International Journal of Science and Research (IJSR) ISSN (Online): 2319-7064 Impact Factor (2012): 3.358 Volume 3 Issue 10, October 2014 www.ijsr.net Licensed Under Creative Commons Attribution CC BY Convenience of Agency Banking on Financial Service Delivery to Rural Based Customers in Rongai-Sub County, Kenya John Kimamo Mwangi 1 , Daniel M. Wanyoike 2 1 Jomo Kenyatta University of Agriculture and Technology, School of Human Resource Development 2 Jomo Kenyatta University of Agriculture and Technology, School of Human Resource Development Abstract: Agency banking involves banks providing financial services through nonbanks such as pharmacies, retail outlets’, supermarkets, post offices. Agency banking was launched in Kenya in 2010 by the Central Bank of Kenya with intent of increasing financial access of the Kenyan populace especially those in the rural areas and low income areas. The study sought to assess the influence of agency banking convenience on financial service delivery to rural based customers’ in Kenya. The study sought to understand agency banking from the rural based customers’ point of view. The study used causal-comparative research design and questionnaires were administered to collect data. The study was conducted in Rongai Sub-County. Stratified sampling technique was used. A sample of 135 residents of Rongai Sub-County was used. Analysis of data entailed quantitative methods using Statistical Packages for Social Sciences (SPSS) performing descriptive statistics and Chi-square test. The findings of the study revealed that there exists a significant association � � ���= ���. ��, � =. ��. between convenience and financial service delivery. The study concluded that agency banking has resulted to convenience in banking by rural based customers Keywords: Convenience, Agency banking, Financial service delivery, Rural-based customers 1. Introduction Agency banking has been adopted by most banks in Kenya. A majority of the banks adopted branchless banking majorly with a view of increasing their market share and thus increase their performance but the Central bank of Kenya launched agency banking to increase financial access and improve convenience of customers especially the rural based customers and low income customers while accessing financial services. Agency banking has to go a notch higher to effectively compete with mobile money transfers which has been providing convenience to customers while transacting financial services such as bill payments, checking of account balances, money transfer and many more services and this has therefore led to banks increasing working days and hours to provide more service hours to clients so that they can access banking services at their convenience. Agency banking has as well been introduced to aid in increasing convenience in banking for customers especially for those based in rural areas as the agents operating hours are more since some agents open as early as 0:600 hours and close as late as 01:00 hours [3]. Even though there agent banks in the rural areas financial service delivery has not increased as expected and further not everyone in the rural areas has enjoyed convenience while accessing financial services as would be expected due to the large number of existing agent banks in the rural areas. This is because the model inherited various challenges which include insecurity due to the location of the agents since they lack the sophisticated security that is available in banking halls, technological and operational challenges such as systems collapsing, equipment breakdown, incompetent agents and insufficient float. 2. Theoretical Background The study was guided by two theories namely Agency Theory and Technology Acceptance Model. Agency theory is a theory that explains the relationship between principals and agents in a business or firm. The principal assigns duties to the agent and the agent performs work assigned by the principal. [1]Agency banking model allows the use of agents as proposed by agency theory. Agency theory advocates for an agency relationship where the financial institutions act as the principal and the agents act on behalf of the financial institutions. Agency banking model uses technology for its operations and thus questions are bound to be asked about the user friendliness of the technology adopted by the model hence the need to employ Technology Acceptance Model in this study. Technology Acceptance model by Davis, (1986) predicts acceptability of a tool or technology and identifies the modifications which must be brought to a system in order to make it acceptable to users. The model suggests that the acceptability of an information system is determined by two main factors: perceived usefulness and perceived ease of use. Perceived usefulness is defined as the degree to which a person believes that the use of a system will improve their performance. Perceived ease of use refers to the degree to which a person believes that the use of a system will be effortless. Perceived usefulness in relation to agency banking comes into play in the sense that it was meant to ease financial transactions by enabling customers to access financial services at their convenience making banking an enjoyable experience as queuing is eliminated and this would enhance financial service delivery to rural based customers in Kenya. Perceived ease of use for agency banking is demonstrated by the fact that the electronic device is connected to the bank and the agent guides the customer in using the device. Paper ID: OCT14765 2208