Both primary and secondary data on branchless banking and financial performance of banks. One mobile banking scheme in particular, mpesa in kenya, has shown phenomenal. The breakdown of modes of branchless banking transaction remained constant with overthecounter otc transactions accounting for 80 percent of overall transactional volume, while mwallet transactions stood at 14. Financial inclusion and consumer protection in peru. It served the needs of growing farming communities and started operations in 1968.
Branchless banking a tool for financial inclusion 1 definition branchless banking bb is one of the marvels of innovation in the fields of information communication technology ict and bpr business process reengineering. However, while branchless banking was viewed to be critical for the success of welfare programs, the potential impact of welfare programs on the financial viability of local banking agents was also widely recognized. These services are often deployed as smartphone apps, and although marketed as secure, these applications are often not regulated as strictly as traditional banks, leaving doubt. The effect of branchless banking strategy on the financial. This study was guided by counsels of previous researches undertaken abroad in an effort to find out the contributions of agency banking on financial performance of the commercial banks in kenya. Jansen further reports that brazil established their branchless banking model in 2003 when banks only had branches in 1,500 of the countrys 5,500 municipalities. The early adopters of branchless banking in kenya had to rely on studies from south. Present report focuses on the impact of choice of technology on agent economics. When using branchless banking to provide savings services. An investigation of the sustainable benefits of agency.
View test prep orion platform intro nbe v05 from ad 642 at boston university. Central bank is the lender of last resort in kenya and is the banker to all other banks. So far, 7 of the partner banks have made noteworthy progress in blb expansion with over 100 blb points launched across the country. Branchless banking, the use of alternative delivery channels such as mobile banking and agent banking, is. Pdf the effect of branchless banking strategy on the. Financial sector opportunities and challenges branchless. Aug 24, 2011 will these sizeable investments pay off. We examined recent trends in mobile money and branchless banking regulations related to cash in, cashout cico networks physical access points allowing users to exchange physical cash and electronic money in low and middleincome countries.
The paper then explores financial education as a key strategy for strengthening the weak levels of knowledge and skills associated with branchless banking among low. Financial inclusion innovations and financial performance of. Besides, studies in other regions outside kenya have indicated that mobile banking saves of. How branchless banks took over country daily nation. By highlighting the opportunities and challenges with branchless banking, the aim is to show that it is possible to lift the welfare of low. Agent banking involves a number of technologies in order for the financial institutions to keep track of the transactions done by the retail outlet. Assessment of branchless banking profitability outcomes on.
Pdf the effect of branchless banking strategy on the financial. Kenya has become the epicentre of branchless banking. One very important impact of the choice if technology is on the viability of the business model. The mobile phone in particular has attracted attention as a personal point of potential access and is used by a growing number of explicitly propoor cellphone banking. Introduction as with conventionally delivered financial services, consumers using branchless banking services face risks and challenges as well as. The five largest commercial banks in kenya are kenya commercial bank, barclays bank, standard chartered bank, cooperative bank and national bank of kenya. A laboratory for innovation october 2011 pakistan is one of the fastest developing markets for branchless banking in the world. Kenyas first fully locally owned commercial bank was the cooperative bank of kenya, which was initially a cooperative society. Branchless banking, the use of alternative delivery channels such as mobile banking and agent banking, is becoming increasingly popular among commercial banks in kenya and in other developing countries. According to safaricom 2011,financial inclusion is a big challenge in kenya,only 22. This study purpose was to evaluate the effect of branchless banking on the financial performance of commercial banks in kenya. Return on assets roa was used as the main indicator of commercial banks financial performance. Usage experiences in kenya by adrian d kamotho njenga lecturer of information systems, catholic university of eastern africa email. According to lyman et al 2006 the bank driven agent branchless banking places the bank at the centre of all the branchless activities.
Branchless banking which involves the use of agency banking and electronic banking channels in the distribution of banking products and services is one such innovation. The mobile banking service enables subscribers to use their mobile phones to carry out transactions that would have otherwise been done by commercial banks themselves, usually over the counter. In the context of agent banking, lyman et al 2006 traces two models of branchless agent banking emerging at the global level. Can branchless banking live up to the promise of lifting the welfare of lowincome earners in kenya. As part of its global policy initiative, consultative group to assist the poor cgap partnered with the superintendence of banks, insurance and afps of peru in late 2008, with the purpose of enhancing the understanding of the issues and trends in consumer. Pdf branchless banking bb is an emerging financial segment also known as banking beyond branches. Nov 28, 2018 these banking agent guidelines were designed to emulate the bankled brazilian branchless banking system and allow banks to use agents for cico services, just as mpesa uses agents. Keen to take the agency banking advantages, kenyan financial. The trending strategies in barclays banks in kenya is branchless banking delivery channels for providing banking services directly to customers to increase performance.
