Agency Banking Case Study

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CHAPTER ONE INTRODUCTION 1.1 Background of the study Bold (2011) posits that the business environment globally has changed and it has been characterized by stiff competition among the players and the banking industry has not been left behind. Stiff competition in the banking sector has pushed banks to be more innovative and responsive. Some of these innovations include credit cards, ATMs, mobile banking, internet banking, and children accounts, women oriented banking, youth oriented accounts, interest free banking and, the latest arrival in the scene being agency banking. The growth in digital technologies and consumers’ embrace of connectivity means financial institutions no longer need to open branches to attract or retain…show more content…
Since Brazil was an early adopter of the model, the country is often acknowledged as a global pioneer in agency banking. The country has established a full-grown system of agent banks which covers over 99% of the country’s municipalities. Other countries in Latin America have not been left behind. These countries include Mexico (2009), Peru (2005), Colombia (2006), Ecuador (2008), Venezuela (2009), Argentina (2010), and Bolivia (2006). Elsewhere, other countries have also embraced the agent banking model to expand financial services. These countries include Pakistan, Philippines, Kenya, South Africa, Uganda, and India (AFI, 2012). Globalization has facilitated the integration of the economy with other world class economies, for example Singapore, thereby forming an economic global village. Advancement in information and technology, de-regulation, globalization of markets and stiff competition has ensured that banks are better educated, more inquisitive, sophisticated and decisive. This has resulted in a rapid change in the banking environment with the consequent serious implications and challenges regarding the survival and profitability of banks (CGAP, 2003). In Kenya, the financial sector has…show more content…
Financial inclusion, also known as banking sector outreach, refers to the process of availing a number of required financial services, at a fair price, at the right place, form and time and without any form of discrimination to all members of the society. Financial inclusion models’ objective is to advantage the poor majority of whom are excluded in the use of formal financial services. Aduda and Kilunda (2012) who are proponents of financial inclusion argue that financial exclusion leads to loss of the opportunity to grow, a retarded country's growth as well as increased poverty levels. Agency banking is a major financial innovation adopted by commercial banks in Kenya. According to Gakure & Ngumi (2013), indicated that bank innovations have a moderate influence on profitability of commercial banks in Kenya 1.2 Statement of the

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