Alternative service channels elbowed out a record 2,517 workers from the banking halls in 2016 as management moved to break the expensive brick and mortar model.
This marked the fourth straight year that banks are shrinking their staff size to increase their cost to income ratio, a measure of efficiency. The 2016 drop translates to nearly four times the number of jobs (711) that were lost in 2015.
While banks added 17 staff to the management level, 628 supervisory jobs were lost while clerical and secretarial level lost 1,988 jobs. However, 82 support staff jobs were created, according to the Bank Supervision Annual Report 2016 by the Central Bank of Kenya (CBK).
Employees are staring at more job cuts with many banks complaining that the decision by the Government to cap the cost of credit had complicated their businesses.
Job cuts have been announced at KCB, Standard Chartered, Barclays, Family Bank, National Bank of Kenya, NIC Bank, Ecobank, Bank of Africa, First Community Bank and Sidian Bank.
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According to CBK, trimming of jobs is an indicator of the banks’ improved efficiency as a result of automated processes hence reducing the number of required supervisory, clerical and secretarial staff.
"On average, in 2015, one employee was serving 972 customers whereas in 2016 an employee was serving 1,209 customers. This shows increased efficiency in customer service as a result of banks embracing technology,” says CBK.
Two decades ago (1996), the number of account holders was at one million with each staff serving about 60 customers. By December last year, banks had 41.2 million deposit account holders.
The latest trend is a departure from the norm that had been established since 2002 when the staff size grew every succeeding year from 10,884 to 31,636 in 2012 as most banks favoured expansive branch network that has now proved expensive.
By December last year, CBK data show, 18 commercial banks and five microfinance banks (MFBs) had contracted 53,833 and 2,068 agents, respectively, spread across the country. This implies a 33 percent increase or 13,241 new agents for banks while MFBs contracted additional 914 agents or an increase of 79 per cent when compared to the 2015 data.
Over 87 per cent of the approved commercial bank agents were concentrated in three banks with the largest physical branch presence. Equity Bank leads with 25,428 agents followed by Kenya Commercial Bank (12,883) and Cooperative Bank with 8,856.
"The overall increase in the number of agents is attributed to the growing confidence and acceptability of the agency banking model by the public and banks as an alternative channel of doing banking business," notes CBK.
Equity Bank CEO James Mwangi who cut 200 jobs in the South Sudan subsidiary alone has already stressed that he will only retain branches that can serve high value transactions and business advisory roles.
The sector’s watchdog notes that MFBs are facing infrastructural challenges in increasing uptake of agency banking. Notably, CBK says, over 95 per cent of the agents are contracted by the largest micro-finance bank – Kenya Women Finance Trust.
The number of banking transactions undertaken through bank agents increased by 30.9 per cent from 79.6 million in 2015 to 104.2 million at the close of last year.
Last year, the value of banking transactions undertaken through agents rose from Sh442.2 billion in previous year to Sh734.2 billion, a growth of 66 per cent.
The number of transactions relating to payment of retirement and social benefits grew the fastest (882.1 per cent) as the value transacted grew more than 13 times from Sh1.1 billion to Sh14.5 billion. This was as a result of Government’s move to appoint some banks as their payment agents for the National Safety Net Programme (Inua Jamii).
Value of cash deposits through agency banking grew by 80 per cent to Sh538.3 billion while that of cash withdrawals rose by slightly above a third to hit Sh175.2 billion. "The increase in number and value of transactions underlines Kenyans’ growing confidence and acceptability of the agency banking model by banks and the public as an economical, convenient and safe delivery channel," said CBK.
A new trend is emerging where telecoms are partnering with banks to offer micro-loan and micro-savings products such as the KCB M-Pesa and Mshwari loans.
Last year, CBK notes, banks submitted over 70 applications seeking approval to introduce new products related charges. Most of the applications sought to introduce mobile phone banking services in partnerships with IT service providers.
CBK is now challenging banks to roll out more structured financial products rather than simply money transfer, airtime and bill payments ‘use-cases’ that have been the mainstay of their services.
The sector is operating in a highly disruptive environment of the ever changing consumer needs, innovative financial products, technological advancement and the use of multiple delivery channels.