How to Start / Open A Bank Agency Business in Kenya



Bank Agency Business Plan in Kenya


Overview

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This factsheet takes a quick look at the banking agency business. This as 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 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. This has made banks invest in training and monitoring of the bank agents.

Equity was the bank that fully embraced agency banking, and its success made several others coming running, playing catch up. Nowadays all major banks offer bank agency services or its equivalents like mobile and internet banking

Equity’s success in the bank agency business is due to a number of factors which although not part of the content of this factsheet are worth mentioning. These include hands-on management of agents. Whereas some banks used agent management companies, Equity from the word go run agents from branches. This helped it closely monitor recruitment, training and even performance of the agents. Something which could not be effectively achieved through a network management company, more so because the bank created a whole department for agency management.

Equity also integrated mobile phones into their banking agents such that customers didn’t necessarily need ATMs to conduct transactions. This attracted many to the agents. And from the start Equity offered a wider variety of services through agents such as bank opening.

Other factors include aggressive marketing which created awareness among customers. If customers are not aware of the range of services they can get from agents they will not be interested in using the services. At the start Equity commissions were attractive compared to those of rivals.

And although a number of banks have now developed equally efficient models, Equity still maintains the lead in terms of number of agents.

From our interviews the 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.

 

 

 

 

Before we look at other aspects of agency banking let us look at the process, requirements and commissions of different banks.

The Process

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 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 banking 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 set up, 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.

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 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. 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.

Equity Bank

Requirements

A strategic business physical location

An existing business that has been operating for a minimum of 12 months

Business permits for the existing business

Current statements for the last 6 months

Bank or loan statements from any other institution for the past 12 months

National ID

A certificate of good conduct

Business profile

Certificate of registration of business

Credit reference bureau report

For companies and partnerships:

Articles and memorandum of association

Board resolution for partnership and companies

Audited financial records for the past 12 months for companies

Before starting the application process make sure you fulfill the above. The next step involves filling the actual agency banking application forms where you will attach all the above and two passport photos.

 

 

 

 

The bank representative will also visit your premises and fill in appraisal form basically saying what she thinks of your outlet and its ability to represent the bank in the area. This will be used by the banks to determine your suitability and grant you the agency or not.

If successful you sign a contract which details your obligations and liabilities among other things.

Among the cash that you will be required to pay are :

Kshs.1000 agency application of fee payable to the CBK.

Deposit of Kshs.100, 000 which acts as the float. You will be required to open an agency account with Equity.

Commissions

As an agent you will be paid commissions based on the value of different transactions. The commissions are as follows:

Cash Deposit

Customer Charges

Agent Commission

100 – 5000

0

10

5001 – 10000

0

15

10001 – 20000

0

20

Above 20000

0

30

 

Cash Out Withdrawal

Customer Charges

Agent Commission

 

 

 

100 – 2500

 

 

 

 

 

 

 

25

 

15

 

 

 

2501 – 5000

 

 

 

 

 

 

 

45

 

25

 

 

 

5001 – 10000

 

 

 

 

 

 

 

75

 

35

 

 

 

10001 – 20000

 

 

 

 

 

 

 

145

 

60

 

 

 

20001 – 35000

 

 

 

 

 

 

 

170

 

70

 

 

 

35001 – 50000

 

 

 

 

 

 

 

195

 

90

 

 

 

Above 50000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

220

120

Family Bank

Requirements

The starting point is a visit to the local branch of Family Bank. The checklist for Family Bank which is used in evaluating agency applications is as below.

Copy of National ID

Certificate of Good Conduct (Individuals / Partners )

Two Passport Size Photographs

Copy of PIN

CV of Business Owners

Commercial Activity For Minimum of 18 Months (Previous 2 years business permits )

Valid / Current Business Certificate

Current / Valid Business Permit

6 Months Business Statements of Account - Certified

Credit Reference Bureau

Bankers Cheque For Kshs. 1,000 IFO CBK (Renewable annually )

Agency Application Fee – Kshs.1000

Minimum working capital of Kshs.100,000

Witnessing by Commissioner of Oath ( Necessary forms from application

Permanent Structure

Turnovers for the last 6 months

Personnel dedicated for agent banking

Physical security

Nature of commercial Activity

Completed CBK application forms

 

Commissions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amount

Customer

 

Agents

Customer

Agents

 

 

 

 

Charge

 

