The Central Bank of Kenya (CBK) has passed a law allowing banks, deposit-taking microfinance institutions (MFIs) and mortgage finance companies to open branches through third parties, or agency banks. “Banks will be able to leverage on additional cost effective distribution channels to offer financial services,” said CBK Governor Professor Njuguna Ndungu. Prior to this law, banks were required to have a physical office in any area in which they operated.

“This is what 80 per cent of the banking population requires. Demand for banking services can be created through agency relationships ultimately boosting the top line revenues for banks,” Mr James Mwangi, the Chief Executive of Nairobi-based Equity Bank.

By Stefanie Rubin, Research Associate

About Central Bank of Kenya (CBK):

Established in 1966, the Central Bank of Kenya is the country’s central banking authority. With the microfinance regulations taking effect in May 2008, the Central Bank of Kenya operationalized the Microfinance Act of 2006. The Act paved the way for the licensing of microfinance institutions (MFIs) that take deposits from the public. Professor Njuguna Ndung’u was appointed Governor of Central Bank in March 2007.

Additional Resources:

Source Article: Business Daily: “Institutions Get Okay to Launch Agency Business”

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