lets take a quick look at the banking agency business. This as represented by neighborhood businesses offering services on behalf of banks and in return are paid by a commission. Such services include withdrawals, deposits, account opening, checking among others.
Banks started offering agency services in 2010 when the CBK issued the Kenya Guideline on Agent Banking. Whereas banks initially used agency services as a way of ‘branch expansion’ and reaching as many consumers as possible, nowadays agents banking is also about cutting the costs of the banks.
Banks want to push consumers away from banking halls which are more expensive to run than the agents. This means that banks want to have customers enjoy a similar if better or more convenient experience than they do in the banking halls. This has made banks invest in training and monitoring of the bank agents.
Equity was the bank that fully embraced agency banking, and its success made several others coming running, playing catch up. Nowadays all major banks offer bank agency services or its equivalents like mobile and internet banking
Equity’s success in the bank agency business is due to a number of factors which although not part of the content of this factsheet are worth mentioning. These include hands-on management of agents. Whereas some banks used agent management companies, Equity from the word go run agents from branches. This helped it closely monitor recruitment, training and even performance of the agents. Something which could not be effectively achieved through a network management company, more so because the bank created a whole department for agency management.
Equity also integrated mobile phones into their banking agents such that customers didn’t necessarily need ATMs to conduct transactions. This attracted many to the agents. And from the start Equity offered a wider variety of services through agents such as bank opening.
Other factors include aggressive marketing which created awareness among customers. If customers are not aware of the range of services they can get from agents they will not be interested in using the services. At the start Equity commissions were attractive compared to those of rivals.
And although a number of banks have now developed equally efficient models, Equity still maintains the lead in terms of number of agents.
From our interviews the preferred banks for agency business are Equity, Cooperative, Family and KCB. Preference is in terms of the number of customers they have, the demographics of the customers and the support in terms of marketing.
Before we look at other aspects of agency banking let us look at the process, requirements and commissions of different banks.
The exact process of applying and being granted a bank agency will vary from bank to bank.
That said all banks follow a common general template which we detail here.
The first step will involve you visiting the nearest branch of the bank of which you want to become an agent. You will be told of the agency requirements. The information will be provided by customer service representatives or whoever is in charge of the banking agency within the branch. It’s advisable to visit the branch nearest to the location you want to set up.
Secondly have a look at the requirements and conditions (we have listed them in the next section). If you fulfill the basic of them like say having a business which has run for the last 12 months get all the required documents. You will need to apply for some of them from respective institutions. For instance where a bank requires a certificate of good conduct you will need to apply for it from the CID headquarters. Where a credit report is required you will need to apply from a Credit Reference Bureau such as Metroplol and so forth.
(Some bank agency department staff will advise you beforehand if you meet the requirements and there is banking opportunity in your location. For some you have to go through the process to the end. When in doubt ask. )
Once you have all the documents and information ready you can now fill the necessary forms as provided by the bank.
On filling and returning the forms a bank agency representative will visit your premises so as to appraise it. Among the factors that they consider are the location of your business, the set up, how secure it is, the kind of foot traffic you are likely to attract , what other businesses are there in the area, are there ‘enough’ banks agents in the area and such other factors. The agency representative will make a report which will then determine whether you are granted the agency or not.
If positive and you fulfill all the required conditions, paying the required fees then you are presented with the necessary material to start the agency services. These will include a POS, books to record transactions, branding materials among others.
This is a general template; particulars could vary. For instance, in some cases bank representatives will approach a business selling the idea of becoming an agent.
The ease of the process also tends to vary from bank to bank and branch to branch. In some banks staff are not very helpful and agency representatives not easy to locate as they are mostly in the field. You have to make lots of effort to reach them. While in other the process is easier and friendly.
The reality is that whereas banks have laid down procedures and processes they are not always followed to the letter.
Requirements and Commissions
Although specific requirements vary slightly from bank to bank they are generally the same. This is because the requirements have been developed by the Central Bank of Kenya in conjunction with the banks.
Let us look at requirements and agent commissions of specific banks. Please note these are the official requirements. Some banks will be a little flexible and not necessarily follow the requirements to the letter. For planning purposes use the following requirements as a guide.
- A strategic business physical location
- An existing business that has been operating for a minimum of 12 months
- Business permits for the existing business
- Current statements for the last 6 months
- Bank or loan statements from any other institution for the past 12 months
- National ID
- A certificate of good conduct
- Business profile
- Certificate of registration of business
- Credit reference bureau report
- For companies and partnerships:
- Articles and memorandum of association
- Board resolution for partnership and companies
- Audited financial records for the past 12 months for companies
Before starting the application process make sure you fulfill the above. The next step involves filling the actual agency banking application forms where you will attach all the above and two passport photos.
