Agency banking is fast losing its appeal after pensioners and beneficiaries of State funds ditched the service for mobile banking in 2018.
Payment of retirement and social benefits through agency banking last year declined significantly by 94 per cent to Sh1.1 billion from Sh19 billion in 2017, with most recipients opting for a mobile banking-enabled payment service.
Moreover, payment of utility bills such as electricity is also shifting to mobile money. Payment of bills through bank agents dropped from Sh13.7 billion in 2017 to Sh11.6 billion, though the platform remained popular for cash deposits and withdrawals.
The value of banking transactions undertaken through agents increased from Sh1 trillion in December 2017 to Sh1.18 trillion in December 2018, according to a new report by the Central Bank of Kenya (CBK).
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This growth was mainly driven by cash deposits which grew by 14.4 per cent to Sh906 billion from Sh791.7 billion the previous year.
Cash withdrawals in the period under review grew by 7.6 per cent to Sh269.1 billion from Sh175.2 billion in 2017, even as Sh458 million was transferred through the bank agents.
“Despite the overall increase in the value of transactions, there was a decline in transactions relating to payment of retirement and social benefits and payment of bills in the year 2018,” said CBK in the report.
A new payment model, Inua Jamii, transfers regular stipends to beneficiaries who include people over 70 years and orphans.
“One of the important benefits of the new programme is that it reduces distances covered by beneficiaries in accessing banking services as well as reducing over-reliance on care givers by giving beneficiaries more control of their accounts,” said Labour and Social Protection Cabinet Secretary Ukur Yattani last year when they unveiled the programme.
The programme targets a total of 1.3 households, with around five million Kenyans being direct beneficiaries. Since its inception in 2004, the government has spent Sh125.7 million.
Inua Jamii operates through four banks - Cooperative, Equity, Postbank and KCB. The method is mobile banking-enabled where beneficiaries are able to pull their money directly from bank accounts and withdraw from mobile money agents.
Consumers are also trying to reduce distances in accessing banking services when paying bills. As a result, payment of bills through agency banks reduced by 15.5 per cent from Sh13.7 billion to 2017 to Sh11.6 billion in 2018.
During the period under review, 19 commercial banks and five microfinance banks had contracted 59,578 and 2,026 agents, respectively, recording a decrease from 61,290 and 2,068 agents respectively by December 2017.
The change implies a decline of 2.8 per cent (1,712) and 0.02 per cent (42) in the number of agents contracted by banks and microfinance institutions.
“The decline is attributed to the closure of some of the agents due to low business volumes and low income earned by the agents, rendering the agents inactive,” said CBK.