ASSESSMENT OF FACTORS INFLUENCING ADOPTION OF AGENCY

BANKING: WITH EMPHASIS TO SELECTED COMMERCIAL BANKS IN

ADAMA CITY.

A THESIS SUBMITTED TO LEADSTAR COLLEGE OF MANAGEMENT AND

LEADERSHIP IN PARTIAL FULFILLMENT FOR THE REQUIREMENT OF
DEGREE OF MASTER IN BUSINESS ADMINISTRATION (MBA)

BY:ADANECH TAFESE;

ADVISOR: - Dr DEMEKE (ASSISTANT PR OFESSOR)

LEADSTAR COLLEGE OF MANAGEMENT AND LEADERSHIPFACULTY OF BUSINESS&

LEADERSHIP GRADUATE DEPARTMENT OF BUSINESS ADMINISTRATION

Oct:- 2017
Adama , Ethiopia
 DECLARATION

I hereby declare that the research entitled ‘‘Assessment of Factors Influencing

Adoption of Agency Banking: With Emphasis to Selected Commercial Banks in
Adama City’’ is my own work. I have carried out the study independently with the
guidance and support of my Advisor BONSEN ALEMU (ASSISTANT PROFESSOR).

To the extent of my knowledge, the study has not been submitted for award of any
Degree or Diploma program in any other institution.

Declared by:Alemayehu Nigusu

Signature Date

i
 CERTIFICATION

Here with, I certify that Alemayehu nigusu has been carried out his research work on
the topic entitled “Assessment of Factors Influencing Adoption of Agency Banking:
With Emphasis to Selected Commercial Banks in Adama City’’ under my
supervision as an advisor.

Confirmed by: - BONSEN ALEMU (ASSISTANT PROFESSOR).

Signature Date

ii
 ACKNOWLEDGMENTS

This study has been made possible by a great deal of support from a number of people
who have been kind enough to stand beside me every step of the way through my stay in
the program. Yet, it would not be in its current shape if it hadn‟t been by God‟s enormous
will and support. Therefore, the highest gratitude goes to God.

First, I would like to express my heartfelt appreciation to my advisor BONSEN

ALEMU (ASSISTANT PROFESSOR).
whose valuable comments and counsel guided the entire study to reach its current state.
Thank you for being understanding and supportive. Special thanks go to all respondents
who have sacrificed their valuable time to provide me with the vital information needed
to complete the study. I thank them all for their patience and understanding.

Finally, my utmost gratitude goes to my spouse, family members and colleagues for the
moral support and understanding committed while pursuing the class. Thank you very
much and God bless you all.
Dear friends thank you very much for being there whenever I needed your support and
input.

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 Table of Contents
Contents Page
Declaration ...........................................................................................................................
i Acknowledgments .............................................................................................................
iv List of Tables ....................................................................................................................
vii List of Figures ..................................................................................................................
viii List of Abbreviations
......................................................................................................... ix Abstract
............................................................................................................................... x Chapter
One: Introduction .................................................................................................. 1
1.1. Background of the Study ............................................................................................. 1
1.2. Statement of the Problem............................................................................................. 3
1.3. Basic Research Questions ............................................................................................
5
1.4. Purpose of the Study ....................................................................................................
5
1.5. Objectives of the Study................................................................................................ 6
1.6. Significance of the Study .............................................................................................
6
1.7. Scope /Delimitation of the Study................................................................................. 7
1.8. Limitation of the Study ................................................................................................
7
1.9. Organization of the Study ............................................................................................
8
Chapter Two: Review of Related Literature .......................................................................
8
2.1 Definition of Terms ...................................................................................................... 9
2.2 Theoretical Review .....................................................................................................
10
2.3 Empirical Review ....................................................................................................... 13
2.4 Conceptual Framework ...............................................................................................
19

5
Chapter Three: Research Methodology ............................................................................
20
3.1. Research Design ........................................................................................................ 20
3.2. Target Population....................................................................................................... 20
3.3. Sampling Methods and Techniques ...........................................................................
21
3.4. Sources & Type of Data............................................................................................. 22
3.5. Data Collection Instruments ...................................................................................... 22

6
3.6. Instrument Validity and Reliability ........................................................................... 23
3.7. Data Analysis ............................................................................................................. 24
3.8. Ethical Consideration................................................................................................. 24
Chapter Four: Presentation, Analysis & Interpretation of Findings ................................. 25
4.1. Respondents‟ Profile .................................................................................................. 25
4.2 Factors Influencing Commercial Banks to Adopt Agency Banking .......................... 29
4.3. Factors Influencing Agents to Adopt Agency Banking. ............................................ 38
4.5. Correlation Analysis .................................................................................................. 44
4.6. Regression Analysis................................................................................................... 46
Chapter Five: Summary of Findings, Conclusion & Reccomendation ............................ 51
5.1 Summary of Findings.................................................................................................. 51
5.2 Conclusions................................................................................................................. 53
5.3 Recommendations....................................................................................................... 54
5.4 Suggestions for Further Research ............................................................................... 55
References......................................................................................................................... 56
Appendices.......................................................................................................................... 1
A)Data Collection Instruments ........................................................................................... 1
B) List of Retail Commercial Banks In Ethiopia.............................................................. 10
C) SPSS Data Output ........................................................................................................ 11

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 LIST OF TABLES
Table 3.1: Reliability Test……………..…………………………………………….......24
Table 4.1:Respondents‟ Demographic Profile With Respect to Bank Employees……..26

Table 4.2: Respondents‟ Demographic Profile With Respect to Agents..……………...28

Table 4.3:TechnologicalFactors Driving Adoption of AgencyBanking ……………..30

Table 4.4:Organizational Factors Driving Adoption of Agency Banking….………….31

Table 4.5:Environmental Factors Driving Adoption of Agency Banking …………….32

Table 4.6: Agency Banking AdoptionWith respect to Driving Factors...……………..33

Table 4.7:Technological Factors Challenging Adoption of Agency Banking..………...34

Table 4.8:Organizational Factors Challenging Adoption of Agency Banking ….……..35

Table 4.9:Environmental Factors Challenging Adoption of Agency Banking................36

Table 4.10: Agency Banking AdoptionWith respect to Challenging Factors ...……..... 37

Table 4.11: FactorsDriving Agents to Adopt Agency Banking.....……………………..39

Table 4.12:Factors Challenging Adoption of Agency Banking by Agents.....................40

Table 4.13:Collinearity test with respect to driving factors..………… ……………….42

Table 4.14: Correlations between Agency banking Adoption & its driving factors…....44
Table 4.15: Correlations between Agency banking Adoption&itschallenging factors 45

Table 4.16:Model summary with respect to driving factors…………………………. 46

Table 4.17:ANOVA table with respect to driving factors.………………………...….46

Table 4.18:Coefficients of regression model with respect to drivingfactors……...

