Agency banking transactions hit Sh320bn mark

The number of transactions conducted by bank agents rose by 38 per cent last year underscoring the growing confidence in the banking concept introduced four years ago.

Central Bank of Kenya said 35,789 agents contracted by 16 commercial banks conducted 58.2 million transactions last year compared to 42 million deals in 2013. The value of the transactions was Sh320 billion up from Sh236.2 billion in 2013.

“The banks had (since introduction) contracted 35,789 active agents facilitating over 139.0 million transactions valued at Sh752.5 billion by December 2014 which is a notable increase,” said CBK in its monetary policy statement.

Banks have contracted businesses such as supermarkets, pharmacies, couriers, hardware shops and post offices as third party agents to provide cash-in cash-out transactions and other services.

Data from Central Bank show the agents handled Sh99 billion in the three months between December and September indicating they are now handling more than a billion shillings daily.

When agency banking was introduced in 2010, there were fears the public would shy away from using the outlets to get services due to concerns over security and confidentiality.

The public appears to have overcome the jitters and embraced the model borrowed from Brazil, which Kenyan banks are busy replicating in regional countries.

The model allows banks to reach more customers without opening new branches that are expensive to set up, or deploy staff. It is estimated that its costs Sh30 million to set up a new branch which usually takes a year to break even.

Agency banking uptake in Kenya has encouraged retailers in neighbouring countries including Uganda, Rwanda and Ethiopia to embrace the unconventional model.

“It depends on the bank strategy; if the bank is in retail banking it makes sense,” said head of research at Standard Investment Bank, Francis Mwangi.

READ: Agency banking transactions rise three-fold in 2012

Co-operative Bank, Equity and KCB Group that are largely retail bankers have adopted the model most aggressively with their combined agents standing at more than 28,000.

Mr Mwangi said corporate customers, whose accounts are usually funded electronically, usually visit banks to conduct more complex transactions that cannot be handled by the agents such as letters of credit.

CBK, however, said the banks had opened 71 branches in the nine months to September last year compared to a total of 70 opened in 2013.

Standard Investment Bank attributed the increase in branches to entry of new players in the banking sector such as Guaranty Bank which acquired Fina Bank and the need to service the agents.

The agents operate with a ‘float’ system, just as in mobile banking, meaning they also need to have a point to deposit excess cash which should not be far from their area of operation.

Agents contracted by Equity and KCB are already conducting more transactions than their ATM networks.

The agents are, however, still lagging behind mobile money agents who last year transacted an average of Sh7.3 billion per day compared to Sh6.3 billion per day in June the same year.

A recent survey by Financial Services Deepening Kenya showed the agents had significantly increased access to banking services with 52 per cent of the population being within three kilometres of an agent, compared with only 22 per cent within three kilometres of a branch.