Bank agencies transacted Sh1bn daily in past three months

Money Markets

An Equity agency outlet on Kenyatta Avenue in Nairobi. PHOTO | FILE 

By GEORGE NGIGI

In Summary

• Central Bank of Kenya figures show 30,449 agents contracted by 16 banks conducted 14.5 million transactions worth Sh82.2 billion in the three months to the end of September. This translated to 163,000 deals valued at Sh913 million daily.
• Agency banking allows lenders to reach more geographical coverage without opening new branches.

Bank agents are handling nearly a billion shillings daily barely four years after the concept was introduced into the country.

Fresh numbers from Central Bank of Kenya show 30,449 agents contracted by 16 banks conducted 14.5 million transactions worth Sh82.2 billion in the three months to the end of September. This translated to 163,000 deals valued at Sh913 million daily.

In the three months to June the bank agents had transacted Sh72.5 billion in 13.5 million deals which translated to Sh800 million daily.

“The use of agency banking model continues to facilitate banks to reach the under-banked and unbanked Kenyan public,” said Central Bank.
Banks have contracted entities, such as security firms, courier services, pharmacies, supermarkets and post offices to act as third party agents to provide cash-in cash-out transactions and other services.

Lenders have been able to mop up cheap deposits using the agents which have seen more banks take up the model and increase the number of contracted third parties.

In the three months alone they contracted 3,699 new agents. “Agency banking continues to help the banks in cost efficiency in mobilising cheap deposits,” said Old Mutual Securities in an investor note on Equity Bank performance.

Lenders have noted the agents conduct more deposit transactions than withdrawals. Equity Bank’s 15,875 agents are currently conducting more business for the lender than its tellers in the branches and ATMs.

The bank said in the third quarter the agents collected Sh45.2 billion in deposits while paying out Sh18.5 billion as withdrawals.

READ: Bank agency transactions in double growth

When agency banking was introduced there were fears the public would shy away from using the outlets to get services due to security and concerns over confidentiality.

The public looks to have overcome the jitters and embraced the model borrowed from Brazil, but ably propagated by banks locally and in the region.

The model allows banks to reach more geographical coverage without opening new branches, which are expensive to set up, or deploy staff. It is estimated that its costs Sh30 million to set up a new branch which usually takes a year to break even.

A recent survey by Financial Sector Deepening Kenya showed the agents had significantly increased access to banking services with 52 per cent of the population being within three kilometres of an agent, compared with only 22 per cent within three kilometres of a branch.

The model has been embraced in neighbouring countries such as Rwanda and Uganda which are also grappling with low access to financial services.

A recent FinAccess survey showed a quarter of the bankable population in Kenya is excluded from access of any financial services while 7.8 per cent only use informal systems that include chamas (investment clubs).