………………………………………………..……………………
……. 47

Table 4.19:Model summary with respect to challenging factors….…………………... 48

Table 4.20: ANOVA table with respect to challenging factors…………………………49
Table 4.21:Coefficients of regression model with respect to challenging factors……...49

vii
 LIST OF FIGURES

Figure 2.1 Conceptual frameworks------------------------------------------------------------ 19

8
888
 LIST OF ABBREVIATIONS

AML ----------------------Anti-Money Laundering

CFT ------------------------Counter-Terrorism Financing

ATM-------- ----------------Automatic/Automated Teller Machine

E-banking-------------------Electronic banking

AIB-------------------------Awash International Bank

CBE------------------------Commercial Bank of Ethiopia

CBO------------------------Cooperative Bank of Oromia

LIB-------------------------Lion International Bank

UB-------------------------United Bank

DB--------------------------Dashen Bank

NIB-------------------------Nib International bank

BOA------------------------Bank of Abysinia

WB-------------------------Wegagen Bank

ICT--------------------------Information Communication Technology

NBE-------------------------National Bank of Ethiopia

POS ------------------------ Point-of-Sale

S.C------------------------Share Company

SPSS -----------------------Statistical Package for Social Sciences

KYC------------------------Know Your Customer

CGAP---------------------- Consultative Group to Assist the Poor

BA--------------------------- Bachelor of Art

9
 ABSTRACT
Agency banking is a recent phenomenon in Ethiopian banking industry. Except 3 banks,
large number of Commercial Banks in the country didn’t start agency banking service in
Adama city which shows existence of gap in its implementation. The aim of this study is
therefore;to identify factors influencing adoption of Agency-Banking by Commercial
Banks & Agents participated in its implementation. The researcher used both descriptive
& explanatory research design. Working population were selected judgmentally using
criterion and sample respondents were selected by simple random sampling using lottery
method. The researcher used primary data. The data was collected by using semi-
structured questionnaires & interview. The collected data was analyzed using descriptive
& inferential statistics. Advancement in technology, user friendliness, the prospects of
cost saving, accessibility issues & stiff competition were among the major factors
enhanced adoption of agency banking by Commercial Banks. On the other hand,
adoption of agency banking by Commercial banks is inhibited mainly by customers’
distrust, low awareness level & resistance to accept technology. Commissions earned on
transactions made and associated benefits like increased customer traffic, cross-selling
products, being known by more customers were among the major factors motivated
Agents to adopt agency banking. However, customers’ distrust of technology, security
risk, network interruption were among the major challenges agents faced.The correlation
finding revealed that there is a positive and significant correlation between agency
banking adoption & its determinant factors .Agency banking adoption by
Commercial
Banks is explained 55.3% by variables included in the study& driving technological
factors is the dominant factor in enhancing Commercial Banks to adopt agency
banking.On the other hand, agency banking adoption by Commercial Banks is inhibited
30.4% by variables included in the study& challenging environmental factors is the
dominant factor in inhibiting Commercial Banks from adopting agency banking.

Key words: Agency Banking, Adoption, Challenges, Driving factors

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 CHAPTER ONE

INTRODUCTION
This chapter presents introductory part comprising of the background of the study,
statement of the problem, basic research questions, purpose of the study, objectives of the
study, significance of the study, scope(delimitation of the study),and limitation of the
study &organization of the paper.

1.1.Background of the Study

The business environment has globally changed and it has been characterized by stiff
competition and this is not an exception to banks. Competition has pushed Commercial
Banks towards becoming more innovative. These innovations include credit cards,
ATMs, internet banking, mobile banking, youth oriented accounts, Women oriented
banking, Interest free banking and agency banking, which are most recently introduced in
the banking sector (Bold, 2011).

The revolution of information technology has influenced almost every facet of life,
among them is the banking sector. The introduction of electronic banking has
revolutionized and redefined the way banks were operating. Technological advancement
has not only affected the way of living but also has an effect on the way people do their
banking. Banks and other financial institutions, which have traditionally relied on
physically established branches to provide banking services, are now gearing towards the
adoption of mobile banking services as a form of branchless banking which has the
consequence of lowering cost of banking. Technology has therefore created greater
opportunities to service providers to offer great flexibility to the customers. To this end,
banks are fast developing branchless banking such as ATM, internet and mobile banking
among others (Laukkanen&Pasanen, 2007).Till recently, bank customers were used to
stand in line to get financial services but now because of the multi-channel service outlets
they can perform it from anywhere at any time. Funds are transferred electronically
between financial institutions and individual accounts, and between individual accounts
using e-banking system (Shyamapada et al, 2011).

1
Like all other social entities, financial institutions in Ethiopia are being constantly
expanding with technological innovations. E-banking services commenced in Ethiopia in
late 2001, while Commercial Bank of Ethiopia (CBE) introduced about eight ATMs to
deliver service to the local users. Later on in the year 2005, Dashen bank S.C introduced
ATMs & in 2009, it commenced delivering mobile banking service in Ethiopia to acquire
E-commerce and mobile merchant transactions that allows transfer of funds from one‟s
account to others. On the other hand, Zemen Bank S.C launched internet-banking
service in the year 2010, to Ethiopian banking industry (Ayana 2012).

Agency banking is branchless banking based on ICT that allows financial institutions to
offer financial service outside the traditional bank premises (Mas, 2008; Mas and Siedek,
2008). Agent banking allows customers to conduct a limited type of financial transactions
at third party outlets that include post offices, supermarkets, grocery stores, pharmacies,
and gas stations etc. located in remote areas (Warii, 2011). It is the retail outlet, that
conducts the transaction and lets clients deposit or withdraw cash, transfer funds, effect
bill payment, inquire about an account balance, or receive government benefits or a direct
deposit from their employer rather than a branch teller (Siedek, 2008).Globally, these
retailers are being increasingly utilized as important distribution channels for financial
inclusion. Agent banking is used to reduce the cost of delivering financial services,
relieve crowds in bank branches and establish presence in new areas (Kumar et al .2006).
Agent banking became one of the most promising strategies for offering financial
services in emerging markets (Chai et. al. 2011). Though commercial banks continue to
invest in opening brick and mortar branches complimented by various delivery channels
and access to formal financial services remains a big impediment to financial
performances, customers from the remote areas are forced to travel long distances and
spend huge amounts of money and time on transport in order to access a branch. To curb
these challenges, a number of central banks around the world have issued legislation that
allows commercial banks to contract third party retail networks as agents (Ivatury and
Lyman, 2006).

2
Agency banking service has enabled banking institutions to compete more effectively in
different countries by extending their products and services beyond restriction of space
and time through established third party with the application of technology. The main
factors that contributed to agency banking adoption by commercial banks in different
countries are the prospects of cost reduction, availability of the services beyond the
banking service time and related customer service enhancements. However, lack of
suitable legal frameworks, low level of ICT infrastructure, lack of customers trust and
awareness towards the technology and customers‟ fear to use the technologies are among
the factors that holds banking industry to adopt agency banking (Afework, 2015).
Agency Banking in Ethiopia is at embryonic stage& the researcher is interested to assess
factors influencing its adoption with emphasis to selected Commercial Banks in Adama
city.

