blog post image

CBK: Kenyan banks record growth in agency banking model

NAIROBI, KENYA: Kenyan banks recorded significant improvement in agency banking introduced six years ago.

The model aimed at improving financial inclusion in the country witnessed a rise of 55.8 million transaction in first-quarter of 2016 compared to 10.3million transacted same period last year.

In a report released by Central Bank of Kenya, the value of banking transactions undertaken through agents increased from Sh65.0 billion to Sh176.7 billion over the same period. This was mainly due to increased confidence and acceptability of the agency banking model by banks and the public as an economical, convenient delivery channel.

As at March 31, there were 17 commercial banks that had contracted 40,224 agents which had facilitated over 170.5 million cumulative transactions valued at Sh930.2 billion as compared to 16 commercial banks that had 34,381 agents that had facilitated 149.4 million transactions valued at Sh817.7 billion as at March 31 2015. 

Since the rollout of the agency banking model in May 2010, commercial banks have continued to contract varied retail entities to offer basic banking services on their behalf.

The contracted entities include security companies, courier services, pharmacies, supermarkets and post offices who act as third party agents to provide cash-in-cash-out transactions and other services in compliance with the laid down guidelines.

Since the launch of agency banking banks have been able to reach out to the unbanked population across the country.

KCB for instance has recruited over 10,000 agents now making it easier for one to deposit and withdraw cash.

Other services offered under the model includes loan payments, allows one to pay for mortagage, bills, and social payments to the elderly people. In counties such as Nakuru, the government uses agents to collect revenue.

“The uptake of this new system is overwhelming among the pastoralist communities, they are for instance able to sell their cattle and easily deposit the money with agents reducing chances of losing their sales to raiders,” says Edwin Otieno, Head of Agent Banking at Kenya Commercial Bank.

Existing rules provide that for one to be an agent they will be vetted for reputation and morals, have a certificate of good conduct and must have a good history for loan repayment.

In the case of a legally registered company, it must have records of audited accounts and be of good financial standing.

However, the regulations put responsibility to the bank to determine, based on agent risk assessment, which services a particular agent should provide.

The profile of agents includes village town wholesalers, consumer goods distributors, supermarket owners, and petrol station operators.