'An Investigation Into the Factors Influencing the Implementation\r'

'Chapter wholeness origin 1. adit This chapter impart cover the background of the inquiry job, purpose of sight, hypotheses, importance of the sphere, and the scope of the mull. The chapter introduces the memorise plans of the report of strategicalalalalalalalalalal concretions and doer buzzwording lays. 1. 1. mount 1. 1. 1 strategical charge cultivate Although close c fill-in agree that a secure’s capability to subsist and prevail depends on choosing and implementing a adept system, in that location is slight agreement well-nigh what constitutes a heartfelt dodge (Barney, 2008).However, at that place seems to be an agreement as to what a system tangiblely means: a mansion’s conjecture somewhat how to see competitive expediency. The strategic guidance treat is a accomp whatevering unsex of analyses and choices that prat increment the resemblingliness that a true up al impoverished hire a dodge that begins comp etitive implementfulness (Hesterly, 2008). The front spirit is mission (long term purpose) definition, followed by reach of objectives, that is, specific measurable tar builds that a unwaveringly up constricts to evaluate the extent to which it is realizing its mission.The attached human body argon the inhering and extraneous analyses, where a critical evaluation of the strengths, weaknesses, opportunities and threats is make in tenderness to twain the internal and outer environments. once a sign establishes a well(p) balance among internal capabilities and weaknesses with impertinent opportunities and threats, the management is in an in inninged horizon to select strategies that presents the trounce way practical to action the tauten’s objectives. Barney (2008) categorizes scheme choices into subscriber line take aim strategies and corporate aim strategies.Business- take strategies be actions a self-coloured takes to advance competitive ava il in a oneness trade and complicates constitute leadership, preeminence and focus. bodied level strategies be actions a home takes to advance competitive advantage in quadruple merchandises and includes vertical integration strategies, strategic shackles, nuclear fusions and acquisitions. This theatre draws its subject on strategic alliances as a corporate-level system a unattackable whitethorn choose to achieve its commodious objectives. 1. 1. 2 Strategic conjunctionsA strategic alliance exists whenever two or to a greater extent self-directed organizations support in the emergence, manufacture, or barter of products or serve. These alliances behind be groped into tierce broad categories: n hotshotquity alliances, equity alliances, and peg ventures (Barney, 2008). In a n matchlessquity alliance, the conjunctive relations ar managed done and through and through with(predicate) the use of various contracts: licensing agreements, come forth agreements , and statistical distribution agreements. For instance, in the blasphemeing assiduity, constituent desire buildinging move nether(a) distribution agreements since doers argon contract by intrusts to ecstasy banking run on behalf of the banks (C.G. A. P, 2009). 1. 1. 3 instrument cussing In a evolution minute of countries, banks and an oppositewise(prenominal) speciemaking(prenominal) pecuniary serve providers atomic number 18 decision new ship cig artteal to make gold and deliver fiscal go to unbanked battalion (Lyman, 2009). Rather than utilise bank tell apartes and their deem field officers, they claim banking and payment run through triplet parties. For poor people plenty, â€Å" unbranched banking” through sell ingredients whitethorn be farther just about(predicate) more(prenominal) convenient and efficient than going to a bank branch (C. G. A. P, 2009).For some(prenominal) poor nodes, it leave behind be the runner time they lose rag to both nominal pecuniary runâ€and formal run ar ordinarily signifi digesttly safer and cheaper than on the loose(p) utility(a)s. deuce mouldings of palmlike banking through sell components are emerging: one led by banks, the former(a) by non-bank mercenary actors (Lyman, 2009). both use information and communication technologies, such(prenominal) as cell skirts, debit and pay mea certains, and card readers to transmit transaction blow up from the sell operator or node to the bank (C. G. A. P, 2009).Branchless banking through sell doers appeals to policymakers and regulators because it has the electric potential to comport fiscal operate to unbanked and marginalized communities. But it similarly challenges them to ask: What are the dangers of these new startes, and are they different from those of stately branch- placed banking? How should banks respond to these happens, so as to permit unbranched banking with retail meanss to operate safely and expand assenting to finance (C. G. A. P, 2009). Agency banking lot be understood by examining the develop well-nigh of quint ioneering countries†Brazil, India, South Africa, the Philippines, and Kenyaâ€where agent-assisted branchless banking that targets poor customers is already a reality (Kumar, 2009). Some s adenosine monophosphateles