The Impact of Agency Banking Financial Innovation on Market Capitalization of Commercial Banks Listed in NSE, Kenya
Nicodemus Itivi Muthoka
Paul Munene Muiruri
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The study sought to evaluate the impact of Agency banking, a form of financial innovation, on Market capitalization of listed Commercial Banks in Kenya. In the past recent years, the Kenyan Financial sector has been experiencing a significant change. Quite a number of financial products have been made using new efficient processes. Agency banking to be specific has been very successful in propelling the performance of banks in many developing countries. In Kenya, agency banking was introduced in 2010. In spite of the great advancement and success in Agency banking in Kenya, there have been challenges facing it where security measures have not been put in place leading to it being less popular among investors. Again, agency banking has been limited as large transactions cannot be transacted on the platform. This forms the basis of this study which aims at examining the impact of Agency banking on market capitalization of the Kenyan listed commercial banks. The study targeted all the 11 NSE listed commercial banks in Kenya as at 31st December 2017 where all were sampled making it a census. Data on market capitalization and agency banking was obtained from the banks’ annual published financial statements available at NSE website and CBK quarterly reports. The data obtained was then cleaned, coded and statistical outputs generated using STATA statistical package. Descriptive and inferential analysis was employed to analyze the data where Panel data analysis was performed. The findings revealed that Agency banking innovation had a statistically significant effect on the market capitalization of the listed commercial banks in Kenya. It is therefore recommended that listed banks should embrace agency banking through increasing the number of agents and should cover all regions in Kenya and encouraged customers to be regular users of the agents so as to increase the number of transactions as this would increase the market share. A comparative study should be conducted in other countries preferably in Africa or developing nations to test for the influence and impact of Agency banking on market capitalization in commercial banks.
- Economics