DRIVERS OF AGENT ACTIVITY:
REACTIVATING AGENTS IN
RURAL KENYA
Working with savings banks to double the number of savings accounts in the hands of the poor
April 2016
RETAIL
REGIONAL
RESPONSIBLE
Learning Paper
LEARNING PAPER
Learning paper
With case study incorporated
DRIVERS OF AGENT ACTIVITY:
REACTIVATING AGENTS IN
RURAL KENYA
Working with savings banks to double the number of savings accounts in the hands of the poor
April 2016
CONTENT
This study was commissioned by the World Savings and Retail Banking Institute (WSBI) within the framework of the WSBI program
“Working with savings banks in order to double the number of savings accounts in the hands of the poor.” This specific study
aims to share lessons learned during the program run.
Both qualitative and quantitative research was conducted in partnership with Kenya Post Office Savings Bank (KPOSB), also referred
to in this paper as Postbank. The geographic areas covered throughout 2015 were Nairobi, Rift Valley, Central, Western and
Coast Regions. With agent dormancy and inactivity being an industry-wide problem, we wanted to understand how many of
the reported agents remain active, semi-active or dormant as well as what might be reasons for inactivity.
The first section of this publication describes what matters from a strategic, management and operational point of view when
working with agents within a bank-led partnership model. The paper adds a case study on KPOSB’s journey in grasping why
agents go dormant and what needs to be done to reactivate them.
The authors would like to extend their thanks to the KPOSB management, agent banking and branch staff as well as all agents
who participated in the study. Their tireless support helped make the study possible through logistical arrangements, time, sharing
their views openly, and participating in the development of agent reactivation strategies.
Author:
Co-author:
Mbinya Mutiso
Weselina Angelow
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DRIVERS OF AGENT ACTIVITY: REACTIVATING AGENTS IN RURAL KENYA
THE STATUS OF AGENT BANKING IN KENYA
Banks and MNOs have long posited that closing the
proximity gap provides a clear means to narrowing
the financial access gap. In 2013, WSBI conducted a
proximity study to understand the relational factors of
proximity and access. The study1 used geospatial
information system data to look at how much
populations cluster together in the sort of numbers
that might make an agent outlet sustainable, and how
many customers need to be captured by the different
types of outlets to become financially sustainable at
reasonably affordable pricing.
The findings indicated that for a single teller kiosk
mainly found in urban and rural settings, the optimal
number for sustainability is 2,000 customers per
month. For a full service agent, found in a mostly
urban setting, the optimal number for sustainability is
700 customers per month. The Micro Save Kenya
ANA 2014 survey2 findings indicated that mobile
money agents posted a median 46 daily transactions
against a bank agent’s 30 daily transactions. This means
that a bank agent averaged 900 transactions a month,
or at least one transaction a day, representing 45% of
the optimal number of 2,000 for a sustainable agent.
What the strong results do not tell us is about the
elephant in the room so to speak. How many of the
reported agents are active, semi-active or dormant?
And why?
Agent dormancy and inactivity is an industry wide
problem, though it’s magnitude is not well
documented. The MicroSave ANA 2014 survey,
comprising more than 8,000 MNOs and bank agents,
indicates that while agency banking and mobile
money had been implemented fully by 2010, 61% of
the agents had been in business for a year or less,
compared to 59% in 2013. What does this tell us?
While the network is now a year older, agents do not
report more years in business. In 2014, only 58% of
agents in Kenya expected to be in the agency business
in 2015, an alarming latent churn rate. Uganda and
Tanzania reported 22% and 30% latent churn rate
respectively. High agent churn rate means a higher
number of operationally inexperienced agents,
resulting in higher downtime and transaction errors,
more customers sent away, and higher customer
dissatisfaction with the channel.
In 2015, Kenya reported in excess of 35,000 mobile
money agents and 13,500 bank agents spread across
the region. The agents transacted 50.4% of all cash
transactions, exceeding all transactions carried out at
a bank branch or by ATM. The FinAccess3 report of
2014 reported a 33% jump in financial inclusion
between 2013-2015 with 218 service points for
every 100,000 people, up from 162 outlets in 2013.
This paints a very rosy picture for agency banking
as the next financial inclusion channel.
