Kenya has become the epicentre of branchless banking financial. Assessment of factors influencing adoption of agency. Some of the specific developments in the year included the. This approach adopted by equity bank changed the banking system in kenya and many banks adopted the. Journal of economics and sustainable development issn 22221700 paper issn 22222855 online vol. Branchless banking which involves the use of agency banking and electronic banking channels in the distribution of banking products and services is one such innovation. The growing investment in mobile technology and bank financial performance in kenya need various studies to establish whether mobile banking has contributed to the financial performance of banking institutions in kenya. The lower the transacon value, the cheaper branchless banking is in comparison with banks. According to safaricom 2011,financial inclusion is a big challenge in kenya,only 22. Branchless banking, the use of alternative delivery channels such as mobile banking and agent banking, is becoming increasingly popular among commercial banks in kenya and in other developing countries. Branchless banking bb is one of the marvels of innovation in the fields of information communication technology ict and bpr business process reengineering. These channels are less expensive and more adaptable than the traditional bank branch, bringing more people into formal finance. However, even with current 45,500 agents offering financial services, the penetration rate is still a challenge, for many banks have not embraced the model. Mobile money and branchless banking regulations affecting.
Kenya legitimized agency banking act 2009 to enable central bank of kenya to license banking agents for commercial banks. Determine whether quality of agents is affecting adoption of agency banking in. Kenya where agentassisted branchless banking that targets poor customers is already a reality. This branchless banking initiative focuses on providing mobile financial services to the unbanked population of the country. Putting the banking in branchless banking world economic forum. Branchless modes of banking that target the low end market, like mpesa and zap, are 19 per cent cheaper than traditional banking and 54 per cent cheaper than informal forms of banking. Pdf the effect of branchless banking strategy on the financial. Theimpactofdigitalfinancialservicesonfirms performance.
Mpesa has spread quickly, and by 2010 had become the most successful mobilephonebased financial service in the developing world. Reynolds tw, klawitter m, biscaye p, et al mobile money and branchless banking regulations affecting cashin, cashout cico networks in low and middleincome countries. Pdf financial innovations and bank performance in kenya. Jun 29, 2017 internet banking is nothing but a banking transaction, carried out over the internet, via, respective bank or financial institutions website, under a personal profile, with a personal computer. Kenya uganda nonbank lending institutions movable collateral branchless banking transport distance to frontier score comparison finance uganda has a solid regulatory framework and administrative procedures for commercial crossborder transportation. Mobile money moves forward in uganda despite legal hurdles. This focus note introduces the main issues involved in regulating branchless banking, particularly regarding the use of retail agents. This guide presents practical advice to providers on how to build a viable network of agents, which is a critical component of a branchless banking service.
It is the mode of rendering financial services through distribution network without having conventional branch brick and mortar set up. Branchless banking a tool for financial inclusion 1 definition branchless banking bb is one of the marvels of innovation in the fields of information communication technology ict and bpr business process reengineering. The effect of branchless banking strategy on the financial. The study of motivated is the social by economic trend kenyasin population which has been varying consistently depending on the employment rate and the income levels. As per the policy of state bank of pakistan only bank led model of branchless banking is allowed for the establishment of bb setup. Update on regulation of branchless banking in kenya january 2010 this update of cgaps 2007 notes on regulation of branchless banking in kenya1 incorporates research conducted by cgap in january 2010 regarding relevant legal and policy changes through the end of 2009. In olden days people started dealing with other on sitting on benches. In kenya, existing regulations require financial institutions to build brick and mortar branches. Another form of ebanking in kenya is eazzy 247 offered by equity bank of kenya. The amount of investment in agency and electronic banking.
Branchless banking free download as powerpoint presentation. Changes to these regulations will permit the establishment of branchless or agency banking. Get the knowledge you need in order to pass your classes and more. Jan 29, 2010 in kenya, existing regulations require financial institutions to build brick and mortar branches. Kenya 2006 zambia 2005 tanzania 2007 banked other formal informal only unserved. Conversely, mobile banking is a service that enables the customer to perform banking transactions using a. The business environment has changed in kenya as in other parts of the world and it has been characterized by stiff competition among the players and the banking industry. Banking credit and debit cards, atms, interactive tv and branchless banking. Assessment of factors influencing adoption of agency banking.
Both the country reports and focus notes 38 and 43 are available online at cgaps website. There has been increased competition from local banks as well as international banks, some of which are new players in the country. Typically, pointofsales pos terminals or mobile phones. This study investigated the role of financial inclusion on the relationship between branchless banking strategy and financial performance of commercial banks in kenya. A direct bank sometimes called a branchless bank or virtual bank is a bank without any branch network that offers its services remotely via online banking and telephone banking or through an independent banking agent network and may also provide access via atms often through interbank network alliances, mail and mobile. Mpesa m for mobile, pesa is swahili for money is a mobile phonebased money transfer service, payments and microfinancing service, launched in 2007 by vodafone group plc and safaricom, the largest mobile network operator in kenya. Influence of branchless banking services on saving practices. Financial innovations and bank performance in kenya. The early experience with branchless banking is based on the research and observations of cgaps work in technology and microfinance, and identifies a need for the following. Transaction economics for technology enabled branchless banking. Financial sector opportunities and challenges branchless. A wide spectrum of mobilebranchless banking models is evolving.
This is true despite the benefits of branchless banking. Oct 26, 2016 branchless banking is defined as the delivery of financial services outside conventional bank branches, often using agents and relying on information and communications technologies to transmit transaction details. This study focused on mobile banking technology in relation to its effect on commercial banks financial performance. Assessment of factors influencing adoption of agency banking in kenya. The agents also have free association brand advertisement through the. The effect of branchless banking strategy on the financial performance of commercial banks in kenya article pdf available september 2017 with 2,426 reads how we measure reads. Sep 22, 2014 african payments provider iveri, in conjunction with calleo, a specialist businesstobusiness research and consultancy firm, has released a new whitepaper titled, accessing the unbanked. The study also sought to establish how security, liquidity.
