How To Start An Agency Banking Business

Written by Ruth Njiri

Back in 2010, when agency banking was in its formative stages, a good number of people were skeptical about the public’s reception to the new form of banking. There were many concerns raised about the confidentiality and security of the service outlets.

Today, the public seems to have overcome their initial reservations and embraced the new banking model. The model which was initially borrowed from Brazil, is now being replicated in East African countries by Kenyan banks.

What is Agency banking?

Agency banking is the delivery of financial services to customers by a third party on behalf of a licensed bank or mobile money operator (Principal). The third parties (agents) are non-bank retail agents who rely on technology such as:

  • POS (point-of-sale) terminal
  • Mobile devices
  • Card readers.

How Do I Start the Agency Business?

If you are already running an enterprise, such as a Pharmacy, M-Pesa shop, hardware shops or retail stores you are eligible to become a banking agent. This way you can supplement your income and increase customer traffic to the core business.

So What Is Required Of You By The Bank?

The requirements are almost the same across the main Kenyan banks. They include:

  1. The banks expect you to have an enterprise that is strategically located and has the capability to serve multiple customers.
  2. The enterprise must have the required licenses and you are expected to attach copies of your PIN and business permit. In addition to this, one needs to gain the CBK (Central Bank of Kenya) license approval. It costs KES. 1,000.
  3. In order to qualify, the business should have been in operation for a minimum period of 12-18 months.
  4. You have to attach your account statements, certificate of good conduct, copy of ID, resume and two passport sized photos.
  5. You must reserve anywhere between KES. 50,000 to KES. 100,000 as initial float for the agency enterprise.

Once your application is approved, the bank will provide you with a PDQ machine and you can proceed to begin agency banking services. 

What Support Does The Bank Offer An Agent?

As you go about the agency business, the bank will support you by offering services such as:

  • Free training to you and employees who will assist in running the agency business
  • Transaction statements will be provided upon request
  • The bank gives you access to customer care services and the 24 hour help desk
  • The bank officials will regularly visit your business to check on your progress and listen to your concerns

How Do You Make Money?

Your income in the agency business will be derived solely from commissions on transactions processed through your outlet by bank customers. The commission is shared between you and the bank as defined in your revenue share agreement.

The commissions are charged on utility payments, balance inquiry, cash deposits, mini statements and many more. They are credited to your agent commission account and depending on your choice; statements will be issued monthly or after a long period.

What Are Some Of The Challenges To Expect As An Agency Banker?

Just like any other business, there are many challenges which you should be prepared to encounter. The common ones being issues related to network delays and breakdown of bank systems. Other challenges are customers requesting for services without having proper identification. Despite the challenges, many agents are doing well in the business and finding ways to overcome the challenges.

Would you try out agency banking as a business? Please comment below and let us know if this article was helpful. All the best!

Learn More:

  1. Agency Banking in Kenya
  2. Kenyans Moving to Agency Banking

About the author

Ruth Njiri