CHALLENGES ASSOCIATED WITH ADOPTION OF AGENCY BANKING AND BANK PERFORMANCE: A CASE OF SELECTED COMMERCIAL BANKS IN KENYA

Abstract

The study sought to determine the effect of challenges associated with adoption of agency banking on bank performance of four selected commercial banks in Kenya. Empirical evidence indicates that the effects of challenges associated with adoption of agency banking on bank performance in Kenya are positive and that there is relationship between accessibility of banking services, low cost of service and customer transactions as a result of agency banking. The study employed purposive sampling to obtain a sample of 44 respondents from four banks. Data was collected using questionnaires. The findings of the study indicate that administrative challenges do not significantly affect bank performance whereas reliability and operational challenges were found to have a significant effect on bank performance. The study concluded that the banks needs to do more in containing some of the challenges studies since they impacted on agency banking as a product generally. Based on the findings, the study made recommendations to commercial banks management, academicians and policymakers. The study recommended that policy makers heighten awareness to the public through regular open day forums, media and exhibitions on the need and use of agency banking, and develop strategies that will capture new customers. Banks should also be allocating more resources to most especially minimize liquidity problems. The study finally suggested further research on the effects of adoption of agency banking on other upcoming agencies for other commercial banks and microfinance institutions.