Mobile money and branchless banking regulations affecting. Several countries adopted the concept of agent banking and getting huge success in the area of financial inclusion e. Kenya, to establish the effect of agency banking on performance of commercial banks, and to establish. Notes on regulation of branchless banking in kenya currently have the necessary tools including specific regulations to supervise the payment system. The research focused on the types of problems encountered by consumers of branchless banking services and showed how these experiences shaped consumer practice and perceptions. The amount of investment in agency and electronic banking. Technology has been crucial in getting smallscale banking services around the world out of the banking hall and into environments that poorer people find less intimidating. Rewards, risks, and regulation 1 in this focus note, retail outlets are referred to as retail agents, because although they are not always true agents in the legal sense, they are not licensed to perform cashin deposit andor cashout withdrawal functions on their. A recent global pricing study report on banking services targeting the poor by cgaps, undertaken on 16 leading branchless banking services from 10 countries in africa, brazil and asia, indicates.
The study was based on the fact that there is ground to cover in expanding access. In 1995 the exchange controls were lifted after the liberalization of the banking in kenya. Branchless banking encompasses the provision of a broad range of financial services outside. Branchless banking is 54% cheaper than informal oplons for money transfer. Models of branchless banking can be classified into three broad. Clear regulations and a regulator that is willing to both listen to the private sector and provide incentives for innovation have promoted a dynamic branchless banking sector. It is believed to reach the lowincome and rural individuals as well as making these individuals better off. There are, however, more than 45,500 agents offering financial services. Transaction economics for technology enabled branchless banking. The effect of branchless banking strategy on the financial performance of commercial banks in kenya article pdf available september 2017 with 2,399 reads how we measure reads. Technology is usually assessed in terms of convenience of conducting transaction, user interface, portability etc.
As time progressed, the changing landscape of banking began to note the entrance of fully indigenous banks. In this case, e banking is defined from the state of branchless or virtual banking indicating that geographical location in banking sphere seems to be less important as banks continue to adopt e banking. Financial innovations and bank performance in kenya scielo. Central bank of kenya is tasked with formulating and implementation of monetary and fiscal policies. The belief that indias high poverty rates renders rural financial institutions unviable is widely held. Cooperative and kenya commercial bank, to offer formal banking services at the grassroots by devolving services has since seen millions of. Bank pricing study, prepared for central bank of kenya. Branchless banking is relatively new in nepal as this form of banking services has been operational for less than a decade. Effect of mobile banking on financial performance of. On average, the cost for carrying out transactions with mobile banking or other forms of branchless banking is 19% cheaper than charges of conventional banks. Model is now widely used in countries like brazil, colombia, ecuador, india, kenya, pakistan, peru, philippines, and south africa. Orion platform intro nbe v05 branchless banking mobile.
A direct bank sometimes called a branchless bank, virtual bank, online bank or an internetonly bank is a bank without any branch network that offers its services remotely via online banking and telephone banking or through an independent banking agent network and may also provide access via atms often through interbank network alliances, mail and mobile. Mobile money, also known as branchless banking, leverages ubiquitous cellular networks to bring muchneeded financial services to the unbanked in the developing world. Abstract as part of its global policy initiative, consultative group to assist the poor cgap partnered with the superintendence of banks, insurance and afps of peru in late 2008, with the purpose of enhancing the understanding of the issues and trends in consumer relations when financial services are delivered through branchless banking, particularly through agents, which are used in ever. Many in the private sector believe reaching large numbers of mass market clients is a precondition to largescale profits, but at the same time, they are uncertain about how quickly branchless banking will gain traction with the unbanked, lowincome clients who make up the mass market.
In terms of branchless banking, kenya is probably best known for nonbankbased models, specifically those launched by mnos. Branchless banking channels like mobile banking, internet banking, agent banking and automated teller machines in kenya are a recent innovation to increase performance as they are expected to lower operation costs. Financial sector opportunities and challenges branchless banking regional financial integration in sadc 22 november 2012 balalaika hotel, sandton gerhard coetzee head inclusive banking segment, absa, south africa director centre for inclusive banking in africa, university of pretoria. They include automated teller machine, internet banking channel, and mobile banking, electronic banking, touch tone telephone credit cards, home banking, debit cards and net. A survey of all the 42 licensed commercial banks in kenya was done. With the introduction of mobile banking and branchless banking services in kenya s financial industry, inexpensive and convenient banking services continue to be provided to the large unbanked. However, the most commonly accepted definition of e. What remains unclear is how these new methods of delivering financial services affect the performance.
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