1.2. Statement of the Problem

Access to finance is critical for sustainable economic growth and social development.
Financial inclusion empowers low-income people and marginalized sectors of society to
actively participate in the economy, which leads to increasing employment and
decreasing poverty levels (Bold, 2011). Apart from increasing access to those excluded
from financial services and reducing reliance on informal financial sources, agent
banking has reduced the need for more staff and branches to reach customers (Arora and
Ferrand, 2007). Agent banking has reduced cost and enhanced efficiency in the financial
sector with a possibility and availing financial services at much lower cost to consumers
(Bean, 2009). It has also increased the ease of banks expansion hence outreach to far-
flung market pockets of bankable populations (Bold, 2011). Agency banking is a strategy
to increase revenue from additional investments, to increase customer base and market
share, to improve indirect branch productivity by reducing congestion in the branches and
to offer low cost solutions in areas with potentially less volume and number of
transactions. It is further intended to enhance easy financial accessibility for both the
unbanked and the banked population (Ivatury and Mars, 2008). Agency banking system
allows customers to access banking services electronically through mobile devices and
bank agents to deposit and withdraw cash, transfer funds, make bill payments, moreover,
3
the cost that involved in servicing low-value accounts, availing physical infrastructure to
remote rural areas and cost (in money and time) incurred by customers in remote areas to
reach bank branches are among the major concerns (Ndungu, 2014).Agent banking which
is a form of branchless banking that allows customers to conduct a limited range of
financial transactions at third party retail outlets is new to Ethiopian banking sectors. The
Ethiopian banking industry heavily relied on the traditional branch based banking.
Forinstance, in 2015/16, 494 new bank branches were opened raising the total branch
network to reach 3,187 from 2,693 last year (2014/15). As a result, the current bank
branch to population ratio of Ethiopia declined from 1:33,448 people to1:28,932 people
(NBE, 2015/16 annual report) however, still it is not satisfactory & there is congestion in
branches which paves way to look for alternatives branchless banking.

Agency banking is one form of branch less banking and it is at infant stage in Ethiopia i.e.
not ye developed. Therefore, the researcher is motivated to study why agency banking is
not adopted by majority of the banks in Ethiopia and what motivates others to launch
agency banking along with their agents. Most of the studies reviewed were done
abroad i.e. various research studies have been conducted on agency banking services
in different parts of the world including our neighbor country Kenya. It is not right to
import the wholesome results of a research without taking into account the contextual
differences and hence the need to carry out local research in order to understand better
the problem raised in the mind of the researcher. The researcher couldn‟t find research
conducted in Ethiopia on Agency Banking adoption both from banks‟ & agents‟
perspective except one, which has been conducted by Afework Gugsa in 2015 which
focused on banks‟ perspective only as well as by considering only banks that have
started Agency Banking service. Agency banking service has enabled banking
institutions to compete more effectively in different countries by extending their products
and services beyond restriction of space and time through established third party
with the application of technology. The main factors that contributed to agency banking
adoption by commercial banks in different countries are the prospects of cost reduction,
availability of the services beyond the banking service time and related customer service
enhancements. However, lack of suitable legal frameworks, low level of ICT

4
infrastructure, lack of customers trust and awareness towards the technology and
customers‟ fear to use the technologies are

5
among the factors that prevents banking industry to adopt agency banking (Afework G,
2015). The study conducted by Afework G, in 2015 simply identified factors affecting
adoption of agency banking from banks‟ perspective only excluding those banks not
adopted agency banking as well as agents participated in its implementation. The study
finding identified only factors affecting adoption of agency banking but their correlation
and the extent to which they influence agency banking adoption was not addressed.

The researcher is aimed to assess factors influencing adoption of agency banking in

Ethiopian Banking Industry where the numbers of bank branches are ever increasing to
outreach customers with significant amount of investment &this study contributed to fill
the gap by identifying factors influencing adoption of Agency banking both from
banks‟& agents‟ perspective as well as the magnitude of relationship and
influence between agency banking adoption and its determinants were also identified

1.3.Basic Research Questions

In order to gain a comprehensive understanding of the phenomenon under investigation,
the following questions were addressed by the research work.

i. What are factors influencing adoption of agency banking by Commercial

Banks?

ii. What are factors influencing adoption of agency banking by agents of

Commercial Banks?

iii. Is there relationship between agency banking adoption & Technological,

Organizational and Environmental factors?

iv. To what extent Technological, Organizational & Environmental factors influence

adoption of agency banking?

1.4. Purpose of the study

6
Access to finance is critical for sustainable economic growth and social development. As
per stated in different literatures, agent banking plays a significant role in enhancing
financial inclusion by increasing the ease of banks expansion to outreach far flung market
pockets of bankable populations, increasing access to those excluded from financial
services& enhancing efficiency in the financial sector with a possibility of availing
financial services at much lower cost to customers. However, the Ethiopian banking
industry heavily relied on the traditional branch based banking and agent banking is at its
infant stage. Therefore, the researcher is interested to conduct study in order to identify
challenges that prevent adoption of agency banking so as to suggest pro-active
measures to mitigate the challenges from the root before they became serious as well as
to identify driving forces that influences adoption of agency banking in order to capitalize
on it.

1.5.Objectives of the Study

1.5.1 General Objective

The general objective of this study was to identify factors influencing adoption of agency
banking by Commercial Banks and Agents participated in its implementation: with
emphasis to selected Commercial Banks in Adama City.

1.5.2 Specific Objectives

i. To identify factors influencing adoption of agency banking by Commercial
Banks
ii. To identify factors influencing adoption of agency banking by Agents of
Commercial Banks.
iii. To see relationship between agency banking adoption &Technological,
Organizational & Environmental factors.
iv. To see the extent of influence Technological, Organizational & Environmental
factors have on adoption of agency banking

1.6.Significance of the Study

7
The findings of this study can be useful for different stakeholders. The study findings can
help the governor Bank (NBE) to know the extent to which Commercial Banks in
Ethiopia have embraced agency banking which enable them to look at critically &
reframe regulation of agent banking in Ethiopia. It will also benefit Commercial Banks in
Ethiopia to have a clear understanding of factors that would be important in embracing
and adopting agency banking. Findings of this study on other hand come in handy for
scholars those wishing to carry out further studies on this topic by using the study
findings as the basis for further research. It will also help those who have not embraced
this concept and enable them to make decisions concerning the adoption of agency
banking service. Moreover, the study will helps the researcher to attain MBA degree, as
conducting thesis is a prerequisite for the partial fulfillment of the program.

1.7. Scope /Delimitation of the Study

This study intended to assess factors influencing adoption of Agency Banking by

Commercial Banks and Agents participated in its implementation with emphasis to
selected Commercial Banks in Adama city. Currently, there are 17 Commercial Banks
involved in retail banking operation across different parts of Ethiopia. However, in
order to make the study more manageable, the study focused on commercial banks that
have stayed in the industry for ten years and above as they are assumed to be strong in
terms of human resource, financial resource, and customer base to be capable of adopting
agency banking. Accordingly, there are nine Commercial banks that have stayed in the
industry for ten years and above. Among the nine banks stayed in the industry for ten
years and above, three of them have started agency-banking operation in Adama city
while the remaining six banks do not started agency banking operation in Adama city. In
order to make the study more manageable, the study is delimited to the sampled banks‟
Business development head at their head quarter for strategic related issues and to
branches of the sampled banks along with their agents in Adama city for implementation
related issues.

1.8. Limitation of the Study

8
The study is limited to the Banks and agents but it would have been more productive if the
study included customers/subscribers of the service. Respondents‟ reluctance was also among
the limitation the researcher faced during data collection. The size of respondents included in
the study was small which is related to small number of banks that have launched agency
banking service in Adama city but it would provide more statistical significance if the
number of sample respondents included in the study became large in number.

