AGENCY BANKING STRATEGY AND PERFORMANCE OF COMMERCIAL BANKS OF TIER THREE BANKS IN KENYA

Abstract

The performance of commercial banks in Kenya has increasingly been influenced by the adoption and utilization of agency banking, which plays a pivotal role in enhancing operational efficiency, customer engagement, and overall bank performance. This study investigates the influence of agency banking on the performance of tier-three commercial banks in Kenya, focusing specifically on the number of agents, agent network coverage, transaction volume through agents, and agent performance metrics. Grounded in Resource-Based Theory, the Technology Acceptance Model (TAM), Diffusion of Innovations Theory, Bank-Led Theory, and Agency Theory, the research examines how the adoption and integration of agency banking affect key performance indicators. A descriptive research design was used, targeting all 21 tier-three commercial banks in Nairobi City County, with a sample population of 2,123 employees across senior, middle, and operational management. Primary data was collected through structured questionnaires distributed to a purposive sample of 273 employees. Data analysis was conducted using descriptive, diagnostic, and inferential statistical methods with SPSS Version 26.0. The findings revealed that agency banking significantly and positively influenced the organizational performance of tier-three banks in Kenya. The study concludes that enhancing agency banking strategies can improve the operational efficiency of these banks. Recommendations include expanding agent networks, optimizing transaction volumes, and improving agent performance metrics to maximize the potential of agency banking and ensure long-term success.