EFFECT OF AGENCY BANKING ON PERFORMANCE OF COMMERCIAL BANKS

Abstract

Agency banking is the vital means in banking industry for Banks to serve their customers at lowest costs with efficient and effectiveness. Agency banking is a type of branchless banking that allows the traditional banks to extend their network of branches and services in a cost-efficient manner through authorized agents. This has investigated the effect of agency banking on performance of Commercial Banks using National Microfinance Bank (NMB) – ARUSHA as a case study. Simple random sampling method was used to select respondents. Data was collected by use of questionnaires and the data analysed by the aid of Statistical Package of Social Scientists Program version 25. The findings show that low transaction cost has significant relationship with Commercial Banks performance with a coefficient of 0.411 this means 41% of correspondents agreed that low transaction cost has positive impacts to commercial banks performance. Also, financial services accessibility has a significant relationship with Commercial Banks performance with a coefficient of 0.677 this validates that 68% of correspondents in field agreed that financial services accessibility has positive effect towards the performance of commercial banks. On top of that Level of deposits volume also has a significant relationship Commercial Banks performance with a coefficient of 0.661 and this assures that there is positive relationship between level of deposit volume and performance of commercial banks by 67%. Generally, the study recommended that; commercial banks should fully embrace agency banking since it plays a greater position in increasing performance of Banks but also it reduced costs the fact that will increase profit to the company. Since there is using of technology in agency banking service deliverance so Banks must adopt improved technology for information security volume of to make it more reliable to the customers. Also, this study recommended that financial education should be provided to help customers understanding the operations of agents and assure the security of their money since it will lead into increasing performance of Agency banking the fact will leads into increase of Bank’s performance.