1.9. Organization of the Study

This study is organized in five chapters. The first chapter deals with introductory part
comprising of background of the study, statement of the problem, basic research
questions, purpose, objectives, significance as well as scope and limitation of the study.
The second chapter will focus on exploring various literatures on the problem under
study to provide definitions to the various concepts as well as explain the
theoretical perspectives and conceptual framework. The third chapter presents the
methodology of the study which covers research design, target population, data type and
source, sampling method and size, data collection &analysis procedures, data collection
instruments‟ validity and reliability as well as ethical consideration of the study.
The fourth chapter covers data presentation, analysis and interpretation of the study
findings. The last chapter will provide summary of findings, conclusion of the study,
suggests possible recommendations and implication for future study.

CHAPTER TWO

9
 REVIEW OF RELATED LITERATURE
This chapter presents literature review comprising of the theoretical review of literature,
empirical literature & conceptual framework.

2.1 Definition of Terms

2.1.1 Agent means a person engaged in a Commercial or Business activity and has been
contracted by a financial institution to provide their services on their behalf (NBE
Directive,FIS-01-2012).
2.1.2 Agent Banking means the conduct of banking business on behalf of a financial
institution through an agent using various service delivery channels (NBE Directive, FIS-
01-2012).
2.1.3 Mobile Banking Means performing banking activities, which primarily consists of
opening and maintaining mobile/regular accounts and accepting deposits; furthermore, it
includes performing fund transfer or cash-in and cash-out services using mobile devices
(NBE Directive, FIS-01-2012).
2.1.4 Agency Banking is a service outlet contracted by financial institution or mobile
network operator to process clients transactions rather than a bank teller. It is the owner
or an employee of the retail outlet who conducts the transaction and lets its client deposit,
withdraw and transfer funds, pay their bills, inquire about an account balance, or a direct
deposit from their employer, or receive government benefits. Banking agents can be
pharmacies, super markets, conveniences stores, lottery outlets, post offices etc.
(Ivatury & Layman, 2006). Agent banking, which leverages heavily on ICT, is a component
of branchless banking that allows financial institutions to offer financial services outside the
traditional brick and mortar bank premises (Mas, 2008; Mas and Siedek, 2008).
Agency Banking is a branchless banking, which represents a new distribution channel
that allows financial institutions and other commercial actors to offer financial services
outside traditional bank premises.
2.1.5 Adoption is the acceptance and continued use of a product, service or idea (Rogers and
Shoemaker, 1971).

10
2.1.6 Financial Inclusion is provision of a broad range of high quality financial products,
such as savings, insurance, credit, pensions, and payment, which are relevant, appropriate
and affordable for the entire adult population, especially those low income segments.
Inclusive financial sector is characterized by the level of competition between them, the
diversity of financial service providers and the legal and regulatory environments that
ensure integrity of the financial sector and access for all (EFInA , 2015).

2.2 Theoretical Review

Theories of branchless banking can be classified into three broad categories: Bank-
focused theory, Bank-led and Nonbank-led theory.

2.2.1 Bank-led Theory

In the most basic version of the bank-led theory of branchless banking, a licensed
financial institution (typically a bank) delivers financial services through a retail agent.
That is, the bank develops financial products and services, but distributes them through
retail agents who handle all or most customer interaction (Lyman, Ivatury and Staschen,
2006). The bank is the ultimate provider of financial services and is the institution in
which customers maintain accounts. Retail agents have face-to-face interaction with
customers and perform cash-in/cash-out functions, much as a branch-based teller would
take deposits and process withdrawals (Owens, 2006). Virtually any outlet that handles
cash and is located near customers could potentially serve as a retail agent. Whatever the
establishment, each retail agent is out fitted to communicate electronically with the bank
for which it is working. The equipment may be a mobile phone or an electronic point-of-
sale (POS) terminal that reads cards. Bank-led model offers a distinct alternative to
conventional branch-based banking in that customer conducts financial transactions at a
whole range of retail agents instead of at bank branches or through bank employees
(Lyman, Ivatury and Staschen, 2006). This model promises the potential to substantially
increase the financial services outreach by using a different delivery channel (retailers/
mobile phones), a different trade partner (Chain Store) having experience and target
market distinct from traditional banks, and may be significantly cheaper than the bank
based alternatives. In this model, customer account relationship rests with the bank

11
(Tomaskova, 2010). Agents related risks arise from substantial outsourcing of customer
contact to retail agents. From a typical banking regulator‟s perspective, entrusting retail
customer contact to the types of retail agents used in both the bank-led and nonbank-led
models would seem riskier than these same functions in the hands of bank tellers in a
conventional bank branch.
These retail agents may operate in hard-to reach or dangerous areas and they lack
physical security systems and specially trained personnel. The lack of expert training may
seem a particular problem if retail agents‟ functions range beyond the cash-in/cash-out
transactions of typical bank tellers to include a role in credit decisions (State Bank of
Pakistan, 2011). Banking regulation typically recognizes multiple categories of risk that
bank regulators and supervisors seek to mitigate. Five of these risk categories-credit risk,
operational risk, legal risk, liquidity risk, and reputation risk-take on special importance
when customers use retail agents rather than bank branches to access banking services.
The use of retail agents also potentially raises special concerns regarding consumer
protection and compliance with rules for combating money laundering and financing of
terrorism (Kumar, et al. 2006). The bank lead theory is related to this study as it focus on
how financial institution like bank deliver their financial services through a retail agent,
where the bank develops financial products and services, but distributes them through
retail agents who handle all or most customer interaction . For example; Family bank of
Kenya distributes its financial product through its Pesa pap agent, where the agent have
face-to-face interaction with customers and perform cash-in/cash-out functions, much as
a branch-based teller would take deposits and process withdrawals.

2.2.2 Nonbank-led Theory

12
In this theory, customers do not deal with a bank, nor do they maintain a bank account.
Instead, customers deal with a nonbank firm either a mobile network operator or prepaid
card issuer and retail agents serve as the point of customer contact. Customers exchange
their cash for e-money stored in a virtual e-money account on the non-bank‟s server,
which is not linked to a bank account in the individuals name (Kumar, et al. 2006). This
model is riskier as the regulatory environment in which these nonbanks operate might not
give much importance to issues related to customer identification, which may lead to
significant Anti-Money Laundering and Counter-Terrorism Financing (AML/CFT) risks.
Bringing in a culture of Know Your Customer (KYC) to this segment is a major
challenge. Further, the nonbanks are not much regulated in areas of transparent
documentation and record keeping which is a prerequisite for a safe financial system.
Regulators also lack experience in the realm. For these reasons, allowing nonbank-led
model to operate is an unnecessarily big leap and an unjustifiably risky proposition.
However, this model becomes viable after regulators have gained sufficient experience in
mitigating agent related risks using bank led model and need to think about mitigating
only e-money related risks (Kapoor, 2010).

2.2.3 Bank-focused Theory

The bank-focused theory emerges when a traditional bank uses non-traditional low-cost
delivery channels to provide banking services to its existing customers. Examples range
from use of automatic teller machines (ATMs) to internet banking or mobile phone
banking to provide certain limited banking services to banks‟ customers. This model is
additive in nature and may be seen as a modest extension of conventional branch-based
banking. Although the bank-focused model offers advantages such as more control and
branding visibility to the financial institutions concerned, it is not without its challenges.
Customers‟ primary concerns are to do with the quality of experience, security of identity
and transactions reliability and accessibility of service and extent of personalization
allowed. Banks address these issues by providing a branchless banking service with an
easy to use interface, made secure with the help of multi-factor authentication and other
technology, capable of running uninterrupted 365 days a year (Kapoor, 2010). The bank-

13
focused theory emerges when a traditional bank uses non-traditional low-cost delivery
channels to provide banking services to its existing customers.