The new microfinance handbook reflects this challenge. In this line, the current study sought to establish the challenges facing growth of agency banking in kenya. The unprecedented uptake of mobile phone banking services in kenya is a testament to this fact. Banks are finding creative ways to reach customers with savings, credit and moneytransfer products. The rise of branchless banking financial services analysis.
Branchless banking, however, is changing the economics. Present report focuses on the impact of choice of technology on agent economics. It has since expanded to tanzania, mozambique, drc, lesotho, ghana, egypt, afghanistan, south africa, india, romania, and albania. Both primary and secondary data on branchless banking and financial. There are, however, more than 45,500 agents offering financial services.
Can branchless banking live up to the promise of lifting the welfare of lowincome earners in kenya. Mpesa customers can deposit and withdraw money from a network of agents that includes airtime resellers and retail outlets acting as banking agents. One very important impact of the choice if technology is on the viability of the business model. Internet banking is nothing but a banking transaction, carried out over the internet, via, respective bank or financial institutions website, under a personal profile, with a personal computer. May 2008 with the right market conditions, mobile banking could reach large numbers of poor people who are outside the formal financial system, predicts a new report from cgap, the global microfinance body. When using branchless banking to provide savings services. Transaction economics for technology enabled branchless. Technology is usually assessed in terms of convenience of conducting transaction, user interface, portability etc. Evidence from branchless banking models october 2018 south african journal of economic and management sciences sajems 211. Update on regulation of branchless banking in kenya january 2010 this update of cgaps 2007 notes on regulation of branchless banking in kenya1 incorporates research conducted by cgap in january 2010 regarding relevant legal and policy changes through the end of. Branchless banking in africa currently, only around 23% of adults in africa have a bank account. Pdf the effect of branchless banking strategy on the. There is little evidence on the impact of indias experiment with branchless banking or on the factors that may influence the effectiveness of bcs. Putting the banking in branchless banking count held in trust or the equivalent for the benefit of emoney customers so as to isolate the funds from claims by issuer creditors in the case of issuer bankruptcy, for example, although other approaches also exist.
The general objective of this study was to establish the factors influencing the uptake of agency banking services by customers in commercial banks in kenya. However, no matter what business model, if mobile banking is being used to attract lowincome populations in often rural locations, the business model will depend on banking agents, i. Difference between mobile banking and internet banking. In terms of branchless banking, kenya is probably best known for nonbankbased models, specifically those launched by mnos. Job omagwa department of accounting and finance, school of business, kenyatta university, kenya 2017. The mediating effect of financial inclusion on the. A survey of all the 42 licensed commercial banks in kenya was done. By highlighting the opportunities and challenges with branchless banking, the aim is to show that it is possible to lift the welfare of low. Kamau, 2012, undertook a study on the relationship between mbanking and financial performance of banks in kenya and established negative and weak correlation between the two. Investigate if customer service is affecting adoption of agency banking in kenya. This study is an attempt to examine whether the use of mobile banking and agent.
Contents introduction 1 examples international 4 examples southern africa 9 regulatory challenges 12 potential for remote access initiatives in southern africa 14. Assess whether convenience is affecting adoption of agency banking in kenya. The authors hope these five countries experience will be useful for financial sector policy. Putting the banking in branchless banking count held in trust or the equivalent for the benefit of emoney customers so as to isolate the funds from claims by issuer creditors in the case of issuer bankruptcy, for example, although other approaches also.
Branchless banking is defined as the delivery of financial services outside conventional bank branches, often using agents and relying on information and communications technologies to transmit transaction details. Mobile banking to transform microfinance world bank. Bank pricing study, prepared for central bank of kenya. A wide spectrum of mobile branchless banking models is evolving. The term bank is derived from old italian word banka which means a bench or money exchange table. Influence of branchless banking services on saving. Another form of e banking in kenya is eazzy 247 offered by equity bank of kenya. Challenges facing growth of agency banking in kenya.
African payments provider iveri, in conjunction with calleo, a specialist businesstobusiness research and consultancy firm, has released a new whitepaper titled, accessing the unbanked. The same possibilities present themselves in bank led models a bank that partners with a mobile phone operator to provide cellphone banking may see this as an extension of existing services to the banked or as a platform for reaching the unbanked. Influences of fund transfer on financial performance and. The regionally integrated and harmonized crossborder transportation system throughout the east. To assess the factors that affect adoption of agency banking in kenya. Come browse our large digital warehouse of free sample essays. The banking industry in kenya has also involved itself in automation, moving from the traditional banking to better meet the growing complex needs of their customer and globalization challenges. Direct banks reduce the significant costs of maintaining a branch. We also notice that newer researchers often ignore past research and investigate the same issues. Notes on regulation of branchless banking in kenya currently have the necessary tools including specific regulations to supervise the payment system. While households are free to transact with any bank, and any other bc, the assignment of a specific bc to a gp is intended to ensure universal coverage and the financial viability of the system. Conversely, mobile banking is a service that enables the customer to perform banking transactions using a cellular device. Sammy mwando school of human resource development, jomokenyatta university of agriculture and technology, po box 6200000200 nairobi, kenya email. Difference between mobile banking and internet banking with.
1465 999 21 1263 409 1548 190 210 938 988 612 977 565 1547 398 1475 1054 1327 210 320 883 1237 1380 1145 1383 1250 493 394 1014 595 736 890 1125 1107 1222 1307 689 94 941 125