The Effects of Agency Banking on Accessibility of Financial Services in Kenya: A Case of Equity Bank, Eldoret Town

Abstract

Agency banking is an emerging trend in the Banking sector where the banking Institution and management enter into contracts with selected agents to provide banking services for a commission. In Kenya, most financial institutions have adopted agency banking to provide fundamental banking services to customers. However, little information is available on the effects of this Agency banking in accessibility of financial services. The study on Agency Banking was carried out on two branches of Equity Bank found in Eldoret town. One of the objectives of the study was to investigate the effects of Agency Banking on Accessibility of financial services such as accepting deposits, providing withdrawal services and providing excellent means of payment in Eldoret town. The study used a case study design with a target population of 126 consisting of departmental managers, employees in the credit department and agency customers. A sample size of 96 respondents was selected using stratified sampling techniques, questionnaires, and financial document analysis were used to collect data. Data analysis was carried out using descriptive statistics. The study found that the components of agency banking were agency depositing, withdrawing and means of payments. It also established that agency banking influences credit accessibility through the assistance of agency withdrawing, agency means of payments and agency depositing. The study concluded that the components of agency banking include depositing components, bill payment components and withdrawal components, which were tailored towards assisting customers to build up their bank account for lending and borrowing purposes. The effects of agency depositing services included determining monthly average services, amounts of loans accessible, enabling manual depositing, improving loan serviceability and credit turn overs. The effects of agency withdrawal services on credit accessability included building up credit worthness, indicating the type of business, enabling faster means of cutomer evaluation, the activeneness of the business and affecting credit account turnover. The effects of agency mean of payment on credit accessibility included improvement of account activeness of the account, building up cash turnover, indicating the nature of the business and the activeness of the business and finally reduced loan default. The study recommended that, there is a need to enhance utilization of agency banking to improve the performance levels of accessibility of credit. Loosening of collaterization conditions, provision of adequate credit. Provision of sufficient information, control of interest rates by Central Bank and development of a framework to integrate credit sale centers. The researcher suggests further study to be carried on the role of strategic alliances on operations of agency banking to compliment the current study.