2.3 Empirical Review

Some related studies were conducted by different researchers in different parts of the
world but the researcher could not find one that was conducted on Agency Banking
adoption in Ethiopia both from banks and agents perspective except one which has
conducted by (Afework, 2015). But different studies have been conducted on the related
e-banking services. Specifically, (Wondwossen and Tsegai, 2005), (Gardachew, 2010),
(Ayana, 2012) have conducted researches on the challenges and opportunities of E-
banking in Ethiopia. The aims of their study were to analyze the status of e-banking in
Ethiopia and investigate challenges and opportunities in implementation of same.
Accordingly, they have spotted low level of internet penetration, poorly developed
telecommunication infrastructure, lack of suitable legal and regulatory framework for e-
commerce and e-payment, inadequate banking system, political instabilities, high rates of
illiteracy, high cost of internet, absence of financial institutions networks that link
different banks and frequent power interruptions among the challenges. Based on studies
conducted in different parts of the world, the following are discussed in line with the
conceptual framework of the study.
2.3.1Technological Factors refer to adopter‟s perception of e-banking attributes. Typical
characteristics of technology considered in technology adoption studies are based on the
assumption of Roger‟s diffusion of innovation (Rogers 2003) that include relative
advantages (perceived benefits), and relative disadvantages (perceived risks).
Different researchers described technological factors differently. Adoption depends on
the pool of technologies both inside and outside the firm as well as the application‟s
perceived relative advantage (gains), complexity (learning curve), compatibility (both
technical and organizational), observbility (visibility/imagination), trial ability (pilot
test/experimentation) Hart O. et al, (2012). For this study, to avoid overlap between
organizational and technology contexts, Perceived benefits and perceived risks are
considered suitable from the technological factors as presented by Ayana (2012).

14
Perceived Benefits: - is discussed in terms perceived usefulness and perceived ease
of use as fundamental determinants of technological adoption where an individuals
intention to use an application is predicted and explained by once perception of the
technological usefulness and its simplicity Hart O. et al, (2012).
Perceived Ease of Use: - refers to the level of degree where an individual believes that
using a particular system would be free of physical and mental effort. It measures the
prospective user‟s assessment of the mental efforts required of the use of the target
applications (Davis, 1993). Innovations with perceived complexities of user interface and
steep learning curve, is thought risky to adopt Opia (2008). Ease of use is a powerful
determinant of intention to accept innovation(s) (Hart O. et al, 2012).

Perceived Usefulness: - is related to users' perception of the degree to which using a

system will be beneficial (Alsabbagh &Molla, 2004). It provides diagnostic lenses
into how actual use and intention to use or attitude towards using are influenced. The
attainment of perceived near-term usefulness paves way for long-term usefulness Hart O.
et al, (2012). It relates with the cost and time saving and it considered from the
perspective of improving service delivery and creating more access to users. It covers
both the direct and indirect benefits for the banking industry as well as for the consumers;
where direct benefits include savings on operational cost, improved organizational
functionality, improved efficiency, increased profitability and productivity gain. Indirect
benefits, on the other hand, include the opportunity or intangible benefits such as
improved customers‟ satisfaction through improved services, improved banking
experience and fulfillment of their changing needs and lifestyle (Lu et al.2005).
Perceived Risks: - One of risk faced by banksin offering branchless banking services is
the customers‟ resistance to use the services that significantly hinder the growth of e
banking (Laforet 2005 and Zhao et al. 2008). Issue related to security is also a concern
when dealing with technologies related to online transactions (Chang 2007 & Rogers
2003). Therefore, the perception of the risks regarding the e-banking is expected to
influence its adoption Ayana (2012).

15
Technological Advancement; - Technology adoption especially in banking systems has
shown a great momentum and spread at an unbelievable pace across the world.
Considering the importance of banking systems high presence and affordability, there is
great potential of using this in agent banking for provision of banking services to
unbanked community (Arora and Ferrand, 2007). However, technology systems have
associated data and network security risks which make them susceptible for conducting
financial transactions. Technology risks regarding information and data security based on
applicable models of agent banking have been reported thus creating uncertainty to the
clients. Financial institutions are required to plan and act for long term development and
prosperity of their agents to reach the targeted customers from a set of population
(Owens, 2006). This requires close coordination (collaboration) with agents, providing
them opportunities to learn more, to become more efficient and; a fair pricing mechanism
for the services provided by the agents (Arora and Ferrand, 2007). As the technology
changes rapidly, banks have been greatly affected in its operation, whereby application of
the technology ensures quick and effective services to the clients. However, banking
agents do not change their system as frequent often leading to system failure and the
consequent delays in transaction execution (Lyman, et al, (2008). This leads to customer
inconvenience and trust over the security/safety of transaction lodged with agent banks.
Moreover, these constant systems failure makes transactions with banking agents
vulnerable to fraud.

2.3.2 Organizational Factor Refers to the organization‟s characteristics that influence its
ability to adopt and use of branchless banking. Organizational factor captures firm‟s
business scope, organizational culture, top management support, complexity of
organizational structure measured in terms of centralization, vertical differentiation, and
formalization, the quality of human resource, and size related issues such as
specialization and internal slack resources (Jeyaraj A. Et al, 2006). Organizations
influenced by a number of factors, like firm size, top management support and financial
and human resources in their preference to adopt technological innovation (Iacovou 995)
and (Grover, 1993). It is also defined in terms of several descriptive measures: firm size
and scope; the formalization, centralization and complexity of its managerial structure;

16
the quality of its human resources and the amount of internally available slack
resourcesKvin Z. et al. (2004) and Tornatzky and Fleisher (1990).
Accordingly, the researcher considered the financial &human resources as well as
accessibility issues as organizational factors influencing adoption of agency banking
Financial Resources: - Financial resources are an important factor in facilitating
innovation adoption for any organization and they are often correlated with the firm size
(Iacovou, 1995 &Kuan, 2001). The availability of financial resources and costs related
with adoption of innovations has paramount importance and deserves consideration.
Human resources: - enable banks to obtain the required technical and managerial skills
and expertise to adopt and implement technological innovations like that of agency
banking system are also found important to consider as factors influencing adoption of
agency banking.

2.3.3 Environmental Factors: -Refers to the external environment in which an

organization operates and its condition for supporting the development of branchless
banking services. Environmental factors mainly relates to different facilitating and
inhibiting factors in areas of operations (Al-Qirim,2006). The arena in which firms
conduct business in adopting technological innovations; its industry, competitors,
access to resources supplied by other externals and dealings with government are claimed
to be covered under environmental contexts Kvin Z. et al. (2004). The researcher
intended to see the influences of Legal frameworks, National ICT infrastructure and
Competitive pressure as significant factors to be considered in the study.

