Agent Banking As a Diversification Strategy: Case of Kenya Commercial Bank

A Research Project Report Submitted to the School of Business in Partial Fulfillment of the Requirement for the Degree of Masters in Business Administration (MBA)The study sought to determine and explain the extent to which Kenya Commercial Bank has been able to adopt agent banking as a diversification strategy. To achieve this purpose the study was guided by the following research questions. What are the factors that influence agent banking as a diversification strategy? Has KCB drawn competitive advantage from its agent banking business? Is agent banking sustainable and consistent with KCB’s future plans? Reviewed literature revealed that over a long period in the past diversification has been a game changer for many businesses and institutions when it came to the reduction of risks and increasing revenue bases. The reviewed literature pointed out big renowned corporations in the world today which have succeeded as a result of embracing diversification. It also captured those that have tumbled due to failure to innovate and diversify accordingly. As a follow up to the literature review’s outcome, the research study went ahead to find the empirical evidence to support or refute the findings of the literature study. The researcher utilized a descriptive study design in the explanation of the phenomena and characteristics about the subject population, who in this study comprised of bank staff and the bank’s appointed agents. The descriptive study was deemed to be appropriate in discovering and measuring the relationships among the variables deduced from the feedback presented by the respondents in the respective questionnaires administered to them. The total population of the study was 200, with each group having 100 respondents each. The study was carried out within Nairobi CBD especially towards the downtown where Agent banking is a thriving business. This was done within the months of September and October 2015. The data collected was analyzed with the use of inferential and descriptive statistics aided by computer software and the final research document submitted as per the set dates. The empirical evidence from the study revealed enormous contributions that agent banking had made to improve service delivery to the bank’s customers. The study revealed that the bank had sought to diversify to this line of business as a way to ensure excellent service delivery to its large population of customers. The bank established this line of business to bring on board the small scale business people found in the informal city addresses. In doing so the bank established a mutually beneficial relationship with the appointed agents as it saw them increase their customer numbers and also their earnings from the commission paid to them by the bank. The study went ahead to reveal that from the new line of business the bank had been able to cultivate competitive advantage by attracting more customers and improving on customer satisfaction. The bank’s strategy as revealed by the study was greatly embraced by the appointed agents who are among the key stakeholders as they co-own the business with the bank. From the study it was revealed that the strategy was very consistent with bank’s ambitions and safely in the long run. The benefits of agent banking were seen in all aspects of increasing revenues, financial inclusion, market penetration and customer loyalty. All of which are cornerstones to successful business. The study concluded that KCB had been able to tap into the abundant human resources in the many educated but unemployed Kenyans and that the strategy was consistent and sustainable accordingly. Finally the study recommended further support and facilitation of agent banking by the bank to overcome the few challenges associated with it to reap maximum benefits