The performance of commercial banks in Kenya has been declining in the recent
years evidenced by decline in return on assets and return on equity from 3.99 percent
and 24.7 percent in 2016 to 3.5 percent and 22.5 percent in 2018. This trend indicates
a challenge in the entire banking industry regarding profitability. Agency banking was
introduced to increase the reach of banks to enable banks to reach the unbanked.
Agency banking can therefore enhance market share and performance of banks. The
purpose of this study was to examine the influence of agency banking transactions on
financial performance of commercial banks in Kenya. The specific objectives of the
study were to assess the influence of cost of transactions in agency banking, number
of transactions in agency banking and value of transactions in agency banking on
financial performance of commercial banks in Kenya. The study was guided by
agency theory, financial intermediation theory and bank led theory. Comparative
research design was applied in the study where the 16 commercial banks that have
adopted agency banking in Kenya were the study population. Secondary data was
used and it was obtained from the CBK bank supervision annual reports (2013-2017).
Quantitative data collected was analyzed using descriptive statistics such as means,
standard deviations, percentages and frequencies. Inferential statistics were also
derived through panel data regression method. The results from the analysis were
presented in figures and tables. The study findings showed that value of transactions
had a significant positive effect financial performance of commercial banks when
measured using ROA and ROE. The study findings showed that number of
transactions had no significant effect on ROA or ROE. Further findings indicated that
cost of transactions had no significant effect on ROA or ROE. From the study
findings, the following recommendations were made. First, commercial banks should
motivate their clients to transact high value transactions through their agents and not
only the small value transactions. Further, banks should focus on value of
transactions, not just on volume when they are marketing and designing policy for
agency banking. Lastly, banks should focus on gaining economies of scale through
increasing volumes of agency banking transactions to reduce unit cost. They should
hence ensure that agents have enhanced customer security and transaction security to
attract more customers to feel confident to transact through the agents.
Edu, F (2021). Agency Banking Transactions And Performance Of Commercial Banks In Kenya. Afribary.com: Retrieved June 14, 2021, from https://afribary.com/works/agency-banking-transactions-and-performance-of-commercial-banks-in-kenya
Frontiers, Edu. "Agency Banking Transactions And Performance Of Commercial Banks In Kenya" Afribary.com. Afribary.com, 04 Jun. 2021, https://afribary.com/works/agency-banking-transactions-and-performance-of-commercial-banks-in-kenya . Accessed 14 Jun. 2021.
Frontiers, Edu. "Agency Banking Transactions And Performance Of Commercial Banks In Kenya". Afribary.com, Afribary.com, 04 Jun. 2021. Web. 14 Jun. 2021. < https://afribary.com/works/agency-banking-transactions-and-performance-of-commercial-banks-in-kenya >.
Frontiers, Edu. "Agency Banking Transactions And Performance Of Commercial Banks In Kenya" Afribary.com (2021). Accessed June 14, 2021. https://afribary.com/works/agency-banking-transactions-and-performance-of-commercial-banks-in-kenya