Agency Banking and Accessibility to Financial Services of Commercial Banks in the Northern Province of Rwanda

1David Nyambane and 2Munyengabe Albert

1Faculty of Business and Management, Kampala International University, Western Campus, Uganda.

2Faculty of Business Administration (Finance and Accounting) of Mount Kenya University Kenya.


This research project was on assessing the effects of agency banking on accessibility to financial services in commercial banks in the Northern Province of Rwanda. The study adopted a descriptive research design. The population was 555 agents under which sample size was 233 people found using the Yamae formula. The study used a stratified and simple random sampling method. Also, different research instruments of data collection were used which include: journals, articles, document analysis and questionnaires. The reliability of the study was tested by carrying out pilot research and found that Cronbach’s Alpha of .831. The data was analyzed using SPSS version 21 and data was presented using tables, percentages, means, and standard deviations. To analyze the relationship between two variables, Pearson Chi-Square and Pearson correlation were used to come up with comprehensive results. It was clear from the study that strategic responses to the implementation of agency banking as a competitive strategy in enhancing customers’ access to financial services included the provision of high-quality customer service, enhancing the operational structure and improving the brand image. The study established that operational structure, brand image and financial services awareness among the rural population are positively correlated (r = 0.805) with access to financial services. Access to financial services was greatly enhanced by strategically increasing the proximity of agency banking services, increasing the number of services that could be offered through agency banking and increasing awareness among the population on financial services available at agency banking outlets.

Keywords: Agency banking, Financial Services, Commercial banks, Customers, Rural population.


Agency banking is one in which banks provide financial services through nonbank agents, such as grocery stores, retail outlets, post offices, pharmacies, or lottery outlets. Agency banking takes customers out of the bank halls to kiosks and villages. Investors have pumped billions into new platforms that offer agency banking services. This model allows banks to expand services into areas where they do not have sufficient capacity to establish a formal branch, which is particularly true in rural and poor areas where as a result a high percentage of people are unbanked. Agency banking is quickly becoming recognized as a viable strategy in many countries for extending formal financial services into poor and rural areas in that agency banking enables clients to store, send and receive electronic money through local agents, rather than travelling to the nearest bank branch [1]. Agency banking has been adopted and implemented with varying degrees of success by several developing countries, particularly in Latin America. Brazil is often recognized as a global pioneer in this area since it was an early adopter of the model and over the years has developed a mature network of agency banks covering more than 99% of the country’s municipalities. Other countries in Latin America have followed suit, including Mexico, Peru, Colombia, Ecuador, Venezuela, Argentina and Bolivia [2]. In Africa and Asia continents, the countries that have utilized the agency banking model to expand financial services include Pakistan, the Philippines, Kenya, South Africa, Uganda, and India. The regulation, design, and implementation of agency banking vary across countries [3]. The partnership has helped banks to take financial services closer to people and, more importantly, to areas that lack them. Kenya being the pioneer of agency banking in Africa changed its banking laws in January 2010, to allow commercial banks to offer their services through third-party businesses. The agents operate as satellite branches. The banking concept that is deepening access to financial services is gaining currency in Kenya, where one-third of the population still lacks access to formal banking services [4]. In Rwanda, agency banking was introduced in 2012, with Equity Bank being the pioneer. Other banks such as KCB, BK, and COGE Bank have followed suit. These banks have embarked on an important reform to expand banking services to millions of poor households by enabling third-party retail agents as a low-cost distribution alternative to branches. These agents are increasingly utilized as important distribution channels for financial institutions. Banking agents are usually equipped with a combination of POS card readers, mobile phones, barcode scanners to scan bills for bill payment transactions, PIN pads, and sometimes PCs that connect with the bank’s server using personal dial-up or other data connection [5]. Clients that transact at the agent use a magnetic stripe bank card or their mobile phone to access their bank account. Identification of customers is normally done through a PIN, but could also involve biometrics. About the transaction verification, authorization, and settlement platform, banking agents are similar to any other remote bank channel. By December 2015, Equity Bank Rwanda had a total of 1016 agents in operation [6]. Agency banking minimizes fixed costs by leveraging existing retail outlets and stores hence financial service providers do not need to invest in their physical infrastructure also by using mobile phones rather than POS terminals as technology platforms, financial service providers do not even have to incur equipment costs, for each new retail outlet opened. Such a variable cost structure makes the agent’s economics very simple [7].

