The Relationship between Agency Banking and Financial Performance of Commercial Banks in Kenya

Banking agents are usually equipped with a combination of point-of-sale (POS)card reader, mobile phone, barcode scanner to scan bills for bill payment transactions, Personal Identification Number(PIN) pads, and sometimes personal computers (PCs) that connect with the bank’s server using a personal dial-up or other data connection. This research used the descriptive design method using secondary data gathered from the commercial banks in Kenya that had adopted agency banking in Kenya. The population of the study was the 10 commercial banks in Kenya that had adopted agency banking by the end of 2012 namely Equity Bank, Co-operative Bank, KCB Bank, Post Bank, Family Bank, Chase Bank ,Consolidated Bank, Diamond Trust Bank, Citibank and NIC Bank. Annual reports on individual banks’ financial performance were used to extract financial performance indicators. CBK’s annual report and supervisory reports were also used to establish the number of agents registered and the total transactional value conducted through the agents. The variable of interests were the cash withdrawal and deposit transactions done through agents, number of active agents, return on assets, cost to income ratio and staff cost to revenue ratio.