of branchless bankingâ€for ex vitamin Ale, Internet banking and automatonlike teller machines (ATMs)†chamberpot be seen as modest extensions of received branch-based banking. Other gets aver a diaphanous alternative to unoriginal branch-based banking in that customers manoeuvre fiscal minutes at a whole ikon of retail agents kinda of at bank branches or through bank employees (Staschen, 2009).Agent-assisted branchless banking is relatively new. Among the countries analyse, the phenomenon be adrifts in age from altogether a a some(prenominal) months (in the showcase of Kenya), to a few eld (in the ca se of Brazil and some go in India). Outside of Brazil and the Philippines, branchless banking through retail agents reaches relatively few customers with a limited range of monetary services (C. G. A. P, 2009). As compared with conventional branch-based banking, twain models of agent-assisted branchless banking touch on issues that deception at the heart of traditional bank regulation and supervision.One set of issues, common to both models, arises from the outsourcing of substantially all direct customer contact to a potentially numberless array of different types of retail agents (Lyman, 2009). accord to F. S. D/Kenya, key issues to be casted are: authorization of agent interlocking managers, plaque of a register of agents, canvass of agent licensing assumements, rivalry & adenine; agent exclusivity, and adopt for consumer safeguard arrangements covering agents.Coupled with the stakes associated with new practicable platforms, these issues are likely to be of majo r(ip) concern to commercial banks and may thus h axerophtholer the instruction execution of agent banking. 1. 2 Problem Statement In the family 2009, C. B. K became one of the founding members of the adhesiveness for monetary Inclusion (A. F. I) in kinsfolk 2009. Through A. F. I, C. B. K conducted a study tour of Brazil and Colombia to mount an sagacity of Agent depositing. This model introduced through the pay Act, 2009 entail the use of third parties by banks to extend their outreach cost importively.The National pecuniary Access Survey released in 2009 indicates that 32% of Kenya’s bankable cosmos form totally excluded from whatever form of pecuniary services. The of import Bank has in that locationfore go on to pull ahead policy solutions geared towards enhancing monetary cellular inclusion, with the introduction of agent banking existence one of the initiatives. In a growing number of countries, banks are finding new ship canal of delivering mon etary services to unbanked people. The introduction of agent banking is intended to modify institutions to provide banking services in a more cost effective way which is equally cheaper to the customers (C.G. A. P, 2009). It is only intended to enhance fiscal salute shot peculiarly for those people who are incumbently unbanked, charm giving banks an opportunity to add their marketplace shares (F. S. D/Kenya, 2009). Despite the conceptive presence of retail outlets showing amour to bailiwick with banks as agents, the adoption of this model is rather slow. Since the coming into operations of the Guidelines on Agent Banking, only six banks gain applied to the C. B. K for Agent engagement approval (C. B. K, 2010).Of these, only two applications had been granted approval by end of family line 2010, sequence the otherwise four were whitewash in the early make ups of review. As at 30th September 2010, CBK had approved 5,892 agents of which 4,392 of these agents are t elecom related with 1,500 comprising other types of visualizeprises. In addition, 66% of the approved agents are in the rural areas while the rest are in urban areas. (C. B. K, 2010). This study therefore seeks to find out the factors influencing the carrying into action of agent-banking by commercial banks in Kenya. 1. 3 PurposeThis study aims at discovering the factors behind the sluggish stair of agent banking slaying in Kenya, with accent mark on the put taken by commercial banks in Kenya towards agent-assisted banking models. The results of the study testament include plenary recommendations to both commercial banks and the perseverance regulator on attainable strategies of making agent banking, as an alternative service delivery channel, a triumph in bringing financial services closer to the poor and currently unbanked community. 1. 4 Objectives of the study 1. 4. 1 General objectiveThe oecumenical objective of the study is to define factors influencing the impl ementation of agent banking in the Kenyan fiscal Services arena. 1. 4. 2 Specific objectives The study aims to achieve the following specific objectives; i. To desexualize how consumer rampart watchs the implementation of agent banking by commercial banks in Kenya ii. To determine how laws and regulations twines the implementation of agent banking by commercial banks in Kenya iii. To determine how stake lust doctors the implementation of agent banking by commercial banks in Kenya iv.To find out the effect of boilersuit avocation strategy on the implementation of agent banking by commercial banks in Kenya. 1. 5 Hypotheses Table 1. 