelines were enacted in 2010.
Banking industry development and social investment report 20. 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. Investigation on importance of agency banking in provision of banking services in kenya. Equity bank kenya limited, is a financial services provider headquartered in nairobi, kenya. 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 evokes immediate attention and interest. Agency banking was introduced in kenya in 2010 according to opm 2011. Agent banking operations as a competitive strategy of. As per the 2009 national financial access survey, 32% kenya. The bank led model is a general agency arrangement where only a bank may act as a principal in forming agent banking relationships. Agent banking operations as a competitive strategy of commercial. The stakeholders should participate in rolling out of mobile financial. Kenyas first fully locally owned commercial bank was the cooperative bank of kenya, which was initially a cooperative society. The history of banking began when empires needed a way to pay for foreign goods and services, with something that could be exchanged more easily.
The origin of commercial banking in kenya related to commercial connections in east africa, which existed towards the end of the 19th century. Countries kenya, tanzania and uganda are the only developing countries which make the payments of their. Limited studies have been carried out on the adoption and usage of internet banking services in kenya and, therefore, both the adoption and usage trend remains unclear. Kenya legitimized agency banking act 2009 to enable central bank of kenya to license banking agents for commercial banks. 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 equity bank has even leapfrogged past. 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. This relationship creates an agency banking business. 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. A well recognized exception to this general rule is the concept of agency.
It served the needs of growing farming communities and started operations in 1968. Governor of the central bank of kenya, at the launch of ecobank kenya s rapid transfer product, nairobi, 17 june 2010. Eye on kenya, kenya, east africa, agency banking, financial services. Kcb targets agency banking to cement market position. The implementation of agent banking services in kenya is a testament to this fact. The guidelines to facilitate the rolling out of agency model were issued by the central bank and took effect from may this year. The effect of agency banking on the financial performance.
Agency banking co op kwa jirani this is a convenient and simple banking model to suit. Agency banking rollout in kenya was meant to address the low financial inclusion in kenya. These acts are used together with the prudential guidelines which central bank of kenya issues from time to time. Challenges facing growth of agency banking in kenya. However, even with current 45,500 agents offering financial services, the penetration rate is still a challenge, for many banks have not embraced the model. Brazil and colombia identified as champions in agent banking. Investigation on importance of agency banking in provision of. This therefore is an exploratory study that attempts to provide a better understanding of the current trend of internet banking adoption and usage in kenya. The study recommends further research on customer satisfaction and how it influences the growth of agency banking in kenya.
In a report released by central bank of kenya, the value of banking. The bank is now anchored in the constitution under article 231. It is observed that the involvement of key stakeholders in implementation of agency banking cannot be understated opm, 2011. Non bank led model the non bank led model of agent banking is a general agency arrangement where parties other than banks may act as principal in forming agent banking relationships. The unprecedented uptake of mobile phone banking services in kenya is a testament to this fact. Future of kenya s small banks murky as bigger rivals swoop on projects as of 16 july 2018 kenya. The study targeted banks that offer agency banking services in kenya. Increased income through commission bank agents are usually awarded commissions whenever they perform transactions on behalf of the bank. 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. Oct 31, 2017 agency banking outlets extend banking services in kenya. 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. The mandate of the bank is to formulate and implement monetary policy that promotes price stability, fosters liquidity.
The challenges facing the implementation of agency. Im hoping 2017 is the year of the agent banks, mobile branches as well as bank integrations to take advantage of the existing mobile money agents. The effects of usage associated with mobile phone banking in kenya are yet to be. The apex bank recognises that agent banking and digital banking are efficient, convenient and costeffective delivery channels for financial products and services. Find out the extent to which the selected agency banking dimensions inform policy shift in growth of mses in kenya research questions i.
In 2010 the entity introduced agency banking model which has proved a success and still regulated by central bank of kenya prudential. Jul 01, 2015 the rise of agency banking in kenya published on july 1, 2015 july 1, 2015 15 likes 4 comments. A company secretary can work as a compliance officer in a banking and financial institution and play an important role in ensuring compliance. In 1971, kenya commercial bank was formed as a result of the merger between national and grindlays bank with the governing owning a stake of 60. Investigation on factors facilitating accessibility o f banking services through agency banking in kenya. Central bank, their contracts and the banking policy.