Regulatory Framework: - The existence and maturity of legal frameworks on adoption

of agency banking within a country to influence the diffusion of online transactions.
Policymakers around the world seek to encourage the provision of financial services to
the unbanked and under-banked poor, they implement regulatory frameworks that enable
the spread of low-cost branchless banking while at the same time protect consumers
against fraud. This is a difficult balance to strike, particularly when it comes to regulating
agents, which typically play a crucial role in receiving and dispensing cash on behalf of
the financial service provider (CGAP, 2010). Branchless banking is only allowed to be

17
undertaken by licensed deposit-taking financial institutions (bank and non-bank) or their
agents. Furthermore, all customers of financial institutions (FIs) undertaking branchless
banking activities must be uniquely identified. In each case, customer account
relationship must reside with some FI and each transaction must hit the actual customer
account. All FIs and their agents must comply with the Anti-Money Laundering Act
(2008) as well as the international standards set by the Financial Action Task Force
(World Bank, 2010). It is a regulatory requirement that adequate customer due diligence,
on the spirit of (KYC) be undertaken on all new accounts and on one-off cash
transactions over designated thresholds. This requires identifying the customer and
verifying the customer‟s identity: - Financial service providers to keep detailed
transaction records for at least five years. Financial institutions to report suspicious
transactions promptly to the AML/CFT authority (World Bank, 2010)
A study Conducted in Brazil found that some countries restrict the location of agents,
though such restrictions are sometimes eased when regulators recognize that the
regulations create obstacles to financial inclusion. For example, due to concerns that
agents could threaten bank branches, Brazilian regulation originally allowed agents only
in municipalities that did not have bank branches (Bold, 2011). Indian regulators also
found that initially required agents to be located within 15 kilometers of a “base branch”
of the appointing bank in rural areas, and within 5 kilometers in urban areas. This policy,
intended to ensure adequate bank supervision of its agents, limited the use of agents by
banks with only a few branches (Bold, 2011). Experience has shown that overly
restrictive location requirements can complicate the business case for viable agent-based
banking and ultimately work against financial inclusion goals. In addition, the real-time
nature of most agent services has enabled remote supervision, thereby obviating one of
the central arguments for location restrictions (Tarazi and Breloff, 2011). Regulations
often impose some form of “fit and proper” requirements, mandating a form of agent due
diligence that requires financial institutions to verify that would-be agents have good
reputations, no criminal records, and no history of financial trouble or insolvency. While
fit-and-proper criteria listed in regulation often are not problematic, providers and agents
have occasionally argued that compliance with particular details can impose significant
cost, particularly with respect to gathering documentation (Tarazi and Breloff, 2011).

18
Central banks regulations on agency banking hamper the growth of agency banking,
these regulations slows down the penetration of the agency banking which negatively
affect the performance of commercial banks. Central Bank has stringent regulations on
agency banking, which slow down the growth of agency banking in Kenya thus affecting
the performance of commercial banks in Kenya (Wawira, 2013).
In late 2012, National Bank of Ethiopia has issued a legal framework on Agency Banking
in Ethiopia a directive cited as “Regulation of Mobile and Agent Banking Services under
Directives No. FIS/01/2012 with effective date of January 1, 2013. This directive has
clarified and framed the business modality of the agent and mobile banking services in
Ethiopia. Only financial institutions that are licensed by the National Bank of Ethiopia
are allowed to engage in the mobile & agent-banking services as we follow a bank led
model in the financial services. Mobile and agency banking service shall be carried out
only within Ethiopian geographic boundary and only with Ethiopian Birr. Banks can
deliver agent banking through their agents as specified in the directives.As per same
directive, the following are permissible activities of an agent; an agent, on behalf of the
principal financial institutions as agreed between it and the financial institution and as
may be specifically perform customer due diligence and Know Your Customer (KYC)
requirement of natural persons and make registration: shall open regular saving account
of natural persons, open mobile account of natural persons, perform cash-in and cash-out
services, transfer funds between different parties, perform various payment services. But
not with standing the provision stated above, agents shall not undertake
banking transaction that involves the use of check and other check related instruments
and any other operation related with provision of credit.

National ICT Infrastructure: - National ICT infrastructure is a major factor that

supports the adoption of agency banking as the case for other initiatives Efendioghu
(2004).
Competitive pressure: - Competitive pressure can strongly influence any bank to
develop and adopt technological initiatives and it may affect the bank‟s perception
towards innovation Quaddus & Hofmeyer (2007). Intense competition stimulates the
adoption of innovation (Mansfield et al. 1977).

19
2.4 Conceptual Framework

To explore the key prospects and challenges of agency banking adoption in Ethiopia, this
study is guided by the technology–organization–environment (TOE) framework proposed
by Tornatzky and Fleischer (1990) which is designed for studying the likelihood of
adoption success of technology innovations by customizing the study objective.TOE is a
comprehensive and well-acknowledged framework in the context of innovation adoption
by different organizations and has been used in many studies (Salwani et al, & Ellis,
2009; Chang et al, 2007, Zhu & Kraemer, 2006). Technology adoption within an
organization is influenced by factors pertaining to the technological, organizational and
external environment context (Tornatzky and Fleischer, 1990). Conceptual framework is
a presentation of how the independent and dependent variables are related. Accordingly,
the independent variables are technological, organizational, and environmental factors
while the dependent variable is adoption of Agency Banking by Commercial Banks &
Agents.
Organizational factors:

 Human resource perspective

 Financial resource perspective
 Accessibility

Environmental Technological
factors: factors:

 Regulatory  Perceived
framework Adoption of benefits
 ICT infrastructure Agency  Perceived risks
 Competitive Banking  Technological
pressure advancements

Figure 2.1 Conceptual Framework

Source: (Tornatzky and Fleischer, 1990)

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 CHAPTER THREE

RESEARCH METHODOLOGY
This chapter presents research design, target population, sampling methods & techniques,
sources & type of data, method of data collection, instrument validity & reliability,
method of data analysis & ethical consideration.

3.1. Research Design

The design of the study is quantitative research and the study employed mixed type of
research i.e. descriptive & explanatory research design. Descriptive survey design aimed
to describe factors influencing adoption of agency banking innovation by Commercial
Banks in Ethiopia. Descriptive research tries to “paint a picture” of a given situation by
addressing who, what, when, where, and how questions (Zikmund, 2010). The design
provides a quantitative or numeric description of trends, attitudes, or opinions of a
population by studying a sample. Thus, the design is considered as appropriate for this
study because survey was concerned with describing, recording, analyzing, and reporting
conditions that exists or existed (Kothari, 2003). Explanatory research/causal research
design allows causal inferences to be made; seeks to identify cause and-effect
relationships (Zikmund, 2010) and thus, the researcher assumed the design to be
appropriate totest the effects of independent variables on dependent variable under study.

3.2. Target population

Population is any complete group that shares some common set of characteristics
(Zikmund, 2010). On the other hand, target population is the population to which the
researcher will generalize the results of a study (Kothari, 2004). Currently, there are
seventeen Commercial Banks involved in retail banking operations in Ethiopia & all of
these Commercial banks involved in retail banking operation &94 agents involved in its
implementation in Adama city are the target population of this study.

