Barely three months ago, residents of Gatina Village in Nairobi’s Kawangware slum would not imagine a banking opening a branch in their neighbourhood.

Whenever they needed banking services, they had to walk over two kilometres away to reach the branches of banks like Barclays, Co-operative, Equity, KCB and K-Rep Bank.

These days, however, they access to banking services of more than one bank literally at their doorsteps.

“I no longer have to dress properly to go to the bank to withdraw or deposit money,” Mr Richard Oara, a resident who works as a security guard, says.

Mr Oara now has the option of banking with any Co-op Bank, Equity or KCB without breaking a sweat, thanks to the agency-banking concept. This model – where banks use other smaller outlets like shops to offer basic services – was introduced by Central Bank of Kenya (CBK) in May 2010 to spread banking services to millions of unbanked Kenyans.

It is credited with taking financial services to various parts of the country, following in the steps of Safaricom’s revolutionary mobile phone money transfer service, M-Pesa.

The banking law was reviewed to allow commercial banks to use third-parties, including entrepreneurs running micro-businesses in shopping malls and supermarkets, post offices, petrol stations, laundry shops, cyber cafes, chemists, eateries and shops to offer banking services.

This way, individuals and even micro-enterprises can deposit and withdraw money, open accounts and check their balances through agents. Some banks have already branded their agents: there’s Co-op Kwa Jirani, KCB Mtaani and Equity Agent, among others.

Many banks are baking on the army of agents to help them recruit more customers as they seek to grow deposits, commission charges and uptake of credit, especially at the lower end of the market. CBK says agency banking is mainly practised in Latin America, with Brazil being the trendsetter.

“Agency banking is at a nascent stage in Africa with Kenya being the pacesetter,” said Central Bank Governor Prof. Njuguna Ndung’u. “We benefited from experiences in Brazil and Columbia when developing our agency banking framework.”

By the end of May 2012, 11 banks, a mortgage finance company and a deposit-taking microfinance (DTM) institution had been approved to roll out agency networks.

The banks include Equity, KCB, Consolidated, Co-operative, Chase, First Community, Citibank NA, Diamond Trust (DTB), NIC Bank, Trans-National Bank and Family Bank. The mortgage finance company and DTM are Housing Finance and Rafiki Deposit Taking Microfinance Ltd respectively.

According to CBK, out of the 11 banks, nine have rolled out their agency networks and had among themselves engaged a total of 11,176 agents spread across the country. These are distributed across the country with banks recruiting 2,320 agents in Nairobi, 2,393 in Central, 1,064 in Eastern and 2,317 in the Rift Valley. In Nyanza they netted 694 agents, Western, 1,260, Coast, 1,048, and North Eastern 74 agents.

CBK said it has started collecting statistics of agents across the 47 counties in line with the new Constitution.

“The number of agents engaged by banks so far is within CBK’s expectations,” said the industry regulator, adding that the cumulative volume and value of transactions executed through agents is commendable.

Since it was launched in May 2010, the agents have executed a cumulative total of 18.7 million transactions valued at Sh93 billion.

“These are expected to maintain an upward trend as more banks and deposit-taking microfinance institutions roll out or expand their agency networks,” said CBK. But this has not been a smooth sailing.

Banks have cited a number of challenges, especially the regulatory conditions on the agents, among others, the length of period they must have operated (18 months) and the requisite documentations.

Others are the low service uptake by the public and fluctuation of IT networks, which usually affects agents’ transactions resulting in delayed or failed transactions.

“We have reviewed the Prudential Guideline on Agent Banking to address some of the challenges faced by the banks,” says Prof Ndung’u. “Banks have also embarked on public sensitisation efforts to enhance public confidence in the model.”


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