1 WSBI Working Paper: Mapping proximity - Bringing products and services close enough to the poor to be meaningfully usable and still keep them sustainable
for WSBI partner banks, May 2013
2 Agent Network Accelerator Survey: Kenya Country Report 2014 (www.helix-institure.com)
3 Fin Access Report 2015 (www.fsdkenya.org)
LEARNING PAPER
OVERCOMING AGENT DORMANCY
Chart1: Operational issues
STRATEGY
• AGENT BANKING
• BANK
MANAGEMENT STRUCTURES
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POLICIES AND PROCEDURES
MONITORING AND SUPERVISION
COMPENSATION STRUCTURES
LIQUIDITY MANAGEMENT
PRODUCT & SERVICE
• PRICING
• MARKETING
RELATIONSHIP BUIDLING & COMMUNICATION (INTERNAL & EXTERNAL)
By 2015, the KPOSB had established 992 agents with
a 46% dormancy rate as defined in the Dormancy
Policy4. Considering the level of resources expended
towards establishment and management of the
agency banking business, the need to look into
overcoming dormancy and creating sustainable
agents became very clear. The focus of this paper will
be on the stated reasons for agent inactivity and
dormancy and approaches to overcoming agent
dormancy, with specific focus on tackling operational
issues which are institutional in nature.
Aligning agency banking strategy with bank
strategy
A mismatch between the global bank strategy and
the agent Banking strategy could well be the most
important cause of agent dormancy. When the agent
banking strategy is not seen as contributing
substantively to the bank’s performance, resources
will not be allocated in time, or in sufficient amounts
if at all. This includes funds, personnel, risk management,
policies, systems, monitoring and evaluation.
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Initial buy-in of the agent banking strategy must be
sought at all levels of the institution. If key decision
makers and staff do not understand the value add
that the agency provides, it may be perceived as a
threat. The business rationale of decongesting
branches and reducing the cost of setting up brick
and mortar may not resonate with staff who have
performance targets to achieve.
A viable business model must be developed and
performance monitored continuously to allow for
review. Evaluation of the legal and technological
environment is imperative to keep in step with
dynamic shifts that will impact on the business
model.
AGENT STATUS
DESCRIPTION
AGENT STATUS
DESCRIPTION
Active Agents
With activity within 12 months
Semi Active
No activity 12-24 months
Inactive
No activity 24-72 months
Dormant
No activity 72 months < above
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DRIVERS OF AGENT ACTIVITY: REACTIVATING AGENTS IN RURAL KENYA
As a strategic business unit, agency banking would
have specific core functions that are recognized and
have adequate resource allocation. These would include
the following;
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Business Development– scoping and recruiting
agents, marketing, and branding
Distribution – Deployment, Agent Network
Managers, and support staff
Operations – customer support, liquidity
management, business tools,
Training and onboarding agents / refresher
training, new products and services
Customer experience – feedback, issues resolution,
communication
Quality assurance and reporting – supervision,
performance management, planning
It is important to ensure that personnel incentives
are aligned across the bank, roles, responsibilities
and reporting lines clearly outlined, and performance
targets unambiguous and activity based.
Deployment model: To build own network,
partner, or outsource?
Banks have different deployment models at their
disposal when embarking into the agency business.
Between building own network, partnering, or
outsourcing, the bank must balance between the
need for speed to market, reach, cost and control.
Many banks opt for building own network, which
provides the opportunity to keep a close check on the
quality of agents recruited, but is costly, time to
market longer, and reach, less. Agent monitoring also
becomes a challenge especially where the bank does
not have enough human resource capacity or
technology to monitor agents.
A critical factor in dormancy is inadequate footprint
of the product. If the bank does not have sufficient
customer numbers, the agent will likewise suffer from
inadequate traffic, which results in low commissions,
agent apathy, and dormancy.
Relationship management & communication
Building relationships with agents is key for a successful
agent network. Fostering open, easy, affordable
communication is key to a sustainable working relationship. Agents cite the following impediments to business;
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lack of bank-wide support
inadequate communication on products and services,
inadequate / untimely communication on
changes in policy and procedures
inadequate support staff
inadequate, delayed, or lack of issue resolution
lack of feedback on issues raised
high costs of communicating with the bank
reactive practice to business issues
disconnect between agency banking staff and
branch staff resulting in support lapses
To address the challenge of relationship building,
communication and support, many banks engage
agent network managers, who provide onsite support.
Collection of feedback in a timely open fashion is key
to keeping a finger on the pulse of the agent network.
Some banks also provide 24/7 toll free lines and
contact centers for resolution of issues as and when
they arise. Staff at the contact center need to be
knowledgeable about agent banking procedures and
policy, as well as other bank products and services.
Management structures
a) Policies and procedures
Inadequate or lack of appropriate policies and
procedures is a recipe for inconsistent business. Policies
that provide guidelines on agent and bank roles and
responsibilities will go a long way in standardizing
business practice. Policies that govern float management, inactivity, errors, hours of operation, branding,
supervision, and communication are imperative in
maintaining a healthy network.
Policies should also stipulate timely sanctions for
undesired behavior, and the Banks’ risk management
team enforce compliance to policy.
It is important to establish a communication channel
that is cost, time, and reach effective.
LEARNING PAPER
b) Compensation – to pay or not to pay?
