AGENCY BANKING AND FINANCIAL PERFORMANCE OF COMMERCIAL BANKS IN EMBU COUNTY, KENYA
Irene Njoki Mbugua - Master of Business Administration (Finance Option), Kenyatta University, Kenya
Dr. Job Omagwa - Department of Accounting and Finance, School of Business, Kenyatta University, Kenya
ABSTRACT
Agency banking is receiving much attention all over the world owing to its associated benefits. In a 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. This study sought to establish the effect of agency banking model on financial performance of commercial banks focusing on commercial banks in Embu County, Kenya. In particular, the study sought to achieve the following specific objectives: establish the effect of cost-effectiveness of agency banking on financial performance of commercial banks, to determine the effect of commissions earned from agency banking on financial performance of commercial banks, to establish the effect of operational flexibility of agency banking on financial performance of commercial banks and to determine the effect of banking hall decongestion financial performance of commercial banks in Embu county, Kenya. This study was informed by: bank-led theory advantage and agency theory. The study adopted a descriptive research design. The study target population was all the Banks agent outlets in Embu County, Kenya. The sample size of the study was 69 bank officials in top, middle and junior level management in Embu County, Kenya. The study used stratified random sampling technique to select the study sample that participated in the study. The study used primary data which was collected by use of questionnaires that were administered through a Drop-off/Pick-Up method. Before the actual study, a pilot testing was conducted to establish validity and reliability of the data collection tool. The data collected was entered and coded in the Statistical Package for Social Scientists (SPSS) for easy analysis and presentation of the results to be yielded. Descriptive statistics such as mean, frequencies, standard deviation and percentages were used for descriptive analysis of the data collected. The study also used correlation analysis and multiple regressions to establish the relationship between the dependent variable and independent variables. The study found that agency banking, has brought about down the cost of banking and banking transactions. The study also found that banking cost of agency banking influence the financial performance of the Commercial Banks in Embu County to a very great extent. The study established that a majority the bank officials’ rated as excellent the amount of commission earned by the bank and the bank agents earned from the adoption of agency banking, that a considerable majority of the respondents were of the opinion that agency banking had led to lead to decongestion of banking halls and that operational flexibility of agency banking is a significant predictor of the financial performance of the selected commercial bank. The study concludes that cost-effectiveness had the greatest effect on financial performance of the selected Commercial banks followed by banking hall decongestion then operational flexibility while commissions earned had the least effect on financial performance of the selected Commercial Banks. The study recommends that Commercial banks in Kenya should improve customers’ perception by making more advertisements and also increase promotion activities of agent’s banking Central bank consider coming with a clear agency banking regulatory policy which creates a universal platform for all banking institutions.
