By CONRAD ONYANGO
Despite the successes from the new banking system, Agency Banking, its poor implementation is viewed to thwart its progressive report and burry the dream to financial inclusion for the unbanked.
Kenswitch Network , a shared financial switch that comprises of a consortium of more than 20 commercial banks in Kenya, facilitating the delivery of electronic banking services through various delivery channels has been the first to term implementation of Agency banking as poor, posing the system to a challenge of accomplishing its financial inclusion objective.
The switch has lamented the rush for agents by early adopters of agency banking as the biggest challenge hindering the development and uptake of the system by small financial institutions.
The network has said the battle for agents has resulted to massive auctioning that in turn lead to exorbitant commission charges from the banks.
Speaking when the Network signed Indo-Africa Africa Finance (IAF) as a member of Deposit taking Micro finance (DTM), the network’s Managing Director, George Wainaina said the war between banks and perpetration of high commissions have impacted negatively on the low income, the rural households and the growth of economy. This is amid the hard economic times characterised by high inflationary rates.
“The industry is already witnessing a free-for- all from the early adopters. The rush to secure agents by the adopters has resulted to banks pitting against the other and demanding higher commission,” said Wainaina.
He added, “This means the problem has impacted directly on the livelihoods of poorer people, hence negatively affecting the overall growth of economy.”
The high commissions have been perpetrated by varied payment agreements between a bank and the agents. Banks were given the mandate to sort payments issues including volumes of transactions among other charges, as the agents are to be appointed from existing businesses.
“Agents will not be appointed from new entities but from businesses that are financially stable. Banks will cater for the costs of hiring and retaining agents, and monitoring any form of harassment through additional charges by agents,” said Habil Olaka at a past function.
In this regard, Saccos and micro finance institutions become the likely targets for the system as they are exposed to and are privileged to high access of money.
This move by Kenswitch comes a year after Central Bank of Kenya issued guidelines on agency banking in a bid to transform the payments space by allowing financial institutions to engage a third party agent to offer a subset of banking services.
The purpose of this Guideline was to provide for agent banking as a delivery channel for offering banking services in a cost effective manner, outline activities which can be carried out by an agent and to provide a framework for offering agent banking services, serve as a set of minimum standards of data and network security, customer protection and risk management to be adhered to in the conduct of agent banking business.
As a way of improving banking services to customers, it has also become a cutting niche for the financial institutions to survive in the sectors’ competitive market. Banks that embraced the system have experienced massive savings on construction costs of premises and leasing,reduced human Resource expenses, savings on equipment like furniture and computers as it transform the lives of the locals.
Equity Bank has emerged the most successful financial institution in adoption of Agency Banking. To date it has approved over 10,000 agents countrywide with over 2,000 agent attendants.
The Bank’s Chief Executive Officer said the models have a potential through various partnerships, as it will maximize profits in businesses.“This is likely to be the biggest business in Kenya’s entrepreneurial space,” he said at a consultative session with agents, Offering that the bank will continue giving the agents support and space for innovations.
The model has also transformed lives across the country. In North Eastern, It provided cash aid to marginalized populations and opened more business opportunities to the locals. This was in partnership with Hunger Safety Net Programme (HSNP).
In terms of profits to the bank, the institution’s after tax profit for 2011 half year results closed at Sh4.74 billion from last years Sh3.01 billion. This accounted for 57 percent in growth. At this period it also managed to increase its customers base by 1.3 million.
In the third quarter release the bank recorded Sh7.29 billion in after tax profit, representing a 42 percent increase. Customer’s base increased by 19 percent from 5.65 to 6.7 million over a period of one year.
This the managing director said it will boost investor confidence for the bank to be able to acquire loans at very competitive prices and recognized worldwide.
“Our brand has become the most trusted even to the international community as seen through the various awards the bank has won, this has attracted investors and has helped fortify their confidence in the brand,” said Mwangi.
“Currently the bank’s Forex income stands at Sh1.5 billion of which Sh0.5 million has been generated from Kenya through client transactions with minimal proprietary forex trading while the rest came from other East Africa Countries where the bank has its base” he added.