Business Growth Activities and Financial Performance of Bank Agents Businesses in Kiambu County, Kenya

Abstract

Developing countries including Kenya are increasingly embracing branchless banking as a means of delivering banking services to many unreached people especially low-income households. As per the 2016 National Financial Access Survey, eighty two point six percent of Kenya's bankable population are already included in the financial service orbit. Statistics by commercial banks show exponential growth - from the bank perspective- in agency banking in terms of number of agents, bank income, number of transactions and deposits mobilization through the bank agents among others. However, statistical evidence indicate that agents do not have huge ability to perform large cash transactions and do not invest a lot on security measures, thus, lowering the confidence potential clients' have in the bank agents. Innovations and new partnerships by the commercial banks also have affected the performance of bank agents businesses negatively meaning that the average commissions received by the agents, decrease with an increasing rate. This study therefore aimed at establishing the relationship between the business growth activities and their effects on the financial performance of the bank agents in Kiambu County, Kenya. The specific objective included; to analyze the capital requirements and the financial performance of the bank agents, to examine the effect of cash management practices to the financial performance of the bank agents in Kenya, to assess the extent to which innovations affects financial performance of bank agents businesses, and to determine the effects of financial services cost on financial performance of bank agents businesses. The study adopted a quantitative research design. The study target population was all the 1072 bank agent businesses in Kiambu County, Kenya. The sample size of the study was 132 bank agents in both the rural and urban areas of the county. The study used stratified random sampling technique to select the sample and used primary data that was collected by use of structured questionnaires administered through a Drop-off/Pick-Up method. Before the actual study, a pilot test of only 16 bank agents was conducted to establish validity and reliability of the data collection tool. The gathered data was edited, classified, coded and analyzed using descriptive and inferential statistics. Descriptive statistics such as mean, frequencies, standard deviation and percentages were used for descriptive analysis of the data collected. The study also used Pearson's two-tailed correlation analysis to establish whether there was causation between the dependent and independent variables. In relation to the findings, the study concluded that business growth activities influence the financial performance of bank agents businesses in Kiambu County, Kenya. In particular, the study concluded that capital requirements, cash management and innovation have a significantly positive influence on financial performance of bank agents businesses in Kiambu County, Kenya. Further, the study concluded that financial services cost has a significantly negative influence on financial performance of bank agents businesses in Kiambu County, Kenya. Finally, the study concluded that innovation best explains financial performance of bank agent businesses, followed by cash management practices, then capital requirements while financial services cost least explains the financial performance of bank agent businesses. The study recommended the need for bank agents to strengthen their business growth activities including capital requirements, cash management, innovation and financial services cost.