The Role of Agency Banking in Enhancing Financial Sector Deepening in Emerging Markets: Lessons from the Kenyan Experience

Dorine Ayuma Barasa, Fred Mugambi Mwirigi


Agency banking has increasingly gained importance in developing countries over the last decade. However the extent to which agency banking can be used as a tool to deepen the financial sector remains largely unknown. Also, the true benefits of the agency banking model to customers, the banks and the bank agents also remains largely unstudied. This study sought to analyze these benefits and provide some insights into the actual performance of agency banking with regard to enhancing access to banking services by the unbanked. The study was conducted among 40 registered outlets with a respondent sample of 400 people. Systematic sampling technique was used to pick the respondents who were requested to fill structured questionnaires. The study incorporated descriptive data analysis tools and the likert scale to determine the weight of the factors. The study concluded that agency banking has played a pivotal role in enhancing the penetration of banking services in unbanked markets. Besides, agency banking also enhances the access of the full range of banking products within a less than formal setting. The study concludes that the agency banking model has not only helped to demystify banking among low income populations but it has also placed beneficiaries on sure path towards become financially secure. The study also found that banking agents also double up as the backbone of electronic money banking since they perform transactions over a bank device, to enable clients to convert cash into electronic money and vice versa. This is an important role in enhancing financial sector deepening.

Keywords: Agency Banking, Financial sector deepening, Market segmentation.

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