Competitive Strategies Employed by Equity Bank Limited in Agency Banking in Kenya

Abstract

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 thes traditional banking methods. 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 agent banking, banks, telecom companies, and other providers are offering saving 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. This will drastically change the economics in the banking industry. This paper analyzes the competitive strategies used by Equity Bank in agency banking in Kenya. To achieve this objective, the study intended to use structured questionnaires with open ended questions and the target respondents were the senior employees of Equity Bank strategically involved in agency banking. The researcher was able to get face to face interviews with three employees out of the target of five and combined primary data gathered with secondary data. The data was analyzed using both qualitative and quantitative techniques. The study found that Equity Bank uses the following competitive strategies in agency banking in Kenya: product offering diversification, market intelligence, cost leadership, training and support, corporate social responsibility, relationship management, financing, customer-care support, innovation, geographical coverage, advertising and publicity and information technology and systems. The study found Equity Bank was the first bank to roll out agency banking in Kenya and by June 2012 it has 5.004 operational agents with the aim of increasing the number to 10,000 by end of year 2012. The bank's agency network is processing 25% of all cash transactions for the bank and this has enhanced access by the customers to the bank's products and services and also enhanced convenience. The bank's aim is to tap into the predominant unbanked rural and peri-urban population to deepen access to financial services in line with Vision 2030. The study therefore concludes that Equity Bank has managed to build competitive strategies in agency banking which have enabled it achieve growth in transactions, profitability, customers, deposits, cost reduction and improved brand. This case study is relevant to people studying the following topics: Banking in Kenya, agency banking, micro-finance, competitive strategy and business in Kenya.