The impact of agent banking as a financial deepening initiative in Kenya

Abstract

This study sought to identify the impact of agent banking as a financial deepening initiative in Kenya. Agency Banking was commissioned in Kenya in April 2010. Due to the short span of the duration in which it has been in existence the study identified only four banks engaging in the exercise. The study was guided by the research objective which was to show the impact of agent banking in its first year of operation in Kenya. Descriptive statistics were used for the analysis.

The research study indicated that there is a connection between agent banking and financial deepening. There is however a major reluctance by banks in Kenya to embrace agent banking as a paltry 10% of the financial institutions have implemented agent baking. The findings indicate that it is only 4 banks out of a possible 43 banks in Kenya that have licensed agents to operate on their behalf as agents. The low number of agent banking adoption could be due to internal weaknesses by those banks that are reluctant to embrace agent banking especially in the area of information technology.

The study established that the bank with the highest number of customers is Equity bank which has 5.3 million customers and 2,851 agents followed by Co-operative bank with 1.9 million customers and 56l agents. This indicates that agent banking has an effect on financial deepening as the higher toe number of agents, the higher the number of customers.

The effect of agent banking on financial sector deepening cannot be conclusively determined currently due to the low number of banks that have implemented it The impact may become clearer once all banks adopt agent banking in Kenya KCB, despite the high number of agents in the country commands less number of customers though this may be correlated to the fact that these agents have been introduced in a districts already covered by the branches.