Factors influencing the adoption of agency banking by commercial banks in Kenya
Wambugu, Johnson K
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The business environment has changed and it has been characterized by stiff competition among the players and the banking industry in Kenya is no exception. Competition amongst the commercial banks has pushed the banks towards becoming more innovative. Most of the innovations were introduced in the period between 2006 and 2010. These include ATMs, credit cards, mobile banking, internet banking, youth oriented accounts, women oriented banking, children accounts and now most recently introduced within the Kenyan banking sector - agent banking. This study sought to determine the factors influencing the adoption of agency banking by commercial banks in Kenya. The research adopted descriptive survey approach focusing on the commercial banks in Kenya that are currently operating agency banking model. Factor analysis technique was also used to interpret the open ended questions. The population of the study consisted of four (4) commercial banks, with a target respondent of forty five (45) staff members that comprise the sample frame. Sample data was collected by use of questionnaire administered through 'drop and pick' technique by the researcher. Observation and personal interviews were also conducted to validate the data obtained from the questionnaires. Data analysis method used was based on the qualitative approach using descriptive statistics; the descriptive mean and standard deviation. A comparative analysis using distribution tables, percentiles and graphical analysis was done to improve the presentation of the analyzed results for ease of interpretation. The responses from the open - ended questions were listed to obtain proportions appropriately. Frequency tabulations and cross tabulations were used to bring out the findings of the study. The study revealed that 76 _ 74% of the commercial banks surveyed, are locally owned whereby 51 % or more of their shareholdings are domestic public owned. This was inferred by the researcher to mean that locally owned institutions are out to support local entrepreneurships hence a good enabling environment for adoption of agency banking. The study further revealed that 69.77% of the commercial banks surveyed have operated agency banking for a period between nine (9) to twelve (12) months. The research indicated that the factors that influenced the adoption of agency banking included; Increasing customer coverage (mean 4.58, SD = 0.751), enhancing revenue (mean = 4.58, SD = 0.752), expanding customer base outside the existing branch network (mean = 4.48, SD = 0.821), high Penetration to the unbanked (mean = 4.42, SD = 0.936) and diverting customers from the crowded banking halls (mean = 4.42, SD = 0.936). This was inferred by the researcher to mean that, the major driving forces of commercial banks while adopting agency banking is increasing the banks operational capacity, while increasing revenues but at the same time reducing the operation cost. The challenges that the research indicated to be affecting the adoption of agency banking included fraud and money laundering (mean = 4.32, SD = 0.601) and fear of break into the premises of the agents (mean = 4.13, SD = 0.645). The least of the challenges was lack of trust with the bank agents (mean = 1.194, SD = 1.147). The researcher inferred these findings to mean that the government regulations on fraud and money laundering ought to be more stringent to deter such vices and security within the agent banking premises need to be tightened. It was also inferred that the regulations on vetting of bank agents have worked positively, thus making lack of trust with the bank agents the least of the challenges.
University of Nairobi, Kenya