21
3.3. Sampling Methods and Techniques
The working populations of this study are Commercial Banks involved in retail banking
operation for ten years and above in the industry as they are assumed to be capable in
terms of financial, human resource and customer base namely, Commercial Bank of
Ethiopia, Awash International Bank S.C, Dashen Bank S.C, Bank of Abysinia S.C,
Cooperative Bank of Oromia S.C, United Bank S.C, Lion International Bank S.C,
Wegagen Bank S.C and Nib International Bank S.C. as well as Agents of Commercial
Banks in Adama city that have stayed as an Agent for more than a year and are on active
status assuming they are supposed to be knowledgeable in due course of implementing
Agency Banking system and could provide reliable data on its adoption. Among the nine
selected Commercial Banks, only three of them namely, Cooperative Bank of Oromia
S.C. United Bank S.C, and Lion International Bank S.C launched agency banking service
while the rest six banks didn‟t launched agency banking service in Adama city during the
study stay.
As clearly stated in the scope part, business development head of each selected
Commercial banks were asked for strategic related issues& for implementation related
issues, employees from branches of the three banksin Adama city along with their agents
were asked on sample basis. As the services provided by banksare homogeneous in
nature& the expected responses are assumed to be identical, the researcher tookfive
employees from each branch of the three banks above the position of junior officer as
they are deemed to be capable of providing the necessary information. The three banks
that have launched agency banking service in Adama city have eleven
branches.Therefore, a total of 58 respondents were selected from banks‟ perspective
which is composed of three employees from their respective head quarter and 55
employees from the eleven branches of the three banks through simple random sampling
using lottery method from the attendance sheet of each branches. With respect to Agents,
there are 94agents of the three Commercial Banks that served for more than a year and on
active status that are able to provide important information as per predefined criterion.
Therefore, considering the above given points, the sample size for this study is calculated
by using Yamane‟sformula as follows:

22
 n= N
1+N (e) ²
Where:
n = the sample size/ required sample size
N = the population size
1 = designates the probability of the event occurring.
e= the level of precision (Sampling error that can be tolerated which is
5%).
Assumptions: A 95% confidence level, and e = ±5%
n= 94
1+94 (0.05) ²
n = 76
Therefore,76 respondents were selected by simple random sampling using lottery
method.

3.4. Sources& Type of Data

The study used primary data. The primary data was collected through survey method by
asking respondents for information using oral & written questioning. Regarding data
type, the researcherused both quantitative& qualitative data.

3.5. Data CollectionInstruments

The researcher used semi structured questionnaires and interview to collect primary data.
Questionnaires were floated to fifty eight employees of the three sampled banks that
launched agency banking which is composed of three employees from their respective head
quarter and 55 employees from the eleven branches of the three banks in Adama city and to 76
agents of the three banks. Self-administered interview was made with Business
development head of the six banks that didn‟t launched agency banking to get in depth
view of what prevents them from adopting agency banking & what motivated them if
they planned to adopt since the researcher can handle interview in person with them
easily.

23
3.6. Instrument Validity and Reliability
Reliability is an indicator of a measure‟s internal consistency. A measure is reliable
when different attempts at measuring something converge on the same result and
Validityis the accuracy of a measure or the extent to which a score truthfully represents a
concept. (Zikmund,2010).
Validity
The researcher checked for face validity to measure thelogical appearance of scale‟s
content to reflect what was intended to be measured by asking different experts. The
researcher‟s advisor gave his comment on each constructs and some questions were
removed because they are out of content, some questions because they were double
barreled questions and some questions for their ambiguity and some questions added to
measure the variables. In addition, discussion was made with area professionals and
peers. Accordingly, there has been a subjective agreement among professionals. When an
inspection of the test items convinces experts that the items match the definition, the
scale is said to have face validity (Zikmund, 2010).

Reliability
To establish the instrument‟s reliability, the researcher conducted pilot study on fifteen
individuals from working population/sampling frameprior to the main study.The
researcher checked for reliability of the instrument by using coefficient alpha (α)method
of measuring reliability for the internal consistency of the measure. A high value of the
cronbach alpha coefficient suggests that the items that make up the scale „hang together‟
and measure the same underlying construct. A value of cronbach alpha above 0.70 can be
used as a reasonable test of reliability Accordingly, the instrument was reliable with the
following Coefficient alpha (α) value for each dimension and over all constructs.

24
Table 3.1 Reliability Test
Variables No. of items Cronbach alpha
Questionnaires for Bank Employees
Driving Technological Factors 9 0.828
Driving Organizational Factors 9 0.810
Driving Environmental factors 4 0.841
Agency banking adoption with respect to driving factors 3 0.715
Over all driving factors 25 0.947
Challenging Technological factors 4 0.864
Challenging Organizational factors 8 0.877
Challenging Environmental factors 6 0.866
Agency banking adoption with respect to challenging factors 3 0.89
Over all challenging factors 21 0.965
Questionnaires for Bank Agents
Perceived benefits 10 0.859
Perceived challenges 7 0.810
Source: primary data,2017

3.7. Data Analysis

Both descriptive and inferential statistics were used to analyze and interpret the findings.
Demographic variables of the respondents and mean scores of each driving and
challenging factors are interpreted using descriptive statistics whereas inferential
statistics is used to find out the relationship & magnitude of influence of each
driving and challenging factors on adoption of agency banking using correlation
and regression analysis via SPSS Version 22.

3.8. Ethical Consideration

The most important ethical principles in educational research are minimizing harm which
includes financial and reputational consequences on the people being studied, Protecting
privacy that is to keep data confidential and respecting autonomy that is showing respect
for people in the sense of allowing them to make decisions for themselves, notably about
whether or not to participate (Hammersley, M. &Traianou, A, 2012).
Therefore, the researcher treated all information gathered with utmost confidentiality to
safeguard the public reputation of the organizations and peoples considered in study.

25
 CHAPTER FOUR

PRESENTATION, ANALYSIS AND INTERPRETATION OF

FINDINGS

This chapter presents analysis and interpretation of findings of the research study both
from banks and agents perspectives comprising demographic profile of respondents‟ ,
factors influencing adoption of agency banking by Commercial Banks and Agents
participated in its implementation, relationship between Agency Banking adoption & its
determinant factors as well as the effect of Agency Banking determinant factors on its
adoption. The collected data was analyzed by using Statistical Package for Social
Sciences (SPSS) software version 22.

4.1. Respondents’ Profile

The respondents participated in the study are of two types which is composed of
employees of Commercial banks and Agents of Commercial Banks participated in
implementation of agency banking.58 questionnaires were distributed to Bank Employees
& all of them were returned while out of 76 questionnaires distributed to Bank Agents,
only 63 of them are returned which accounts for 83% response rate which is reasonable
to make analysis. In addition, the researcher planned to make interview with six banks‟
business development head at their respective head quarter but only five of them
participated in the study which accounts for 83% response rate which is reasonable to
make analysis. The demographic profile of respondents‟ with respect to Bank employees and
Agents participated in its implementation was shown in the table 4.1 and 4.2 below
respectively. However, the demographic profile of respondents‟ has nothing to do with the
study objective rather it is used to simply show the diversity population participated in the
study to maintain the statusquo.

