Is Agency Banking in Kenya Still Profitable?

In this blog, we will explore the current profitability of agency banking in Kenya. We'll analyze the latest data, review the factors influencing profitability, and provide insights from industry experts and agents themselves

In this blog, we will explore the current profitability of agency banking in Kenya. We’ll analyze the latest data, review the factors influencing profitability, and provide insights from industry experts and agents themselves. Our goal is to give you a comprehensive understanding of the financial viability of agency banking today.

One of the key drivers of M-Banking’s success has been its extensive network of agents. As of 2021, there were over 247,000 M-Banking agents across Kenya, offering services such as cash deposits, withdrawals, money transfers, bill payments, and more. For many Kenyans, especially those in rural areas, M-Banking agents are their primary access point to financial services.

What makes Mbaking Agent business Profitable?

But what makes being an M-Banking agent so profitable? Let’s take a closer look in following benefits.

  • Low Startup Costs

One of the biggest advantages of starting an M-Banking agent business such as M-Pesa is the relatively low startup costs. To become an agent, you need to have a valid business permit, a mobile phone, and a float (the amount of cash you keep on hand to facilitate transactions). The amount of float required varies depending on the expected transaction volume, but even a small float of around KES 20,000 (about $200) can be sufficient to get started.

  • Steady Revenue Stream

M-Banking agents such as M-pesa owners earn a commission on every transaction they process. The commission rates vary depending on the type of transaction, but they typically range from 0.5% to 2% of the transaction amount. While the commission per transaction may seem small, the high volume of transactions can quickly add up.

  • Increased Foot Traffic

Having an equity agency banking business can also drive foot traffic to your existing business. Many customers who come to make M-Banking transactions may also purchase other goods or services from the agent’s business. This can lead to increased sales and revenue for the agent’s primary business.

  • Minimal Operating Costs

M-Banking agent businesses have relatively low operating costs compared to traditional financial institutions. Agents do not need to maintain a physical branch, hire a large staff, or invest in expensive infrastructure. The only significant costs are the rent for the business premises and the cost of maintaining a sufficient float.

  • Scalability

As your agency banking business grows, it can scale up its operations by increasing its float and expanding to multiple locations. This allows agents to handle larger transaction volumes and earn higher commissions. Some successful agents have even opened multiple branches, creating a mini-franchise model.

Where to locate your Agency banking shop in Kenya

Below is a list of the best places to locate your M-pesa Shop or Mobile banking services shop or business in Kenya

LocationJustification
Near MarketsMany people visit markets regularly to buy daily essentials. Setting up an M-Pesa shop near a market can help cater to these customers and provide them with a convenient way to manage their finances.
Near Learning institutionsSchools, colleges and universities are hubs of activity, especially during school hours. Setting up an M-Pesa shop near a school can help students and teachers access financial services easily.
Near Shopping Centers and MallsShopping centers are popular destinations for people to buy goods and services. Setting up an M-Pesa shop near a shopping center can help customers make transactions and manage their finances while shopping.
Near Public Transportation HubsPublic transportation hubs like bus stations, train stations, and airports are busy places where people often need to access financial services. Setting up an M-Pesa shop near these hubs can help cater to these customers.
Near Government OfficesGovernment offices are often busy places where people need to access financial services for official purposes. Setting up an M-Pesa shop near a government office can help provide these services. Some of the best areas are near Law courts, police stations and county government offices.
Near Healthcare FacilitiesHealthcare facilities are essential for people’s well-being. Setting up an M-Pesa shop near a healthcare facility can help patients and healthcare workers access financial services easily.
Near Sports and Entertainment VenuesSports and entertainment venues are popular destinations for people to relax and have fun. Setting up an M-Pesa shop near these venues can help customers manage their finances while enjoying these activities.
Near Food CourtsFood courts are popular destinations for people to grab a bite to eat. Setting up an M-Pesa shop near a food court can help customers make transactions and manage their finances while dining.
Near Convenience StoresConvenience stores are popular destinations for people to buy daily essentials. Setting up an M-Pesa shop near a convenience store can help customers access financial services while shopping for daily needs.
Near PharmaciesPharmacies are essential for people’s health and well-being. Setting up an M-Pesa shop near a pharmacy can help customers access financial services while buying medicines and other health products.

Which are the best Agency banking services in Kenya

There are over 20 Mobile banking services in Kenya. Some are run by commercial banks, Saccos or telco companies. If you are wondering which services to offer in your agency shop, M-Pesa is the most widely used mobile banking service in Kenya, with a significant market share of about 75.1%. Airtel Money is the second most popular, followed by Telkom Mobile Money. Equity Mobile Banking and KCB Mobile Banking have smaller market shares.

Mobile Banking ServiceNumber of SubscribersPenetration Rate
Safaricom (M-Pesa)38,000,00075.1%
Airtel Money19,387,46038.5%
Telkom (TKash)1,343,2762.7%
Equity Bank Agent Banking1,000,0002.0%
KCB Mobile Banking500,0001.0%

Best Tips to Run a Profitable Agency banking business in Kenya.

By understanding these key aspects of an M-Banking agency business, you can make informed decisions and increase your chances of success in this rapidly growing sector.

  • Commission Structure: You earn a commission on every transaction you process. The commission rates vary depending on the type of transaction but typically range from 0.5% to 2% of the transaction amount. It’s important to understand the commission structure and how it can impact your revenue.
  • Liquidity Management: Maintaining sufficient liquidity (float) is crucial for your M-Pesa business. You need to have enough cash on hand to meet customer demand for withdrawals and other transactions. Proper liquidity management is essential to avoid running out of cash or tying up too much capital.
  • Compliance and Regulations: As an M-Pesa agent, you must comply with various regulations and guidelines set by the Central Bank of Kenya and the mobile money providers. This includes adhering to know-your-customer (KYC) requirements, anti-money laundering (AML) policies, and other operational guidelines. Failure to comply can result in penalties or even the termination of your agent agreement.
  • Branding and Marketing: To attract customers and build a successful M-Pesa agency, it’s important to have a strong brand presence and engage in effective marketing strategies. Display the mobile money provider’s branding prominently, offer promotions or discounts, and engage with the local community.
  • Diversification: While M-Pesa can be a lucrative business, consider diversifying your revenue streams. Offer other financial services such as insurance, savings, or credit products to reduce your reliance on M-Pesa commissions and create a more sustainable business model.
  • Technological Considerations: Your M-Pesa business relies on technology to process transactions and manage operations. Ensure you have reliable internet connectivity, a stable power supply, and well-maintained point-of-sale devices to minimize downtime and provide a smooth customer experience.
  • Customer Service: Providing excellent customer service is crucial for your M-Pesa business. Train your staff to be friendly, knowledgeable, and responsive to customer inquiries and concerns. Ensure that transactions are processed quickly and accurately, and that customers receive clear receipts and SMS alerts for their transactions.

By following these tips, you can create a profitable and sustainable M-Banking agency shop that provides excellent services to your customers and contributes to the growth of the financial sector in Kenya.

In conclusion

However, it’s important to note that being an Mobile Banking agent also comes with some risks and challenges. Agents need to maintain a sufficient float to meet customer demand, which can tie up a significant amount of capital. There is also the risk of fraud and theft, which agents need to mitigate through proper security measures.

Despite these challenges, agency banking businesses have proven to be a lucrative opportunity for entrepreneurs in Kenya. By leveraging the growing demand for mobile financial services and the low startup costs, agents can build a profitable and scalable business. As M-Banking continues to expand its services and customer base, the potential for agent businesses to thrive will only increase.

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