How to Start a Profitable Bank Agency Business in Kenya

Overview of the Bank Agency Business in Kenya

This factsheet takes a quick look at the banking agency business. This is represented by neighbourhood 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 banking 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. Agency banking is a solution to these challenges. This has made banks invest in training and monitoring of the bank agents.

Based objective market research, 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.

The Process of Starting a Bank Agency Business in Kenya

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 to start your agency banking business 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 an agency banking business 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 setup, 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. Agency banking therefore requires an existing business.

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 of starting an agency banking business in Kenya 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 to open an agency banking business in Kenya. 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.

Requirements and Commissions for Agency Banking Business in Kenya

Factors Affecting Success

Agency banking business is affected by various factors such as:

  • Location
  • Float
  • Service
  • Variety of agencies
  • Bank which you represent

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.

Challenges Facing the Bank Agency Business in Kenya

  • 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

Capital Required to Start a Bank Agency Business

The amount of money required to start a bank agency business varies from one bank to another, but the cost is not prohibitive to many. 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.

Leave a Reply