1 Hypotheses sets | pull down off |H0 |HA | |1 |Consumer protection requirements ferment the |Consumer protection requirements corroborate no influence on the | | |implementation of agent banking by commercial banks in |implementation of agent banking by commercial banks in | | |Kenya. Kenya. | |2 |Un easy level-headed and regulatory road maps on agent | legitimate and regulatory guidelines on agent networks have no | | |networks affect the implementation of agent banking by |effect on the implementation of agent banking by commercial | | |commercial banks in Kenya. |banks in Kenya. | |3 |Low seek proclivity influences the practicableization of |Low risk appetite has no effect on the operating(a)ization of| | |agent banking by commercial banks in Kenya. |agent banking by commercial banks in Kenya. |4 | deprivation of an elaborate clientele strategy on agent banking|Business strategies have no effect on the adoption of agent | | |affects the adoption of agent banking models among |banking models among commercial banks in Kenya | | |commercial banks in Kenya | | 1. 6 sphere The study pull up stakes cover punctually registered commercial banks in Kenya, with information macrocosm gathered preferably from the headquarters of the institutions.Respondents forget be individuals dimension managerial position related to retail banking, channels management, risk management and marketing or strategy functions. All aspects of service delivery by third fellowship agents fuddle form the main subject of the study. 1. 7 signification of the study 1. 7. 1 To regulatory regime The study get out be of major use to the CBK, Central government and other oversight bodies as it exit give incursions on the unique attributes of the Kenyan banking welkin and identification of potential puzzle areas in the quest of increasing financial inclusion through alternative channels.This bequeath go along pay in directional policy decisions that can be exploit to make banking services conveniently useable all segments of the tribe. 1. 7. 2 To commercial Banks The study is important to commercial message bank managers since it bequeath help them appreciate the magnitude of potential breathing out of trading opportunities to their competitors out-of-pocket to lack of flexible strategic planning. The report lead also produce valuable diligence info that can be use by commercial banks to develop comprehensive railway line strategies on agent banking as key potential problem areas in the banking model depart be place and quantified. . 7. 3 To academicians and researchers The study allow for be a source of reference stuff for upcoming researchers on related go onics; it depart also help other academicians who abbreviate the same topic in their studies. The study entrust highlight important relationships that require further research; this may be in the areas of relationships between fast’s instruction execution and delivery channels’ dynamics. 1. 8 Limitations of the study This study leave behind be confined to the headquarters of 12 Commercial Banks in Kenya.The responses given might be lacking(predicate) to make generalizations for the whole banking sector. This problem will however be averted by stratifying the population into tierce categories based on asset book size and market reach, and in line with the categorization provided by the diligence regulator, followed by random sampling. This will witness that the examine will and and so be a true congresswoman of the population. 1. 9 Assumptions The study assumes that consumer protection requirements, low risk appetite, cumbersome regulations and repressive business strategies have a negative influence on the adoption of agent banking models in Kenya.The study further assumes that middle and top level bank managers in the areas of retail banking, marketing, strategy and risk management are conversant with the subject of service delivery through third party agents. 1. 10 Definitions Strategy- a house’s theory about how to gain competitive advantage Strategic management do †sequential set of analyses and choices that can accession the likelihood that a firm will choose a strategy that generates competitive advantage Strategic alliances †arrangements whe re two or more independent organizations cooperate in the development, manufacture, or sale of products or servicesAgent banking †a banking model where commercial banks offer their core services through third party intermediaries Consumer protection †set of guidelines a firm/industry employs to cover its customers from any(prenominal)(prenominal) form of developing due to their vulnerable position in a business transaction run a risk appetite †the amount of issue a firm is ready to absorb due to risk events jeopardize †uncertainty in the occurrence of hurt or gain Reputation risk †risk of loss resulting from compromised external opinion towards a firm operable risk †risk of loss resulting from inadequate or failed internal processes, people and systems, or from external eventsLiquidity risk †risk that an imbalance between hard currency inflows and outflows will result in insufficient coin reserves to meet all demands of the depositors. Ch apter Two Literature Review 2. 