Agent banking operations as a competitive strategy of. The general objective of this study was to establish the factors influencing the uptake of agency banking services by customers in commercial banks in kenya. Agency banking is a model that is aimed at enhancing financial inclusion by reaching out to millions of people in need of financial services. It is licensed as a commercial bank, by the central bank of kenya, the central bank and national banking regulator. However, agency banking is a fairly new concept in africa with it being highly implemented in kenya and south africa agalla, 2014. What services are available at a coop kwa jirani agent. Challenges facing growth of agency banking in kenya. A consumer guide to banking in kenya cost of credit. The companies act, the central bank of kenya cbk act and the banking act are the main regulators and governors of banking industry in kenya. The challenges facing the implementation of agency banking. Bank of kenya or are in the process of acquiring or establishing one inhouse e.
In south africa, the first agency banking was implemented in 2005 mwangi, 2011. Kenya legitimized agency banking act 2009 to enable central bank of kenya to license banking agents for commercial banks. This is because over the last 6 years millions of people, most of whom were financially excluded, have been brought into the formal financial sector through successful rollout of innovative mobile phone financial services products mfs. Agency banking in kenya is the new way that banking in kenya is using to take banking services to the unbanked and under banked at a cheaper rate. The model aimed at improving financial inclusion in the country. According to central bank of kenya statistics on the distribution of agents, 87% are with 3 banks equity bank with 25,428 agents, kenya commercial bank with 12,883 and cooperative bank with 8,856 agents. According to bank supervision and annual report 2014, the banking sector in kenya comprise of the 44 banking institutions, 9 microfinance banks, 2 credit reference bureaus, 87. The bank led model is a general agency arrangement where only a bank may act as a principal in forming agent banking relationships. The banking industry in kenya is governed by the companies act, the banking act, the central. In neighbouring countries such as tanzania, kenya and rwanda agency banking has already been successfully introduced, proving thousands of lowlevel income households access to financial services. However, in africa, agency banking is a new concept, with the modelconcept being highly implemented in kenya and south africa. Laws of kenya insurance act chapter 487 revised edition 2012 2010. Upon successful application, vetting and approval, these agents are authorized to offer selected products and services on behalf of the bank.
Laws of kenya insurance act chapter 487 revised edition 2012 2010 published by the national council for law reporting with the authority of the attorneygeneral. The commercial banking industry in kenya has been in a state of constant change that due to economic liberalization, competition has become stiff, forcing commercial banks to conform to the changing economic environment. The banking industry in kenya is governed by the companies act, the banking act, the central bank of kenya act and the various prudential guidelines issued by the central bank of kenya cbk. However, in kenya, how the utilization of agency banking has contributed to the performance of these banks is not documented. In kenya, the relationship between an employer and employee is governed by the employment act 2007.
The banking sector was liberalized in 1995 and exchange controls lifted. In this act, unless the context otherwise requires accounting officer means an accounting officer appointed under section 17. Ghana, agency banking was introduced in 2008 allowing for bankbased model of branchless banking using nonbank retail agents mckay, 2011. An act of parliament to amend and consolidate the law regulating the business of banking in kenya and for connected purposes act no. Interp retati on act 18 of 1986 2 1 in this act, unless the context otherwise requires. Consolidated fund means the consolidated fund of kenya established.
A study on the innovative factors that affect financial inclusion in the banking industry in kenya. This relationship creates an agency banking business. An act of parliament to amend and consolidate the laws relating to insurance and to regulate the business of insurance and for connected purposes. Agent banking in latin america 05 11 in this chapter, the term banking coverage is used to refer to bank branches or agents operated by commercial or stateowned financial institutions and mfis in countries where mfis are regulated and allowed to operate through agents. Pdf an evaluation of the agency banking model adopted by.
Agency banking was made legal following an amendment to the banking act 2010. Challenges associated with adoption of agency banking and. Agency banking outlets extend banking services in kenya. The study recommends further research on customer satisfaction and how it influences the growth of agency banking in kenya. Hence there have been increased synergies between the banking, insurance and securities sectors with removal of regulatory barriers between the different segments of the financial sector. If you cant read this pdf, you can view its text here. The banking sector was liberalised in 1995 and exchange controls lifted. The banks are training agents who will engage in banking services on behalf of the banks. This act may be cited as the government financial management act, 2004 and shall come into operation on 1st november, 2005. Agency banking coop kwa jirani cooperative bank of kenya. Application for tccnce, b providing loans or other facilities to micro or.
