Impact of Agency Banking on the Operational Efficiency of Savings and Credit Co-operative Societies in Kiambu County, Kenya

Abstract

The Kenyan banking sector is relatively developed and comprises of several commercial banks, numerous insurance companies, a stock exchange system and credit unions including the savings and credit cooperative societies. The recent reforms in the Sacco industry revolutionized the type and quality of products and services delivered to customers by cooperative societies with the organizations adopting agency baking systems within their operations. I estimated the potential impact of agency banking on the operational efficiency of Saccos in Kiambu County. The study adopted the descriptive data technique where data was collected without manipulating the research environment. The target population comprised of 39 branches across 8 registered deposit taking Sacco’s in Kiambu County that have adopted agency banking systems. The study utilized secondary data collected from the Sacco Regulatory Authority supervision reports and audited financial statements as well as annual reports for the Saccos. The reports were analyzed for a period of 3 years, between 2015 and 2017. The study used census to select the participants for purposes of accuracy. The study incorporated secondary data with the data obtained being analyzed using the Data Envelopment Analysis (DEA). The study sought to establish the impact of agency banking of the operational efficiency of Saccos in Kiambu County and therefore focused on five variables which included the agency banking products provided by Saccos, agency bank staff, the location of agent banks, the operating hours and liquidity which had a varied contribution to each factor of operational efficiency i.e. customer retention, profits gained and the rate of cost recovery of Saccos within Kiambu County. The study concluded that the factors of agency banking including the products and services of agent banks, location, the agent staff number and characteristics, their operating hours and the Sacco agent liquidity ratio have a significant influence on the operational efficiency of Saccos in Kiambu County.The study recommended that the provision of frontline services to customers should be improved, Saccos ought to increase the number of agent banks so as to reach more customers and employ a sufficient number of trained agent staff to provide the necessary products and services to a wide range of customers.