Kenya: Agent banking is key to strengthening financial inclusion, says CBK
Kenya's banking sector has witnessed an increase in financial inclusion following the introduction of agent banking, according to a new report from the Central Bank of Kenya (CBK).Kenya's banking sector has witnessed an increase in financial inclusion following the introduction of agent banking, according to
new report from the Central Bank of Kenya (CBK).
This new model has ensured more people have increased contact with banking facilities since its roll out in May 2010, the report says.
In June 2014, there were 15 commercial banks that had contracted 26,750 active agents facilitating more than 106 million transactions valued at Sh571,5 billion (€4.8 billion).
This was up from 14 commercial banks in March 2014 with 24,645 agents facilitating about
million transactions valued at Sh499 billion.
One of the primary impediments to providing financial services to the poor through branches and other bank-based delivery channels is the high costs
inherent in these traditional banking methods.
The amount of money expended by financial service providers to serve a poor customer with a small balance and conducting small transactions is simply too great to make such accounts viable, according to a report from the Bill and Melinda Gates Foundation.
In addition, when financial service providers do not have branches that are close to the customer, the customer is less likely to use and transact with their service.
By using retail points as cash merchants - a model known as agent banking - banks, telecom companies, and other providers can offer financial services in a commercially viable way by reducing fixed costs and encouraging customers to use the service more often, thereby providing access to additional revenue sources.