Although agent banking has been common in Kenya in the recent past, its success factors have not been studied in depth as the industry is still young. As such, this study aims to investigate the factors determining the performance of Bank-Led Agent Bank Business in Kenya. The specific objectives include determining the extent to which financial factors, operational factors and management factors affect the performance of bank-led agent banking businesses in Kenya. This was an exploratory study in design and targeted all the bank agents operating within the rural areas and major towns of Kiambu County of Kenya. A stratified sampling method and structured questionnaire were used to select the sample and collect data respectively. Both descriptive and inferential statistics were used to analyse the data.
The findings show that the performance of agent banking business measured by profits was good; investors in the business did not think of quitting because of the promising nature of the business. Insecurity (robbery/theft were the main reasons for quitting). Amongst the recurrent expenses affecting profits of agent banking businesses include electricity bill and a monthly rent bills. Onetime costs include the cost of acquiring a transaction device and contingency costs. Availability of capital is an extremely important financial factor that affects the performance of agent banking business (p<0.05). There is a positive statistically significant relationship between the number of employees and profits made by an agent banking business (p<0.05). There is a positive slightly statistically significant relationship between the capability to manage business finances and the profits of agent banking businesses (p<0.05).The management of core business had an insignificant relationship to the performance of agent banking business (p>0.05).
The study concludes that agent banking considerably increases the number of customers frequenting a store. The performance of agent banking in Kenya is significantly determined by mobile network coverage and security of agent banking environment. The ability of an agent manager/owner to borrow funds is an extremely important determinant of the agent’s performance while management of core business, capability to manage business finances, and business management capability were important factors to the performance of agent banking. Availability of adequate capital and having adequate number of employees significantly enhances the profits agent banking businesses make. The capability to manage business finances slightly affects the profits of agent banking while the manner of management of core businesses of agent banking in Kenya does not influence profits. The study proposes similar studies in different geographical areas be conducted to eliminate generalisation biases arising from region-specific variables.