The bank representative will also visit your premises and fill in appraisal form basically saying what she thinks of your outlet and its ability to represent the bank in the area. This will be used by the banks to determine your suitability and grant you the agency or not.
If successful you sign a contract which details your obligations and liabilities among other things.
- Among the cash that you will be required to pay are :
- Kshs.1000 agency application of fee payable to the CBK.
- Deposit of Kshs.100, 000 which acts as the float. You will be required to open an agency account with Equity.
As an agent you will be paid commissions based on the value of different transactions. The commissions are as follows:
|Cash Deposit||Customer Charges||Agent Commission|
|100 – 5000||0||10|
|5001 – 10000||0||15|
|10001 – 20000||0||20|
|Cash Out Withdrawal||Customer Charges||Agent Commission|
|100 – 2500|
|2501 – 5000|
|5001 – 10000|
|10001 – 20000|
|20001 – 35000|
|35001 – 50000|
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The starting point is a visit to the local branch of Family Bank. The checklist for Family Bank which is used in evaluating agency applications is as below.
- Copy of National ID
- Certificate of Good Conduct (Individuals / Partners )
- Two Passport Size Photographs
- Copy of PIN
- CV of Business Owners
- Commercial Activity For Minimum of 18 Months (Previous 2 years business permits )
- Valid / Current Business Certificate
- Current / Valid Business Permit
- 6 Months Business Statements of Account – Certified
- Credit Reference Bureau
- Bankers Cheque For Kshs. 1,000 IFO CBK (Renewable annually )
- Agency Application Fee – Kshs.1000
- Minimum working capital of Kshs.100,000
- Witnessing by Commissioner of Oath ( Necessary forms from application
- Permanent Structure
- Turnovers for the last 6 months
- Personnel dedicated for agent banking
- Physical security
- Nature of commercial Activity
- Completed CBK application forms
|Customer Charge||Agents Commission|
|Kenswitch Cash Withdrawal||75||20|
|New account opened with||0||100|
|Kshs.500 ad above|
Cooperative Bank of Kenya
For Individual / Sole Proprietorship and Partnership
- Copy of National ID
- Two passport size photos
- Copy of PIN
- Certificate of Good Conduct
- CV of Business Owner
- Valid and Current Business Certificate
- 6 Months Business Statement of account
- 2 referees with their names, address and telephone numbers
- Book of account for the last two years if available
- Write up of commercial activities for the last 18 months (2 years Business Permit)
- License Application fee of Kshs.1000, payable to Central Bank
For Limited Company
- Copy of national IDs for each of the directors
- Two passport size photos for each of the directors
- Copy of PIN for the company
- CVs of the directors
- VAT registration if available or applicable
- Certificate of incorporation
- Articles and memorandum of association
- Company’s resolution to carry out agent banking
- Previous two years business permits
- 6 months business statement of account
- Audited accounts for the last two years
- Write up of commercial activities of the last 18 months (2 years business permit )
- License application fee of Kshs.1000, payable to Central Bank of Kenya
- You also have to pay Kshs.5000
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The agent gets 50% of the transaction fee charged by the bank. For instance, if a withdrawal costs Kshs. 50 the bank keeps Kshs.25 and the agent gets Kshs.25
These are the rates charged to customers. Commissions are thus 50 % of the fees. The bank also pays for deposits.
|50,001 and above||250|
|Funds Transfer to Any Account||50|
|School Fees Payment||Card – Kshs.50 any amount|
|Cash – Free any amount|
|Bills Payment||Ksh.50 any amount|
- Business registration certificate
- Must have a deposit of 100,000/=
- The business must be an existing legal entity (Company, Partnership, Sole Proprietorship)
- Business registration certificate
- The business must be in existence for a minimum of 18 months.
- The business should be serving at least 50 customers per day
- The business should have ability and willingness to deposit at least Kshs 100,000 to start off Agent Banking Services
- The Outlet should be run by at least a Manager and two assistants who have attained minimum KCSE Certificate
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With KCB the bank and the agent share transaction fees equally that is 50:50. Hence if a withdrawal cost Kshs.30/=, the bank takes Kshs. 15 and the agent Kshs. 15/=.
