Factors influencing the adoption of agency banking strategy by the Kenya Post Office savings Bank

Abstract

The purpose of the study was to identify factors influencing the adoption of agency banking strategy by Post bank and to establish challenges that Post bank is facing in adopting the agency banking strategy.

The purpose of strategy is to provide directional cues to the organization that permit it to achieve its objectives while responding to the opportunities and threats in the environment. Agency banking strategy was introduced in Kenya in 2010 where retail outlets such as shops or post offices act as agents for banks in areas where banks and other financial institutions do not have sufficient incentive or capacity to establish formal branches. Kenya Post Office Savings Bank (Post bank) has started rolling out its agency banking.

The case study design was used to carry out this study. Primary data was collected through face to face interviews with four senior employees at Kenya Post Office Savings Bank at Post Bank House. The interviewed employees were banking services director, head of information and communication technology, head of retail banking and head of marketing and business development. Data collected through the interviews was analyzed through content analysis and presented in explanations and a discussion.

Findings indicated that factors that Post bank puts into consideration in adopting the agency banking strategy include regulations from the CBK, ability to build an agent network, competition from other banks and the reputation of the bank in the market. Financial and human resources commanded by the bank, availability of retail outlets with qualities required to be agents, technology commanded by the bank and infrastructure by potential agents were other major factors. Strategic focus of the bank, banks management structure, strategic orientation and diversity of services to be provided by agents were other factors affecting adoption. Challenges faced in adoption of agency banking include finding the right partners, managing the agent network, setting up the infrastructure, and management structure to incorporate agency model and competition from other banks.