The effect of agency banking on the growth & development of banking industry. A study of Narok Town.

Abstract

The Central Bank of Kenya (CBK) recognizes the financial inclusion challenges which the country Face. These include the cost of financial services and the distance to bank branches in remote places. Part of their approach to addressing these challenges i to promote innovation through mobile financial services and to address the delivery channel costs through increased use of agent banking (Central Bank of Kenya, 2010). Keen to take advantage of the co t-saving and accessibility brought about by the agency banking model, Kenyan financial institutions have over the last one year embarked on an aggressive entry into this segment. However, how this model has contributed to the performance of these banks in Kenya is yet to be documented. The purpose of this study was to evaluate the effect of agency banking in the growth and development of the banking industry. The specific objectives of the study were; To assess the effect of agencies on business performances in Narok county, to determine the contribution of agencies to the developments of banks in Narok and To investigate the effect of agency banking on customer satisfaction hence growth of banks. This study used a descriptive research design. The study targeted banks that offer agency banking services in Kenya. The number of banks offering agency banking was four. The population of the study was 30 employees of the selected banks and 30 agencies. Data collected was quantitative and qualitative in nature and was analyzed appropriately using bars and charts. The descriptive statistical tools helped the researcher to describe the data. This included frequencies, and percentages. Ms Excel was used in analyzing the data. This generated quantitative reports which were presented through tabulations, charts and graphs. The researcher used content analysis to analyze qualitative data obtained from open ended questions. The study showed that some of the effects of regulations on the growth and development of banks attributable to agency banking were board of directors and executive management, accountability and quality control. The study concluded that customer satisfaction and contribution of agencies influence the growth and development of banking industry attributable to agency banking to a very great extent. The study therefore recommends that Agency banking should be given more attention on security measures including risk-based approach and that the banks should find better ways of screening their agents to ensure that the large cash transactions handling is effectively carried out on their behalf. It is also recommended that the banks should explore other services other than money transfer only to improve their performance through agency banking which include: secure operating systems capable of carrying out real time transactions, generating an audit trail, and protecting data confidentiality and integrity