Here are the exact figures.
|100 – 2500||15|
|50,001 and above||120|
|20,001 and above||30|
- Current business permit
- Six months certified bank account statements
- KRA PIN Certificates for all the signatories
- 2 Coloured passport size photographs for all signatories
- Coloured photo of business premises
- Certificate of good conduct for all signatories
- CBK Form 3 – Witnesses by commissioner of oaths / Advocate (Provided by Bank)
- CBK Form 4 – Witnessed by commissioner of oaths / Advocate (Provided by Bank )
- The entity will open an account with National Bank
- Applicable fees to facilitate approval are:
- CBK Licenses Application fee : Kshs.1,000 o POS Terminal lease fee : Kshs.5,000
|Deposit (including||100 – 20,000||0||20|
|5,001 – 10,000||50||25|
|50,001 and above||250||125|
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- In all cases you have to pay a CBK license application fee of Kshs.1000. This is paid to the Central Bank.
- Also for all the banks you pay Kshs.5000 to lease a POS terminal. You renew the lease annually.
- The duration between application and approval varies from bank to bank and case to case but will range between a month and three months. In some cases it can take up to six months.
- At the end of the day the bank are looking for trustworthy individuals to run the agencies to protect itself and the reputation of the banks. They want someone responsible enough to handle cash, keep records and offer great customer service. That’s the purpose of some requirements like Credit Reference Bureau report and certificate of good conduct.
- They also want to maximize the revenue of the agents so that the agency remains a worthwhile investment, otherwise if the business is too crowded in one area monthly commissions go down and agents are demoralized.
Factors Affecting Success
- Variety of agencies
- Bank which you represent
Banks and Agents
For the banks the main activities with regards to bank agencies are:
- Liquidity Management
- Operations , Support and Monitoring
These processes are run through the bank branches or regional offices. The bank is the first point of contact for those who want to become agents. Almost all banks will have an agency manager, supervisor or equivalent at the branch level. Different banks will have different
models. For some banks a supervisor is in charge of a specific number of agents say 40 – 50 like in the case of Equity Bank. For others operations are run from a regional office.
When the banking agency regulations were first developed agents were required to only represent one bank. However that changed when the CBK allowed agents to represent up to five different networks or mobile money operators. Indeed once you get the agency of one bank; it’s a validation of sorts and makes getting that of another bank easier.
Like we stated banks recruit agents either through their own staff who approach potential agents or through businesses approaching banks and offering to become agents. In the former case a bank could identify a high traffic business say a supermarket or big retail shop and seek to capture its customers.
The bank could also observe there are no agents in a certain area and the nearest branch a distance way or overwhelmed and seek to entice business to with the agent business opportunity. In either case you have to meet the requirements as set by the law and the bank.
Once you have started operations the bank will keep monitoring your performance; this in terms of the service you offer, whether you are able to sell services other than withdrawal and deposits, whether you have enough float and any other such factors. Specifics vary from bank to bank, and in some cases branches will set some specific targets for the agents.
You should also remember it’s possible for your agency contract to be terminated for breach of contract. Such breach of contracts could include poor liquidity that is lack of float, poor customer service or even at times not meeting some goals.
Bank agency business is about maximizing space for those with an already existing business. This is by earning extra income through commissions. An agency business also helps attract foot traffic to your business helping you sell other products. For a new business it’s about having a new source of revenue.
An agency business will not succeed if you are in a location with low foot traffic or high foot traffic but of the wrong kind, not made of customers who can .Foot traffic could be virtue of a not easily visible and accessible location or insecurity which makes customers keep away.
Among the frustrations faced by bank agents are:
- Low float
- Low commissions in areas with high competition, low foot traffic, or banks which are not popular
- Downtimes that make some services unavailability
- Delays in payment of commissions among some banks
- Bureaucracy in reconciling among some banks
- Poor support among some banks
A Quick Note on Capital
At the very minimum for each bank for which you are an agent you require a minimum capital of at least Kshs.125, 000 which can be broken down as follows:
Float – Kshs.100, 000
POS – Kshs.5000
CBK Agency Application Fee – Kshs.1000
Other Fees – Certificate of Good Conduct, CRB Report, Commissioner of oaths etc, bank statements etc – Kshs.10, 000
Miscellaneous including branding – Kshs.10, 000
Of course this is assuming you are a business which is already running and you don’t require any licenses. If you are setting a new business from your present location then you will require to pay for licenses.
This means if you want to represent four banks you must at least have Kshs. 450,000.