NAIROBI, Dec.18 (REPORT BY BEDAH MENGO, Xinhua) – Running a wholesale shop in an estate in Nairobi, Evans Wandei no longer needs to disrupt his business in the afternoon to rush to the bank to deposit his day's collection. The businessman has several options. He can walk to a hardware shop, a supermarket or a laundry shop, just a few metres away and deposit his money. At the businesses, which act as agents for various banks, he can also deposit cheques, withdraw cash, apply for a loan and pay his creditors.
"It has become easy for me to access banking services because of the agents," Mr Wandei told Xinhua, "I no longer need to wait until in the afternoon so that I can take my money to the bank. These days I make deposits twice a day," he added. Mr Wandei is among the many Kenyans who are now enjoying such services, thanks to agency banking that is taking root in the country. The banking model allows formal banks to liaise with commercial outlets like shops, petrol stations and supermarkets to offer financial services that include depositing and withdrawing cash.
The partnership has helped banks to take financial services closer to people, more importantly, to areas that lack them. Kenya changed its banking laws in January to allow commercial banks offer their services through third-party businesses. The agents operate as satellite branches. The banking concept that is deepening access to financial services is gaining currency in Kenya, where only one-third of the population lacks access to formal banking services. In the Nairobi’s city centre and residential areas agency banking is rapidly growing. Several shops that include wholesales, cybercafés, eateries and petrol stations offer the services.
"Co-op Kwa Jirani," reads a sign at a cybercafé in Komarock, a middle-income residential area in Nairobi. At the agency, one can deposit and withdraw cash, apply for a loan or deposit their cheques as long as they have the Co- operative Bank card. Other banks offering the services include Equity, which has "Equity Agent," Kenya Commercial Bank (KCB) that runs "KCB Mtaani" and Post bank.
Mr Wandei says agency banking has minimised risks that result from keeping huge amounts of money at his shop. "The fact that the services are few metres from my shop makes it safer for me to carry money and take it for banking," he noted. Initially, Wandei told Xinhua, he had to board a vehicle to reach his bank, which was seven kilometres away. In a day, the trader reveals he deposits at the agent between $555 and $777.
Statistics from the Central Bank of Kenya (CBK) show that the regulator has licensed over 10,000 such outlets, most of which are being run by Equity, KCB and Co-operative banks. CBK said the agents are supposed to increase financial services outreach and to promote financial inclusion to the un-banked and under-banked population without risking the safety and soundness of the banking system. The regulator noted that banks are to use agents in the provision of banking services to reduce the cost of financial services and to foster financial inclusion, reach and depth.
For a business to be licensed as a banking agent, according to CBK rules, it must have been in operational for at least 18 months. More importantly, the business must possess appropriate physical infrastructure and human resources to be able to provide the services with the necessary degree of efficiency and security. Equity Bank is the biggest beneficiary of agency banking in Kenya. While releasing its financial results in October, the bank's CEO James Mwangi said the institution's profit had increased because of agency banking.
The bank posted 81.1 million dollars net profit in its third quarter operations, which was an increase from 56.7 million dollars posted the same period in 2010. The growth came with a 24 per cent income rise from 183 million dollars to 228 million dollars. "Agency banking is becoming a reality, and it is starting to have a significant impact. The agents are now doing a third of the branches' transactions. The agency is creating a whole new business for Equity," Mwangi said.
According to Mwangi, the number of agents working for the bank grew from 875 in January to 2,797 by September. Similarly, their transactions rose to 734,000 from none in January when the services were started. Despite the growth, banks, however, have reported several challenges facing the banking model. These include finding outlets that would safely run as outsourced banks, cash flow problems and security.
"Most people who come for banking services here do not carry transactions that exceed 120 dollars. Some of them because of security reasons," a trader operating a Co-op Kwa Jirani agent in Komarock, Nairobi said in an interview with Xinhua. However, he noted that most of those using the services are traders. "Traders operating small businesses are using the service to avoid inconveniences that come with going to the bank to deposit money where they are likely to find long queue," he said. (Xinhua)