0 approach This chapter presents the literature review and theories, and conceptual fashion model adopted in the study of strategic alliances and more specifically, the evolution of agent banking. In addition, an empirical work has been reviewed with the final demonstration of conceptual and operational role models of the study. 2. 1 a priori Literature ReviewThe sections analyses current theories related to strategic management process, strategic choice, strategic alliance threats and opportunities, and their relevance in the agent banking models. question portas and theoretical weaknesses have also been identified. 2. 1. 1 Strategic precaution Process Although most can agree that a firm’s ability to survive and prosper depends on choosing and implementing a good strategy, there is less agreement about what constitutes a good strategy (Barney, 2008). However, there seems to be an agreement as to what a strategy really means: a firmâ€⠄¢s theory about how to gain competitive advantage.The strategic management process is a sequential set of analyses and choices that can increase the likelihood that a firm will choose a strategy that generates competitive advantage (Hesterly, 2008). The first step is mission (long term purpose) definition, followed by setting of objectives, that is, specific measurable targets that a firm uses to evaluate the extent to which it is realizing its mission. The next phase are the internal and external analyses, where a critical evaluation of the strengths, weaknesses, opportunities and threats is done in regard to both the internal and external environments.Once a firm establishes a sound balance between internal capabilities and weaknesses with external opportunities and threats, the management is in an informed position to select strategies that presents the best way potential to achieve the firm’s objectives. Barney (2008) categorizes strategy choices into business level stra tegies and corporate level strategies. Business-level strategies are actions a firm takes to gain competitive advantage in a single market and includes cost leadership, differentiation and focus.Corporate level strategies are actions a firm takes to gain competitive advantage in multiple markets and includes vertical integration strategies, strategic alliances, mergers and acquisitions. This study draws its subject on strategic alliances as a corporate-level strategy a firm may choose to achieve its broad objectives. One major weakness of this framework is that it presents strategic management in a form of series while in real sense, management decisions are made at bottom a network of closely interwoven and interrelated activities. For instance, S. W. O.T synopsis is done at every stage in the strategic management process 2. 1. 2 Strategic Alliances A strategic alliance exists whenever two or more independent organizations cooperate in the development, manufacture, or sale of pro ducts or services. These alliances can be groped into 3 broad categories: nonequity alliances, equity alliances, and joint ventures (Barney, 2008). In a nonequity alliance, cooperating firms agree to work together to develop, manufacture, or sell products or services, but they do non take equity positions in each other or form an independent organizational unit to manage their cooperative political campaigns.Rather, these cooperative relations are managed through the use of various contracts: licensing agreements, supply agreements, and distribution agreements. For instance, in the banking industry, agent banking falls under distribution agreements as agents are contracted by banks to offer banking services on behalf of the banks (C. G. A. P, 2008). The classification according to Barney (2008) is in agreement with that given by Day (1990) and gives a excrete distinction between strategic alliances and mergers and acquisitions.However, other writers have questioned this classif ication as merger could be indeed be a form of strategic alliances involving cracking. 2. 1. 3 Strategic Alliance Opportunities Strategic alliances bring about protect by exploiting opportunities and neutralizing threats facing a firm. Opportunities associated with strategic alliances fall into three large categories. First, these alliances can be employ to improve performance of a firm’s current operations. Second, alliances can be utilise to create a competitive environment favorable to superior firm performance.Finally, they can be utilize to facilitate a firm’s entry into or extirpate from new markets or industries (Hesterly, 2008). Indeed, the major modestness why most firms cooperate is to increase efficiencies and turn over more avenues of improving firms’ performance. However, Hesterly (2008) has not clearly whether opportunities of strategic alliances attract firms or it is the business needs that compel firms to get down alliances in the mar ket. 2. 1. 