Commission

Charge

Commission

 

 

 

 

 

 

 

 

 

 

 

100 -1000

0

 

10

25

15

 

 

 

 

 

 

 

 

 

 

 

 

1001 -2500

0

 

10

25

15

 

 

 

 

 

 

 

 

 

 

 

 

2501 -5000

0

 

10

45

25

 

 

 

 

 

 

 

 

 

 

 

 

5001- 10000

0

 

15

75

35

 

 

 

 

 

 

 

 

 

 

 

 

10001-20000

0

 

20

120

55

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

20001

-35000

 

0

 

25

150

 

70

 

 

 

 

 

 

 

 

 

35001

- 50000

 

0

 

30

180

 

80

 

 

 

 

 

 

 

 

 

50001

– 75,000

 

0

 

30

210

 

100

 

 

 

 

 

 

 

 

 

75001

-100000

 

0

 

30

255

 

120

 

 

 

 

 

 

 

 

 

 

 

 

 

Customer Charge

 

Agents Commission

 

 

 

 

 

 

 

Balance Enquiry

 

10

 

 

5

 

 

 

 

 

 

 

 

Mini Statement

 

20

 

 

10

 

 

 

 

 

 

 

Kenswitch Cash Withdrawal

75

 

 

20

 

 

 

 

 

 

 

New account opened with

0

 

 

100

 

Kshs.500 ad above

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cooperative Bank of Kenya

For Individual / Sole Proprietorship and Partnership

Copy of National ID

Two passport size photos

Copy of PIN

Certificate of Good Conduct

CV of Business Owner

Valid and Current Business Certificate

6 Months Business Statement of account

2 referees with their names, address and telephone numbers

Book of account for the last two years if available

Write up of commercial activities for the last 18 months (2 years Business Permit)

License Application fee of Kshs.1000, payable to Central Bank

For Limited Company

Copy of national IDs for each of the directors

Two passport size photos for each of the directors

Copy of PIN for the company

CVs of the directors

VAT registration if available or applicable

Certificate of incorporation

Articles and memorandum of association

Company’s resolution to carry out agent banking

Previous two years business permits

6 months business statement of account

Audited accounts for the last two years

Write up of commercial activities of the last 18 months (2 years business permit )

License application fee of Kshs.1000, payable to Central Bank of Kenya

You also have to pay Kshs.5000

 

 

 

 

Commissions

The agent gets 50% of the transaction fee charged by the bank. For instance, if a withdrawal costs Kshs. 50 the bank keeps Kshs.25 and the agent gets Kshs.25

These are the rates charged to customers. Commissions are thus 50 % of the fees. The bank also pays for deposits.

Cash Withdrawals

Amount (Kshs.)

Fees

100 -5,000

50

5,001-10,000

70

10,001-20,000

80

20,001-30,000

120

40,001-50,000

140

50,001 and above

250

Other Services

 

 

 

Service

Fees

Funds Transfer to Any Account

50

School Fees Payment

Card – Kshs.50 any amount

 

Cash – Free any amount

Bills Payment

Ksh.50 any amount

Balance Enquiry

Kshs.10

Mini Statement

Kshs.20

KCB

Requirements

Business registration certificate

Must have a deposit of 100,000/=

The business must be an existing legal entity (Company, Partnership, Sole Proprietorship)

Business registration certificate

The business must be in existence for a minimum of 18 months.

The business should be serving at least 50 customers per day

The business should have ability and willingness to deposit at least Kshs 100,000 to start off Agent Banking Services

The Outlet should be run by at least a Manager and two assistants who have attained minimum KCSE Certificate

 

 

 

 

Commissions

With KCB the bank and the agent share transaction fees equally that is 50:50. Hence if a withdrawal cost Kshs.30/=, the bank takes Kshs. 15 and the agent Kshs. 15/=.

Here are the exact figures.