These guidelines shall apply to all banks and financial institutions and their agents. A well recognized exception to this general rule is the concept of agency. The employment act 2007 also known as the chapter 226 of the laws of kenya repealed the former employment act and the regulation of wages and conditions of employment act chapter 229 of the laws of kenya. Pdf the role of agency banking in promoting financial.
Investigation on importance of agency banking in provision. Cash withdrawals from coop account sacco account fethalink cash deposits to coop account sacco account fethalink. In short, the study of agency law is directly related to the study of modern business organizations. Nonbank led model the nonbank led model of agent banking is a general agency arrangement where parties other than banks may act as principal in forming agent banking relationships. The relationship between challenge liquidity of agency. In kenya, the banking act, central bank of kenya act and the companies act govern the operations of banking sector.
Kenya bankers association is the umbrella body of the financial institutions licensed under the banking act, cap 488, and the kenya post office savings bank act cap 493b. Investigation on importance of agency banking in provision of banking services in kenya. Mauricio and maudrile 2008 did a study on a new agent model for agency banking in colombia. In 2010 the entity introduced agency banking model which has proved a success and still regulated by central bank of kenya prudential guidelines. Agency banking model is a function of certain commercial banks in kenya and as regulated by central bank of kenya legislation that allows them to contract third party retail networks as banking agent. Central bank of kenya is the regulating authority with 45 banking institutions whereby. The operations of banks in kenya are regulated by the banking act cap 488, companies act cap 486, and the central bank of kenya. Agents, typically small shop owners such as pharmacies or grocery stores, will be able to offer many of the common services currently provided at. In 1995 the exchange controls were lifted after the liberalization of the banking in kenya. In this line, the current study sought to establish the challenges facing growth of agency banking in kenya. The board of directors of each banking institution interested in agency banking must make policies guidelines and procedures to.
For instance, colombias 2006 decree on agent banking permits any type of legal entity, including savings and credit cooperatives, to be a banking agent. Get employment act 2007 pdf corporate staffing kenya. Cap 488 banking act an act of parliament to amend and consolidate the law regulating the business of banking in kenya and for connected purposes. The kenya trade remedies act provides for the establishment of the kenya trade remedies agency for the investigation and imposition of antidumping, countervailing duty, and trade safeguards measures, and enables the gok to take necessary measures to protect domestic industries from. These acts are used together with the prudential guidelines which central bank of kenya issues from time to time. Kenyan banks recorded significant improvement in agency banking introduced six years ago.
Equity bank kenya limited, is a financial services provider headquartered in nairobi, kenya. The agency banking in kenya guidelines were enacted in 2010. The effect of agency banking on the financial performance. Banking agents and the bank itself coordination influences the growth of agency banking in kenya. The association promotes and develops sound and progressive banking principles and practices and contributes to the sectors development. The banking industry in kenya is governed by the companies act, the banking act, the central bank of kenya act and the various prudential guidelines issued by the central bank of kenya.
A case of equity bank in kitui central district, kitui county, kenya. The study also sought to establish how security, liquidity availability, customers and awareness influence the uptake of agency banking by customers in commercial bank in kenya. Creation and termination of agency it is a general principle of contract law that only the parties to the contract acquire rights and liabilities under it. The rise of agency banking in kenya published on july 1, 2015 july 1, 2015 15 likes 4 comments.
The relationship between agency banking and financial. In these guidelines, unless the context requires otherwise act means the banking and financial institutions act, 2006. However, even with current 45,500 agents offering financial services, the penetration rate is still a challenge, for many banks have not embraced the model. Overview of the banking industry in kenya stephenson harwood llp to view this article you need a pdf viewer such as adobe reader.
Kenyan banks record growth in agency banking model. Agency banking co op kwa jirani this is a convenient and simple banking model to suit your lifestyle as well as offer you convenience. Banks must first apply to central bank of kenya to get approval to conduct agency banking business. Guidelines on agent banking for the banks 1 guidelines on agent banking for the banks 1. Overview of the banking industry in kenya lexology. Act, and the comment states that the law of agency is encompassed within these supplementary principles. It does not take into account the presence of cooperatives or other unregulated financial institutions. This act may be cited as the banking act interpretation 2.
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