The effect of agency banking on financial performance of commercial banks in kenya
In a growing number of countries, banks are finding new ways to make money delivering financial services to "unbanked" people. Rather than using bank branches and their own field officers, they offer banking and payment services through retail outlets, including grocery stores, pharmacies, seed and fertilizer retailers and gas stations among others. The study sought to establish the effect of agency banking on financial performance of commercial banks in Kenya. This study adopted descriptive research design. The population for this study was 16 commercial banks that have embraced agency banking. The study used secondary data and was collected from previously collected data, general business publications, reports from and by financial institutions and CBK banks supervision reports. Annual reports of the banks were analyzed for the period between 2012 and 2014, which is the study period of 3 years. The study used both quantitative and qualitative techniques to analyse data from the questionnaire. The quantitative data collected was analyzed by using Statistical Package for Social Sciences (SPSS version 22) and presented through percentages, means, standard deviations and frequencies. Multiple linear regression models were used in measuring each variable and this model. The study concluded that increase in the number of agents of commercial banks lead to an increase in the financial performance of commercial banks hence there is a positive relationship between number of agents and financial performance. The study also concludes that there is a positive relationship between cash deposits, volume of deposits, volume of withdraws and financial performance. The study also concludes that bank size has a positive relationship with financial performance of commercial banks; this is because as the number of agents increases the size of the assets increase hence financial performance. The study recommended that; commercial banks should be encouraged to embrace agency banking through adoption of improved technology; this will increase volume of transactions and bank size which will lead to financial performance. Security enhances accessibility and operation of agents’ banks; the government of Kenya should thus improve security to enhance operation of the agents’ bank. This will enable commercial banks in Kenya increase the number of agents. This can be done by reducing the requirements of becoming a bank agent. Commercial banks in Kenya should improve customers’ perception by making more advertisements and also increase promotion activities of agent’s banking. By doing this the number of transactions made by customers will increase. This in turn helps the customers to save more and hence the amount the bank can loan increases. This helps to improve the financial performance of commercial banks. The government should support the program of operation of agency banking. This can be done by reducing the high compliance costs, bureaucracy in registration and high cost of taxation. This will increase the number of transaction by the banks hence profitability.