Agency banking has become one of the essential services in the banking sector in bringing their services closer to the people who are in remote areas where brick-and-mortar branches are not present. To move closer and access many customers, commercial banks started to allow other commercial outlets like shops and supermarkets to act in their capacity as formal banks and this was formally launched by the National Bank of Rwanda about five years ago. According to [8], there will be significant growth in retail deposits amongst commercial banks that have embraced agency banking. [9] conducted a study on the effects of agency banking on access to financial services in commercial banks in Kenya, the study found that agency banking should be given attention to security measures. A few studies have been conducted on the impact of agency banking on the financial services of commercial banks in Rwanda. [10] studied the effect of agency banking on financial inclusion in Kenya. They established that customers with large transactions are unlikely to transact with bank agents because of security risks. Other studies that have been conducted have mainly focused on the impact of agency banking on the operational performance of commercial banks. The few studies on the impact of agency banking on accessibility to financial services in commercial banks in Rwanda that have been conducted targeted individual banks and were carried out before many commercial banks embraced agency banking. Unlike the past, today it is common to find one agent providing services of at least three commercial banks at the same outlet.  The current study therefore seeks to bridge the gap between what has been previously studied by other researchers by carrying out research on the effects of agency banking on accessibility to financial services in commercial banks in Rwanda. Although customers have benefited a lot through agency banking, it is not clear whether the financial services of commercial banks have improved or not as a result of adopting agency banking. This study will attempt to answer the following research question: What are the effects of agency banking on accessibility to financial services in commercial banks in Rwanda?


In line with the first objective of the study which sought to determine the effect of operational structure on accessibility to financial services, the study revealed that good operational structure is a major contributor to customer’s access to financial services. The banks do understand the application of good operation structure in agency banking, in its business operations. This corresponds with [21] since the study found that good operational structure in agency banking very great extent influences banks’ international business operations. Secondly, the study concludes that there is a positive relationship between bill payments and access to financial services. Advances in innovation that have brought about the adoption of telco-money transfer services and the extensive introduction and penetration of point-of-sale devices have encouraged many service providers and businesses to adopt cashless payments. Due to the convenience associated with cashless payments that save bank clients’ time associated with queuing to make payments of some bills such as electricity and water bills as well as the general security related to cashless transactions, many people have adopted such kinds of payments whose imperatives include operating a bank account. Thus, with such kinds of services as payment of bills, financial inclusion among the rural poor has been enhanced. The study further concludes that financial services accessibility by customers through banking agencies had a positive impact on the financial performance of commercial banks in Rwanda with many of the banking institutions indicating that agency banking had made it easier for them to reach out to many potential clients without investing so much in opening branches hence it’s a cost-effective measure. Finally, the study concluded that financial services awareness positively influences access to financial services. When people are aware of the available services, are provided with more accurate and up-to-date information on new developments in the agency banking segment and know where to get the services, their access to financial services increases thus enhancing financial inclusion.


Commercial banks should ride on the successes made in agency banking to scale up access to financial services hence financial inclusion by opening up more outlet networks to considerably reduce the distances covered by the rural poor. Better geographic outreach can remove distance as a barrier to financial access for both the bank and the client, thus allowing banks to be more responsive and less intimidating to their deposit customers. This should be augmented by allowing the agents to perform other services such as a collection of cheques to enhance financial access and inclusion. Secondly, the study recommends improvement of the brand image of all agent banks operating in the retail market. The study further recommends that information and awareness should be put in public to build confidence and trust in agency banking as a secure, efficient and modern way of banking. Riding on the positive influence of customer’s access to financial services, commercial banks and other financial institutions should make careful efforts to institutionalize customer education programs that will raise awareness among not only existing clients but also potential customers. This has the potential to increase take-up of financial services thus benefiting both the client and the financial institution.

Suggestions for further studies

The study relied on self-reported data mainly from the commercial bank perspective alone and used a single industry setting. Further research could seek to address this limitation by using multiple industry settings such as telecommunication companies to conduct their studies and this would enhance the validity and generalization of the research findings.

Although the bank agents were fit to give reliable data, there is a possibility that the information from these agents was not the only source of information about agency banking and accessibility to financial services. It may be vital to use both information from the bank managers and compare it with the views of the other stakeholders like the competitors and suppliers. Possibilities of exaggerated results from self-reported data may also exist where secondary data is not available for further validation. To handle this limitation, future research can combine the views of managers, customers, suppliers, competitors and other relevant organization stakeholders.


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CITE AS: David Nyambane and Munyengabe Albert (2023). Agency Banking and Accessibility to Financial Services of Commercial Banks in the Northern Province of Rwanda. INOSR HUMANITIES AND SOCIAL SCIENCES 9(2): 66-85.