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Agents lead transaction out of crowded Kenyan banks 

by Bedah Mengo NAIROBI (Xinhua) -- The last time Kenyan businessman Ben Musumihe went to a commercial bank to deposit money was three months ago.

All the clothes dealer does these days is to walk to his bank’s agent located some 50 meters from his stall at Mutindwa on the east of Nairobi, Kenya’s capital, and deposit the cash.

The same happens when he wants to withdraw money from his bank account as he goes to the agent, who is near than the bank’s ATM.

“I used to be a strong believer of the banking hall. I could not transact any banking business outside the bank because I felt my money must be handled by the employee of the institution for it to be safe, but things have changed,” he said.

The change of heart came when his bank welcomed agents to work from inside its branches, therefore, doing away with tellers especially for cash deposits.

“There is no need for me to visit the bank about 2 km from my business and be served by an agent yet I can get the service closer,” said Musumi.

The strategy to use agents is adopted by several major commercial banks in the East African nation to decongest their banking halls, and therefore cut costs associated with employing tellers.

While some are using agents within their premises, others are rejecting small cash deposits and directing customers to agents outside the institutions and the rest have transferred transactions to the ATMs and mobile phones.

The moves have consequently directed customer traffic off the banking halls, which at one time were once notorious for congestion.

“A chunk of our deposits are currently being transacted by agents both out and within the bank. The move to bring in the agents was deliberate to encourage customers not to come to the banking halls as they can be served by the same people wherever they are,” said Caroline Wairimu, an employee of a commercial bank

Agency banking was introduced in Kenya in May 2010 after the East African nation changed its laws to allow commercial banks to offer their services through third-party businesses.

The agents are conveniently situated at commercial outlets like chemists, eateries, supermarkets, shopping malls, post offices, petrol stations and laundry shops.

It was expected that majority of bank customers would deposit cash, withdraw and open accounts through agents.

However, until a year ago, the agents were under-utilized as Kenyans have had deep-seated belief in the brick and mortar banks.

A spot check at various commercial banks in the capital Nairobi on Thursday indicated that the financial institutions halls are these days virtually empty.

At Kenya Commercial Bank’s Moi Avenue Branch, there were a handful of customers, with those seeking to make cash deposits encouraged to do it through agents. Initially, lines at deposit counters could stretch for up to 30 meters.

At Cooperative Bank’s Haileselasie branch, three agents stationed inside the institution were serving several customers. Months ago, it was common for the bank hall to be crammed with customers, a good number of them seeking to make deposits.

The institution started working with agents in January last year in a bid to lure customers to alternative banking channels and cut costs.

“Over 70 percent of our previous branch transactions have been migrated to alternative channels including the agents, improving convenience for customers while reducing bank operation costs,” said the bank in a recent statement.

The bank noted that for branches where customers have substantially migrated, the agents have been withdrawn from the banks and transactions are now done away from the banking hall.

Agency banking has helped the financial institutions cut costs associated with permanent employees as the agents are only paid commission.

Central Bank of Kenya data indicated that as at 2016 there were at least 45,000 commercial bank agents in the East African nation, transacting more than 1.5 billion dollars.

Henry Wandera, an economics lecturer in Nairobi, noted that commercial banks in Kenya have no choice but to push customers to agents and other channels especially after the capping of interest rates to cut costs.

“Agents have helped some banks cut up to 30 percent of staff costs, the reason why banks are embracing them besides taking services to ATM and mobile. It is a big win for banks as they push customers out of banking halls. It is a matter of time before customers completely keep off banks,” he said. 

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