Strategic Drivers and Performance of Agency Banking In Commercial Banks in Kenya

Abstract

Agency banking has in the recent past gained momentum among many commercial banks in Kenya. This study sought to establish the influence of strategic drivers on the performance of agency banking in commercial banks in Kenya. To achieve this, the study specifically sought to determine the influence of: product innovation; information technology; human capital; financial resources and examine the moderating effect of firm size on the performance of agency banking in commercial banks in Kenya. The study reviewed previous studies done to support the research objectives from which the research gaps were extracted. Several theories were used to lay more weight on the study variables. These theories were included; diffusion theory of innovation, technology acceptance theory, resource based theory, resource dependency theory and stewardship theory of firm performance. The study used descriptive survey research design. The target population for this study was the 18 commercial banks in Kenya licensed by Central Bank of Kenya to operate agency banking. The branch managers, ICT managers, operations managers, human resource managers and customer relations managers were the key targets respondents in the study. Primary and secondary data was collected using questionnaires and checklist guide respectively. Reliability and validity tests were undertaken and data collected was analysed using SPSS version 26. Inferential analysis was carried out to establish the relationship between the independent variables and the dependent variable. The data analysed was presented in form of tables, pie-charts and bar-graphs. The study established that Product innovation had a positive significant influence on the performance of agency banking among the commercial banks in Kenya. Through introduction of new products and making improvements to the existing products as well as differentiating the products with their peers in the market, better customer attraction was achieved thus enhancing performance. Information technology was also found to have a positive significant influence in agency banking performance in commercial banks in Kenya. Those banks that ensured appropriate ICT skills, availability of ICT infrastructure and upholding training on ICT recorded more deposits through agency banking. The findings further revealed that human capital through educational level of the employees, number of personnel and the level of experience had a positive significant influence on the performance of agency banking among commercial banks in Kenya. The financial resources availed to agency banking through shareholders’ fund, liquidity ratio and value of assets also positively influenced the performance of agency banking. Firm size was found to have a moderating effect on the relationship between strategic drivers and the performance of agency banking in commercial banks. The study concluded that product innovation, information technology, human capital and financial resources were essential in steering the performance of agency banking thus recommending that the commercial banks through the management ought to uphold these strategic drivers in order to enhance the performance of agency banking.