Factors influencing access to agency banking by the local community in Kitui Central district, Kenya

Abstract

Agency banking is the business carried out by an agent on behalf of an institution as permitted by the banking act. It answers the call for greater inclusion across the African continent as a whole. Through agency banking, banks have been able to recruit other businesses with a nationwide footprint to offer banking services on their behalf, allowing them to have branches in areas that were not previously commercially viable. The study analysed the factors influencing access to agency banking by the local community in Kitui central district. These included literacy levels; demographic factors; the type of economic activity engaged in; availability of financial services and the risks involved in agency banking.

The study used descriptive survey and the data collection instruments that were used were questionnaires that had both open and closed ended questions. The sample study location was carried out in Kitui Central district. The target population was bank account holders with various banks in Kitui town plus the agency banks in this area. The sample size was 70 bank account holders who transacted at the agency banks plus 30 bank agents.

The study revealed that gender and age are major factors that influence access to agency banking. Majority of the bank account holders and bank agents were male as compared to the females. More people opened bank accounts at a much older age, and most of the bank account holders and bank agents had attained at least secondary level of education. Majority of the bank customers were engaged in the personal services sector while majority of the bank agents were in the retail sector. Most of the agency banks were located in town while fewer were located in the village.

Equity bank had most of the bank account holders plus bank agencies while the least number was at Family bank which is just rolling out agency banking services in the country. Majority of the respondents indicated that they felt safer transacting at the bank branches as opposed to the agency banks. Only a very small percentage was satisfied with the kind of services they received at the agency banks. More banks thus need to venture into the agency banking business by establishing more agency banks in order to offer more cost effective ways to access financial services by the people.