Factors influencing growth of agency banking in the banking industry: case of Equity bank limited Mombasa county

Abstract

This being a study on bank and bank agent relationship the study resolved utilized agency theory as its theoretical basis such that the theory guided how these factors which are the independent variables influence the dependent variable which was growth of Equity bank agents in Mombasa County. The study was cross sectional in nature such it had been done for a specific period of time. The study also sort to address the problem of financial inclusion taking into consideration the role of agency banking in resolving this problem. In addition transaction cost of banking has always been a barrier to accessing financial services by many people so agency banking provides a cheaper and cost effective way of banking.

The problem of increased competition in the banking sector has necessitated banks to innovations to remain in business which led to the adoption of agency banking. The study employed a descriptive survey research design. It had used data collection methods such as questionnaire, interviews and content analysis to collect both qualitative and quantitative data. The data had been collected from one hundred and forty four Equity bank agents' managers who were administered with questionnaires and tOur Equity bank managers in charge of agency banking from the respective Equity bank branches in Mombasa County.

The data collected was analyzed using correlation technique with the aid of SPSS statistics software. The analyzed data was presented in tabular form to indicate the association between dependent and, independent variables. The study found that reduced market share and increased competition had the highest influence on growth of Equity bank agents given that it had the highest Pearson correlation value. Also risk profiles of bank agents were found to have been the lowest influence on growth of bank agents. Given the findings of the study several recommendations were proposed one being Equity bank should use restricted covenant contracts to tame increased competition attributed to other banks recruiting their bank agents.

The study had recommended that more studies should be conducted on the nature of relationship between bank agents for both within banks and other financial institutions. It also recommended the Central Bank of Kenya being the regulator should conduct more studies on the dynamics of the regulatory on environment to enhance the adoption of agency banking model to only the financial service sector but also other sectors like insurance. Finally the study recommended that further studies on the extent to which agency banking has contributed to increased levels of access to financial services should be conducted.