| dc.description.abstract | Commercial banks authorized for commercial purpose are the super focal empowering
the economy. Therefore, the performance of agency banking stabilizes the
commitment of banks to the country's economic development. However, the financial
performance of commercials banks in Kenya was noted to decline in 2023 partly
caused by decreased agency banking transactions from Kshs 158.4 million to Kshs
145.3 million in 2022 and 2023 respectively. The purpose of the study was therefore
to examine the effect of agency banking on the financial performance of commercial
banks in Isiolo County, Kenya. The specific objectives were to explore the effect of
agency convenience, agency cost, quality of agent services, and agency compliance on
financial performance of commercial banks in Isiolo County, Kenya. The study was
guided by diffusion of innovation theory, transaction cost economics theory, network
effects theory and principal-agent theory. A mixed designs comprising descriptive,
qualitative and quantitative were used, targeting Cooperative Bank, KCB, and Equity
Bank, which control over 90% of authorized banking agents in the region. The target
population included 102 staff in Equity bank, 123 staff in Cooperative bank, and 80
staff in KCB bank, which was a total of 305 banks. The study adopted the Yamane’s
formula (1967) to result to a sample size of 58 staff in Equity bank, 70 staff in
Cooperative bank, and 45 staff in KCB bank, which was a total of 173 staff. Stratified
sampling was applied to select respondents from the finance and accounts departments
of these banks. Data were collected via structured questionnaires and supplemented
with secondary financial data. The pilot research used a sample size of 10% for this
investigation, with 17 respondents randomly selected to fill out the survey in Meru
County. To ensure the data was reliable, Cronbach's alpha was applied, which
measures internal consistency. The questionnaires included in this study underwent a
validation process to guarantee their content and face validity, as well as to gauge their
overall quality. The results were presented using Tables and explanations. The study
found out that the correlation for agency cost was r = 0.751, p < 0.01; correlation for
agency cost was r = 0.702, p < 0.01; correlation for quality of agent services was r =
0.655, p < 0.01; and correlation for agency compliance was r = 0.774, p < 0.01 with
financial performance. Therefore, the conclusion on agency convenience some of the
agency banking services were noted not to be user friendly which hampered a lot of
the clients from subscribing to them. On the agency costs, the operational costs
associated to installation and maintenance of IT, compliance with banking regulations
and staffing the agencies to suit the needs of the bank were high. On the quality of
agent services, the study noted that most of agency banking had average standards to
low standards as compared to what the branch banking was offering. On regulatory
compliance, conclude that it stood out as the most critical factor influencing financial
performance. The study’s recommendations on agency convenience are that bank
managers should prioritize the convenience of agency services. This can be achieved
by expanding the network of agents to ensure that services are accessible anywhere.
On agency cost are that operations supervisors should consider focusing on
implementing more efficient operational processes. On quality of agent services are
that the senior management should develop a policy structure that ensures ongoing
training programs for agents to equip them with exceptional service skills. On
adherence to agency compliance are that the branch managers should foster a culture
of compliance within the organization, emphasizing the importance of ethical practices
and regular training on regulatory updates. | en_US |