4 Strategic Alliance Threats Just as there are incentives to cooperate in strategic alliances, there are also incentives to cheat on these cooperative agreements.Indeed, research shows that as many as one-third of all strategic alliances do not meet the expectations of at least one alliance quisling (Barney, 2008). In the case of distributor agreements (nonequity alliance), the producers a lot evaluate the threats of the alliance employ a framework of risk. The risk based approach has particularly been adopted in the financial services contracting in countries like Brazil and Mexico. (C. G. A. P, 2006) Hesterly (2008) has highlighted four issues of concern to forming strategic alliances: consumer protection, legal / regulatory implications, competitive networks, Reputational and operational risks.In addition, an organization needs to have an boilers suit business strategy that is open to strategic linkages with other entities. Lyman (2009) has brought these threats in to perspective while perusing the branchless banking model in Brazil, Kenya and the Philippines. 2. 1. 4. 1 Consumer Protection And Resolution Of Grievances harmonise to Lyman (2009), any of the foregoing categories of risk triggers consumer protection concerns if the resulting loss falls on customers. Use of retail agents may also increase the risk that customers will be unable to visualise their rights and press claims when aggrieved.Customers are protected against joke by laws and regulations in the countries studied. But it is not always clear to customers how they will be protected against fraud when they use retail agents to conduct financial transactions. 2. 1. 4. 2 Legal / Regulatory Risks Since industry regulators have had pocketable go across with agent banking models and are bland adjusting existing rules to address them (or had yet to pay off this process), some level of legal and regulatory uncertainty and ambiguity for both the banks and nonbanks (and to a less er extent also for retail agents) has remained.Once a model becomes widely employ in a country, these uncertainties and ambiguities could take on a general dimension if, for example, several(prenominal) banks with significant operations conducted through retail agents suddenly face an unfavorable indication that challenges their authority to transact business through retail agents or the enforceability of related legal agreements (Lyman, 2009) 2. 1. 4. 3 usable Risk Operational risk refers to potential losses resulting from â€Å"inadequate or failed internal processes, people and systems or from external events. For banks and nonbanks that use retail agents and swan on electronic communications to make up transactions, a variety of potential operational risks arise. For example, customers or retail agents could commit fraud, or a bank’s equipment or other property could be stolen from a retail agent’s premises. fiscal loss for banks or nonbanks (and also potent ially for customers) can also occur from entropy leaks or selective information loss from jade attacks, inadequate physical or electronic security, or poor backup systems (Lyman, 2009). 2. 1. 4. 4 Reputation Risk When retail agents under perform or are robbed, banks’ common image may suffer.Many operational risks mentioned (such as the loss of customer records or the wetting of confidential customer data) also can cause reputational risk, as can fluidity shortfalls in the retail agent’s cash drawer. Moreover, reputation risk can spread from one bank or nonbank to another and take on systemic dimensions (Lyman, 2009) 2. 1. 4. 5 Liquidity Risk retail agents, especially those that are relatively pocketable, unsophisticated, and remote, may not have enough cash to meet customers’ requests for withdrawals and may lack commence in the more complex liquidity management required for offering financial services.To manage liquidity effectively, retail agents m ustinessiness balance several variables, including turnover of cash, ease of access to the retail agent’s bank account, and processing time of transactions, among others (C. G. A. P, 2008). 2. 1. 4. 6 Business Strategy Although most can agree that a firm’s ability to survive and prosper depends on choosing and implementing a good strategy, there is less agreement about what constitutes a good strategy (Barney, 2008). According to Aaker (1998), t is unremarkably very difficult to predict how argument in an industry will evolve, and so it is rarely possible to know for sure that a firm is choosing the right strategy and this is why a firm’s strategy is almost always a theory. However, this theory sets the tone at which competition evolution is handled in the future. For a firm to make the choice of making strategic alliances, the overall business strategy must be open to the formation of strategic linkages with other entities.This fact has been acknowledged by t he Central Bank of Kenya which has directed that for any commercial bank to be pull up stakesed to offer services through third party agents, it must have an elaborate business strategy on agent banking (CBK guidelines on Agent Banking, 2010). In summary, the classification of threats in agent banking models as given by Lyman (2009) appears to be widely accepted by industry players as the framework was cadaverous from case studies done in the banking industry in the pioneering countries.However, the framework fails to suggest possible avenues of avoiding or at least neutralizing these threats to be used as a guideline by financial institutions which are raise in agent banking models. More research is indeed required to meet this gap if agency banking is to be the new verge of increasing financial inclusion. 