Cash Withdrawals

Amount

Commissions

100 - 2500

15

2,501-5,000

25

5,001-10,000

35

10,001-20,000

60

20,001 -35,000

70

35,001-50,000

90

50,001 and above

120

Cash Deposits

 

 

 

Amount

Commissions

100- 5,000

10

5,001-10,000

15

10,001-20,000

20

20,001 and above

30

National Bank

Individual Requirements

Current business permit

Six months certified bank account statements

KRA PIN Certificates for all the signatories

2 Coloured passport size photographs for all signatories

Coloured photo of business premises

Certificate of good conduct for all signatories

CBK Form 3 – Witnesses by commissioner of oaths / Advocate (Provided by Bank)

CBK Form 4 – Witnessed by commissioner of oaths / Advocate (Provided by Bank )

The entity will open an account with National Bank

Applicable fees to facilitate approval are:

oCBK Licenses Application fee : Kshs.1,000 o POS Terminal lease fee : Kshs.5,000

 

 

 

 

Commissions

Transaction

 

Limit (Kshs.)

Tariff

Agent

Type

 

 

 

 

 

(Kshs.)

Commission

 

 

 

 

 

 

 

(Kshs.)

 

 

 

 

 

 

Deposit (including

 

100 - 20,000

 

0

20

school fees)

 

20,001-50,000

 

 

30

 

 

 

 

 

 

50,001- 100,000

 

 

40

 

 

 

 

 

 

 

 

Withdrawal

 

100

-

2,000

 

20

10

 

 

 

 

 

 

 

 

 

 

2,001

-

5,000

 

30

15

 

 

 

 

 

 

 

 

 

 

5,001 - 10,000

 

50

25

 

 

 

 

 

 

 

 

 

 

10,001 -

20,000

 

100

50

 

 

 

 

 

 

 

 

 

 

20,001

-

35,000

 

140

70

 

 

 

 

 

 

 

 

 

 

35,001

50,000

 

180

90

 

 

 

 

 

 

 

 

 

 

50,001 and above

 

250

125

 

 

 

 

 

 

 

 

Balance Enquiry

 

 

 

 

 

10

5

 

 

 

 

 

 

 

 

Mini Statement

 

 

 

 

 

20

10

 

 

 

 

 

 

 

 

 

 

 

 

Account Opening

 

NIL

150

 

 

 

 

Observations

In all cases you have to pay a CBK license application fee of Kshs.1000. This is paid to the Central Bank.

Also for all the banks you pay Kshs.5000 to lease a POS terminal. You renew the lease annually.

The duration between application and approval varies from bank to bank and case to case but will range between a month and three months. In some cases it can take up to six months.

At the end of the day the bank are looking for trustworthy individuals to run the agencies to protect itself and the reputation of the banks. They want someone responsible enough to handle cash, keep records and offer great customer service. That’s the purpose of some requirements like Credit Reference Bureau report and certificate of good conduct.

They also want to maximize the revenue of the agents so that the agency remains a worthwhile investment, otherwise if the business is too crowded in one area monthly commissions go down and agents are demoralized.

Factors Affecting Success

Location

Float

Service

Variety of agencies

Bank which you represent

Banks and Agents

For the banks the main activities with regards to bank agencies are:

Recruitment

Training

Branding

Liquidity Management

Operations , Support and Monitoring

These processes are run through the bank branches or regional offices. The bank is the first point of contact for those who want to become agents. Almost all banks will have an agency manager, supervisor or equivalent at the branch level. Different banks will have different

 

 

 

 

models. For some banks a supervisor is in charge of a specific number of agents say 40 - 50 like in the case of Equity Bank. For others operations are run from a regional office.

When the banking agency regulations were first developed agents were required to only represent one bank. However that changed when the CBK allowed agents to represent up to five different networks or mobile money operators. Indeed once you get the agency of one bank; it’s a validation of sorts and makes getting that of another bank easier.

Like we stated banks recruit agents either through their own staff who approach potential agents or through businesses approaching banks and offering to become agents. In the former case a bank could identify a high traffic business say a supermarket or big retail shop and seek to capture its customers.

The bank could also observe there are no agents in a certain area and the nearest branch a distance way or overwhelmed and seek to entice business to with the agent business opportunity. In either case you have to meet the requirements as set by the law and the bank.

Once you have started operations the bank will keep monitoring your performance; this in terms of the service you offer, whether you are able to sell services other than withdrawal and deposits, whether you have enough float and any other such factors. Specifics vary from bank to bank, and in some cases branches will set some specific targets for the agents.

You should also remember it’s possible for your agency contract to be terminated for breach of contract. Such breach of contracts could include poor liquidity that is lack of float, poor customer service or even at times not meeting some goals.

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.

Among the frustrations faced by bank agents are:

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

A Quick Note on Capital

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.

Download Bank Agency Business Plan (Kenya) PDF➥