One of the biggest pain points for agents has been
the compensation structures offered by banks. Some
banks offer a tiered compensation structure pegged
on the value of transaction and others a flat rate for
all transactions. Agents have cited low commissions
as a factor in investing less money in the business.
This results in customers being turned away due to
lack of float, though agents will normally pass it
off as a business tool failure, or lack of network.
This leads to decreased traffic as the customer seeks
other agents, leading to lower commissions and,
eventually, dormancy.
The need to keep cash-in free, and small balance
cash-out priced as low as possible – particularly for
the poor – has posed a particular challenge for banks.
Increasing commissions radically also poses the
danger of making a loss on the business unless there
is a matching increase in transactions cost, which results
in reduced transactions and of customer numbers.
For the Postbank and agents to become profitable, a
keen analysis of the breakeven point is necessary,
revision of the business model, and strict management
of the agent banking overheads maintained, while
taking into consideration industry practice.
c) Agent monitoring and supervision
The deployment model selected by a bank will
determine the levels of agent network management
and roles. Agent monitoring is a crucial aspect in
performance. Agents of well-performing banks speak
of rigorous monitoring and supervision on float
management, hours of operation, downtime of
business tools, record keeping, errors and failed
transactions, customer satisfaction and general
“outlet look and feel”.
Monitoring agents should be activity and issue based,
in tandem with expected performance measures in
any given time period. This will result in faster
resolution of issues, identification of agents who are
slacking off, and also provides feedback on on-site
management by support officers.
It is therefore crucial to establish a clear monitoring,
supervision, and reporting framework that highlights
achievement of performance targets. The framework
also describes what action can be taken at every
stage of monitoring and the authorized persons to
take such action. The framework must be contained
in the agent-bank contract. It is crucial for the bank
to have adequate technological and human resource
capacity to manage agents efficiently.
d) Data analytics
An IT-based agent management system that profiles
each agent and tracks activity in real time is a highly
useful tool. Technology is becoming indispensable
to achieve real-time management of agents, quickly
resolve operational issues, and maintain agent activity.
Data can be used to provide insights into agent and
customer behavior and business trends.
e) Liquidity management
Agency banking involves exchanging e-float for cash
and vice versa. Inadequate liquidity is a key determinant
of the agent’s sustainability. Profiling of agents at
recruitment must include a positive appraisal of existing
business turnovers to establish adequacy of float.
Agents cite time taken to rebalance float and cost as
key impediments to business continuity. If the Agent
does not to travel to the Branch, they must rebalance
suing an MNO, which is expensive as it incurs
transaction costs at the MNO and the Bank end.
According to the Micro Save ANA 2014 report 77%
of all agents are located within 15 minutes of a
rebalancing point, and 91% of all agents rebalance at
a bank branch.
With the advent of technology, rebalancing must be
made as seamless as possible, with as little human
intervention as possible, and across electronic channels.
This will reduce the cost and time taken to rebalance.
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DRIVERS OF AGENT ACTIVITY: REACTIVATING AGENTS IN RURAL KENYA
WHAT THEN IS THE OPPORTUNITY
FOR AGENCY BANKING?
Agency banking still remains a viable strategy for
deepening financial access. Players must address the
agent sustainability question in order to reap returns
on investment and make banking a door step reality.
a) Rethinking the agent deployment model
A strategic deployment model that taps into the cash
economy in the rural area will prove to be a winner.
Partnering with VSLAs5 and rural co-operatives that
have proven to be instrumental in mobilizing savings
from the poor provides a valuable opportunity for
the bank to rejuvenate agent vibrancy. The VSLAs
and co-operatives act as agents, closing the proximity
and access gap at the same time.
The FinAccess survey of 2016 indicates that among all
people who use VSLAs, 56% belong to one savings
group while 41% belong to two or more groups.
This provides an avenue for increasing the number of
active accounts. The survey also shows that only 1.5%
of Kenyans use KPOSB as a savings channel while 49%
of Kenyans use VSLAs.
5 Village Savings and Loan Associations
b) “Cash-lite” economy
The Kenyan economy is largely a cash economy.
The interoperability of banks slated for 2016 is set to
drive transaction costs down, and spur the beginning
of a “cash lite” economy. Access to a broader clientele
provided by the planned bank interoperability will
create a real-time interbank mechanism for all bank
account holders in Kenya to be able to transfer money
directly to one another. Beneficiaries without a bank
account will be able to get a one-time code to transact
from licensed agents. Strategic location and reach will
be a game-changer for bank agents
Conclusion
In agent banking, it has become clear that the model
is only as good as the quality of accounts opened,
the relationship management structures in place,
and quality assurance framework. The business model
must meet a variety of needs for the agents to stay
invested. Maintaining account and agent activity is a
key component to creating sustainable agent networks.
Relationship management forms an integral part of
customer retention.
WSBI
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Published by WSBI. © April 2016