Pdf financial innovations and bank performance in kenya. Agent banking guidelines issued in april 2010 to take effect from 1st may 2010. A case of equity bank in kitui central district, kitui county, kenya. The challenges facing the implementation of agency banking in kenya a case study of kcb.
The kenyan banking sector is composed of 52 institutions, including 43 commercial banks, 1 mortgage finance company and 8 deposittaking microfinance institutions. To investigate the role of agency banking in facilitating accessibility of banking services through agency banking in kenya. It is licensed as a commercial bank, by the central bank of kenya, the central bank and national banking regulator. The history of land in kenya nairobi own land in kenya. Mauricio and maudrile 2008 did a study on a new agent model for agency banking in colombia. 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. Home equity corporate site equity bank kenya limited. The unprecedented uptake of mobile phone banking services in kenya. Absa head quarters, waiyaki way, po box 30120, 00100 gpo, nairobi, kenya. Banks must first apply to central bank of kenya to get approval to conduct agency banking business.
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 agents also have free association brand advertisement through. The challenges facing the implementation of agency banking in. First of all there was national bank of india in kenya in 1896 after the establishment of the british in the region. 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. Stay up to date on the latest news and equity products. 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. Agency banking may eventually lead to financial inclusion in the countries where it has been adopted. Pdf the postelection crisis of january 2008 brought kenya close to collapse and the status of a failed state. Cooperative bank of kenya opened its doors in the year 1968. The study selected 4 senior managers from each bank thus forming a sample size of 36 respondents who was used in this study. 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. Banking agents and the bank itself coordination influences the growth of agency banking in kenya. Pdf the role of agency banking in promoting financial inclusion.
Challenges of agent banking experiences in kenya hrmars. A case of equity bank in kitui central district, kitui. Kenya has become the epicentre of branchless banking financial innovations in the last decade, effectively attracting global research interest. Bank history 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. 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. 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. 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.
It was followed by standard bank of south africa in 1910. Cbk cancels licence for indian bank s kenya office. Select online platform eazzybiz eazzynet eazzychama self service portal eazzy remmittance eazzyfx. The agency banking network approval requires some conditions to be met together with completing the agency banking network application form. Similarly, the value of banking transactions undertaken through agents increased from ksh. However, because the concept of agency banking is now widespread banks. Agency banking coop kwa jirani cooperative bank of 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. The population of the study was 9 commercial banks offering agency banking in kenya. Pdf competitive strategies adopted by bank of india kenya. Kenyan banks record growth in agency banking model.
Waithanji 2012 found out that there was a link between agency banking and financial deepening. What services are available at a coop kwa jirani agent. Does a relationship exist between selected agency banking dimensions and growth of. Agency banking outlets extend banking services 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. Focus on agency banking in kenya metric comparison of bank vs. In the year 1955, the ottoman bank and the commercial bank of africa were established. Discussions with afi commenced in june 2009 with formal request for short term grant submitted in late june 2009. Agency banking model is a function of certain commercial banks in kenya and as regulated by. Examine whether there are significant differences in growth among banking agency mses in kenya iv.
The model aimed at improving financial inclusion in the country. Mno agents in kenya location fsp maps shows 83% of bank agents and 76% of mno agents are. 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. Agency banking in kenya requirement agents must also through the banks that sponsor them apply to run agency banking in kenya business.
Sep 19, 2016 kenyan banks recorded significant improvement in agency banking. The next three slides compare the two leading bank networks to the two leading telecom networks. As time progressed, the changing landscape of banking began to note the entrance of fully indigenous banks. In this line, the current study sought to establish the challenges facing growth of agency banking in kenya. In 1971, kenya commercial bank was formed as a result of the merger between national and grindlays bank with the governing owning a stake of 60 percent. Kenya takes a different approach, requiring agents to be forprofit actors and regulating banking agents no. Agency banking co op kwa jirani this is a convenient and simple banking model to suit your lifestyle as well as offer you convenience. Challenges associated with adoption of agency banking and. Adoption and effectiveness of electronic banking in kenya. Analysis of the utilization of agency banking on the performance of. The operations of banks in kenya are regulated by the banking act cap 488, companies act cap 486, and the central bank of kenya.
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