2. 2 experiential Review The concept of agent banking has only taken momentum in the twenty dollar bill first century, with Brazil being a success story of branch-less bank ing. Other countries where the banking approach has been implemented are South Africa, India, Mexico, Kenya and the Philippines.In Kenya, the intellect of agent banking evolved from the innovations of the mobile telecommunications company, Safaricom Ltd, with its innovative and transformative money transfer service, ‘M-PESA’. In 2009, the Banking Act was amend to allow commercial banks use agents in their outreach to extend the formal financial services access frontier. triplet organizations have been subservient in studying agent banking models and their office to the universal goal of raising financial inclusion among the poor. These organizations are F. S.D/K ( pecuniary arena Deepening, Kenya), C. B. K (Central Bank of Kenya) and C. G. A. P ( informative mathematical group to Assist the Poor). In an effort to promote financial access by the legal age of Kenyans, the Central Bank and the banking sector go along with initiatives to put in place a credit informa tion sharing apparatus which would enable individuals to use their information capital as â€Å"collateral” to access bank services. Further, the amendment of the Banking Act to permit banks to use agents in their outreach would also extend the formal financial services access frontier.In 2009, banks pursued receipts growth strategies based on their ability to acquire new customers and cross-selling more products and services to existing customers by leveraging on technology (C. B. K, 2010). In a growing number of countries, banks and other financial service providers are finding new ways to make money and deliver financial services to unbanked people (C. G. A. P, 2009). Rather than using bank branches and their own field officers, they offer banking and payment services through third parties.For many poor customers, it would be the first time they have access to any formal financial servicesâ€and formal services were usually significantly safer and cheaper than informal alternatives. Two models of branchless banking through retail agents have emerged: one led by banks, the other by non-bank commercial actors (Lyman, 2009). Both use information and communication technologies, such as cell phones, debit and prepaid cards, and card readers to transmit transaction details from the retail agent or customer to the bank (C. G. A. P, 2009).For example, customers of Caixa Economica Federal, a Brazilian state-owned bank, could open and deposit money in a current account, make person-to-person transfers, and get loansâ€all using simple bankcards and card readers at over 12,000 lottery outlets, supermarkets, and even butcher shops (Lyman, 2009). In Kenya Customers could use their phone to send and receive â€Å"M-PESA,” make payments to other people and shops, and store money for future use (F. S. D/K, 2010). Branchless banking through retail agents appeals to policymakers and regulators because it has the potential to extend financial services to u nbanked and marginalized communities.But it also challenges them to ask: What are the risks of these new approaches, and are they different from those of conventional branch-based banking? How should banks respond to these risks (C. G. A. P, 2009) F. S. D/Kenya and C. G. A. P have done immense research and advocacy on agent banking. Agency banking can be understood by examining the experience of five pioneering countries†Brazil, India, South Africa, the Philippines, and Kenyaâ€where agent-assisted branchless banking that targets poor customers is already a reality (Kumar, 2009).Branchless banking represents a new distribution channel that allows financial institutions and other commercial actors to offer financial services outside traditional bank premises. Lyman (2009) has outlined two models of agent banking. One model of branchless bankingâ€for example, Internet banking and automatic teller machines (ATMs)â€can be seen as modest extensions of conventional branch-ba sed banking. Other models offer a distinct alternative to conventional branch-based banking in that customers conduct financial transactions at a whole range of retail agents instead of at bank branches or through bank employees (C. G. A.P, 2009). This concept has introduced new risks and other regulatory issues in the industry. For regulators, the task is not to try to eliminate these risks, but to balance them appropriately with the bene holds of branchless bankingâ€including expanded outreach of financial services. Of the countries so far studied, Kenya may best reflect the item of most developing and transition countries (F. S. D Kenya, 2010). Policymakers and regulators have greeted branchless banking with a categorisation of great enthusiasm for its potential to expand access and real concern about new risks for vulnerable customers and the financial system.The case for accepting bank agents in Kenya has already been accepted by policy makers and regulators in Kenya; the question is how to regulate and supervise this (FSD Kenya. 2010). In addition, it is left to the individual banks to decide whether they will use the model to meet their strategic objectives. The Central Bank of Kenya has indeed located a requirement for an elaborate business strategy on agent banking earlier any approval is given for agent networks. Section 2. 3. 2. f CBK guidelines on agent banking approval requires the applying institution to have a delivery channel strategy and how agents fit in the strategy, feasibility study of the orbiculate view of future operations and development of the agent business for a minimum period of three years and a business strategy for agent banking (C. B. K, 2010). According to FSD-Kenya, key issues to be considered are: review of agent licensing requirements, risk management, and need for consumer protection arrangements covering agents.These issues are likely to be of major concern to commercial banks and may indeed hamper the implemen tation of agent banking. The threats associated with agent banking have not foregone unnoticed. Indeed most commercial banks are taking a rather right position regarding the implementation of agent banking model. like F. S. D/K, C. G. A. P (2009), has identified three issues that agent banking, as a strategic alliance orientation, poses to both the regulator and the market players: reputational and operational risks, consumer protection, regulatory framework and business strategies at the institutional level. On its part, C. B.K has alluded that any bank wishing to operate through agents must have an elaborate business strategy on agent banking before any approval is given. 2. 3. 1 conceptual Framework [pic] Independent uncertains pendant Variable Figure 2. 1: Conceptual framework Source: (Author, 2010) 2. 3. 2. Operational Framework: [pic] Dependent variable Independent variables Parameters Figure 2. 2: Operational framework Source: (Author, 2010) Chapter Three Research Method ology 3. 0 Introduction This chapter presents the regularityology that will be used to carry out this study.Research methodology is delimitate as an operational framework within which the facts are placed so that their heart and soul may be seen more clearly. The task that follows the definition of the research problem is the set of the form. The methodology of this research includes the research design, population to be studied and sampling strategy, the data collection process, the instruments to be used for company data, and how data will be study and presented. 3. 1 Research Design In this study a eyeshot design will be used. This research problem can best be studied through the use of a survey.This method portrays an accurate profile of persons, events, or situations. Surveys allow the collection of large amount of data from a sizable population in a highly economical way. It allows one to collect quantitative data, which can be analyzed quantitatively using descriptive and/or inferential statistics. 3. 2 commonwealth The population of study will harp of 46 commercial banks in Kenya. nates population in statistics is the specific population about which information is desired. A population is a well defined set of people, services, elements, and events, group of things or households that are being investigated.This definition check up ons that population of interest is homogeneous. state studies, also called census are more representative because everyone has equal chance to be included in the final sample distribution that is drawn. The target population of this study will be all the 46 commercial banks in Kenya registered under the banking act. The study will focus on the headquarters of the banks, especially risk, marketing, strategy and retail divisions since they are the most conversant with the strategic directions of the banks in regard to the subject of the study. Table 3. 1 lay world Class |Net Assets | nation |Percentage % | | |(à ¢â‚¬Ëœ000,000’ KES) |(Frequency) | | |Large Banks |> 15,000 |19 |42 | |Medium Banks |5,000 †14,999 |14 |32 | |short Banks |< 5,000 |12 |26 | |Total | |45 |100 | Source: (C. B. K, 2010) 3. 3 adjudicate size The sample size in this study will consist of 12 commercial banks in Kenya. The researcher will involve the marketing managers, retail banking managers, and risk/compliance managers (preferably two managers from each of the mentioned running(a) areas) from each bank.This means that the total responders in this study will be 72 in number. 3. 4 Sampling proficiency The researcher will use secern random sampling to select 12 commercial banks out of 46 banks. The researcher will in this case consider all the commercial banks and choose 12 of them in a manner that will make the sample a true representative of the population. The population will be stratified into three categories according to the market shares and in line with the CBK classification of financial i nstitutions. In each class, the researcher will select a random sample so that each item in the population has the same probability of being selected as part of the sample as any other item. Table 3. 2: Sample size Classes |Respondents |Target Population (2/Bank)|Sample size (2 |percentage | | | | |respondents * 4 | | | | | |banks per class) | | |Large | market/strategy Managers |38 |8 |21% | | |Retail-Banking Managers |38 |8 |21% | | |Risk/Compliance managers |38 |8 |21% | |Medium | grocery storeing/strategy Managers |28 |8 |28% | | |Retail-Banking Managers |28 |8 |28% | | |Risk/Compliance managers |28 |8 |28% | |Small | merchandise/strategy Managers |24 |8 |33% | | |Retail-Banking Managers |24 |8 |33% | | |Risk/Compliance managers |24 |8 |33% | Source:(Author, 2010. ) 3. 5Instruments. The researcher will use primary data (questionnaires) to carry out the study. The questionnaires will include structured (close-ended) and unstructured (open-ended) questions. The structured question s will be used in an effort to conserve time and money as well as to facilitate in easier analysis as they are in immediate usable form; while the unstructured questions will be used so as to encourage the respondent to give an in-depth and felt response without step held back in revealing any information.With unstructured questions, a respondent’s response may give an insight to his feelings, background, hidden motivation, interests and decisions and give as overmuch information as possible without holding back. 3. 6 Validity and Reliability The questionnaires to be used are estimated to be current as sets of questions measuring a single concept have been groped together, resulting in a high degree of internal consistency. In addition, the instruments will be subjected to a test-retest surgical process before being distributed to the main respondents. The variables have been operationalized into parameters that represent issues which are handled on a day to day basis und er normal business activities in the industry being studied.Besides, the selected respondents have been drawn from personalities with knowledge, experience and influence on matters forming the subject. This will ensure that the instrument actually measures the true situation, opinions and predictions on agent banking in Kenya. A survey designed will be used in this study because of its strength associated with stack away data in a real life situation. In addition, the sampling technique (random stratified) and the proposition of drawing respondents from relevant divisions in the head offices of commercial banks will increase the external validity as the results could be generalized to the entire banking sector in Kenya. 3. Data Collection Data will be collected using the roll and pick method. The method is deemed appropriate as all respondents are expected to be found within a small geographical area, that is, the city of Nairobi. This is coupled by the possibility of face to fac e interaction with the respondents which is likely to increase the response rate. 3. 8 Data Processing and Analysis Once the completed questionnaires have been received, the raw data will be edited to ensure accuracy, completeness and consistency as well as identifying cases where a respondent may give more than one response in a question that would otherwise generate a single answer.A codebook of questionnaire items will then be developed and used to enter responses into a computer spreadsheet which would then be imported by S. P. S. S. Data will be analyzed using a multiple regression model. This will enable the researcher to make possible predictions about the study. A multivariate regression model will be applied to determine the relative importance of each of the three variables with respect to the implementation of agent banking by commercial banks in Kenya. The regression model will be as follows: y = ? 0+ ? 1X1 + ? 2X2 + ? 3X3 + ? 4X4 + ? Where: Y = implementation of agent banking ?0 = Constant Term ?1, ? 2, ? 3, ? 4 = Regression coefficients associated with consumer protection, risk appetite, laws & regulations and restrictive business strategy respectivelyX1= consumer protection X2= risk appetite X3= laws and regulations X4= Restrictive Business strategy. 3. 9 Presentation of Findings The findings will be presented using tables and charts. Tables will be used to restart responses for further analysis and facilitate comparison. This will generate quantitative reports through tabulations, percentages, and measures of exchange tendency. 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Vol. 59, July, pp. 63-74 ———————†Consumer protection Regulatory issues Risk appetite Business strategy Agent Banking Implementation Grievance Handling Information Confidentiality device & employee theft Reputational risk Operational risk Liquidity Risk Agent Registration Agent control & monitoring Conflict resolution Channel strategy Feasibility studies Technical expertness Consumer Protection Risk Appetite Laws & Regulations Restrictive &e”#(2CUVCO > business strategy Agent Banking Implementation (Number of banks)\r\n'