26
Table 4.1 Respondents’ Demographic Profile With Respect to BankEmployees

Variable Classification of variables Frequency Percent

Sex Male 44 75.9
Female 14 24.1
Total 58 100.0
Age Group in 18-23 2 3.4
years 24-29 27 46.6
30-34 21 36.2
35 & above 8 13.8
Total 58 100.0
Educational BA degree 51 87.9
Qualification Master degree 7 12.1
Total 58 100.0
Employer CBO 26 44.8
UB 16 27.6
LIB 16 27.6
Total 58 100.0
Position Business Development Head 3 5.2
Branch Manager 7 12.1
Customer Service Manager 9 15.5
Customer Relation Officer 5 8.6
Accountant 8 13.8
Auditor 6 10.3
Customer Service Officer 20 34.5
Total 58 100.0
Service year of 1-5 19 32.8
respondents‟ in 6-10 20 34.5
the bank they 11-15 14 24.1
are currently 16 & above 5 8.6
working Total 58 100.0
Source: Primary data, 2017

The result in table 4.1 above indicates that data was obtained from a total of 58
respondents. With respect to classification of respondents by sex, male participants took
a lion share which accounts for 75.9% and female respondents share 24.1 %. With regard
to classification by age, 46.6% of respondents‟ falls in the age group that ranges from
24-29 years and followed by age group range from 30-34 which accounts for 36.2%.
Regarding the educational qualification of respondents, about 87.9 % BA degree holder
and the remaining 12.1% is master degree holder.

27
When we see respondents‟ classification by their employer, 44.8% were from
Cooperative Bank of Oromia S.C followed by United Bank S.C which shares 27.6% and
Lion International Bank S.C which also accounts for 27.6%. With regard to job position,
majority of respondents are Customer Service Officers which accounts for 34.5%
followed by Customer Service Managers which takes 15.5% share. From classification of
respondents‟ with service year categorization, 32.8% of respondents‟ work experience
ranges from 6-10 years followed by respondents worked for 1-5 years. From this, one can
understand that majority of respondents‟ participated in the study were male. With
regard to age group, most of respondents fall in the age range from 24-29 which are
youngsters. From educational qualification point of view, majority of respondents were
BA degree holders. Majority of respondents participated in the study were employees of
Cooperative Bank of Oromia S.C. Regarding respondents‟ position, most of
respondents participated in the study were Customer Service Officers. With respect to
service year of respondents‟ in the bank they are currently working, majority of them
falls in the service years that ranges from 6-10 years.

28
Table 4.2 Respondents’ Demographic Profile With Respect To Agents

Variable Classification of variables Frequency Percent

Sex Male 11 17.5
Female 52 82.5
Total 63 100.0
Age Group 20-30 11 17.5
31-40 41 65.1
41-50 9 14.3
51 and above 2 3.2
Total 63 100.0
Educational Diploma/TVET 30 47.6
Qualification BA degree 28 44.4
Master degree 5 7.9
Total 63 100.0
Business Type Stationary 4 6.3
Internet Café 10 15.9
Mobile Centre 7 11.1
Super Market 9 14.3
Retail Shop 10 15.9
Bar & Restaurant 9 14.3
Pharmacy 4 6.3
Construction Materials Sales 3 4.8
Mini Market 2 3.2
Gift Shop 2 3.2
Video Cassete Rental & Game Zones 2 3.2
Fuel Station 1 1.6
Total 63 100.0
Source: - Primary data, 2017

As indicated in the table 4.2above,out of 63 respondents, 52 of them were females which

account82.5% leaving the remaining 17.5 % share for male respondents. Based on
classification with respect to age group, 65.1 % belongs to age group that ranges from 31-
40 followed by youngsters that belong to age group from 20-30 which took 17.5%
share. Regarding Educational qualification, 47.6% of respondents are Diploma
holder,
44.4% are BA degree holder and the remaining 7.9 % are master degree holders. Based
on business type classification of respondents, internet cafe & retail shop took big share
which accounts 15.9 % each followed by Supermarkets and bar & restaurants which
29
shares 14.3% each. From this we can understand that majority of respondents were
females. With regard to age group, most of them fall in the age that ranges from 31-40.
With respect to educational qualification, majority of respondents are diploma
holder. With respect to respondents‟ business type, most of them are from internet
cafe& retail shop.

4.2Factors Influencing Commercial Banks to Adopt Agency Banking

To explore the key driving and challenging factors influencing adoption of agency banking
by Commercial Banks, this study is guided by the Technology–Organization–Environment
(TOE) framework proposed by Tornatzky and Fleischer (1990) which is designed for
studying the likelihood of adoption success. Different constructs are developed under each
dimension based on their core focus areas to get respondents‟ response using a five point
Likert scale to measure the likelihood of adoption success. Each constructs are analyzed
based on their mean score value. Mean score value below 2.5 shows respondents‟
disagreement with the constructs, mean score value that ranges between 2.5 and 3.5
shows respondents‟ neutrality with the constructs and mean score value of above 3.5
shows respondents‟ agreement with the constructs (Pallant, 2005). The factors
influencing adoption of Agency Banking were segregated as driving and challenging
factors and discussed below separately.

30
4.2.1 Factors Driving Commercial Banks to Adopt Agency Banking

4.2.1.1 Technological Factors

Driving technological factors pertinent to this study is related with perceived benefits of
agency banking i.e. perceived ease of use and perceived usefulness. The data obtained
from the survey study are shown in Table 4.3 as follows,

Table 4.3 Driving Technological Factors Enhancing Adoption of Agency Banking

Factors N Mean Std.
Deviation
Advancement in technology enhances adoption of agency 58 4.45 .597
banking.
Agency banking is user friendly. 58 4.64 .641
Agency banking improves branch productivity indirectly by 58 4.52 .504
reduces congestion in bank branches.
Agency banking is less costly than opening conventional 58 4.14 1.034
bank branches.
Agency banking improves efficiency of the bank. 58 4.76 .432
Agency banking improves quality of service. 58 4.72 .451
Agency banking creates cashless society. 58 4.26 .739
Cumulative Driving Technological Factors 58 4.50 .365
Valid N (listwise) 58
Source: -Primary data, 2017

Perceived Benefits

As the mean score of each constructs‟ in the above table shows, respondents‟ agreed with
technological factors as a key driving factor for adoption of agency banking. User
friendliness with mean score of 4.64 is the perceived ease of use motivating banks to adopt
agency banking as well as the prospects of cost saving (Mean 4.14), reducing congestion in
the bank branches (Mean 4.52),enhancing efficiency(Mean 4.76), improving service quality
(Mean 4.72), promoting the move towards becoming cash less society (Mean 4.26) are
among the perceived usefulness of agency banking contributed for its adoption. In addition,
advancement in technology with mean score of 4.45has played a significant role in driving
banks to adopt agency banking.

31
The study finding is consistent with the findings of Afework (2015) that adoption of agency
banking is influenced by perceived benefits i.e. perceived ease of use & perceived usefulness
of innovation.

4.2.1.2 Organizational Factors

Organizational factors pertinent to adoption of agency banking in this study are

considered from human & financial resources and accessibility perspectives. The data
obtained from the survey study are shown in Table 4.4 as follows,

Table 4.4 Driving Organizational Factors Enhancing Adoption of Agency Banking

Factors N Mean Std.
Deviation
Agency banking brings financial inclusion. 58 4.47 .599
Agency banking increases market share through presence to 58 4.71 .459
new areas.
Agency Banking is convenient in terms of flexible hours. 58 4.52 .504
Proximity of agents to customers eased accessibility. 58 4.19 1.034
Agency Banking saves customers‟ time from moving far 58 4.76 .432
distance to get bank branches.
Agency Banking saves customers‟ cost by reducing 58 4.72 .451
transportation cost to visit bank branches.
Cumulative Driving Organizational Factors 58 4.56 .368
Valid N (listwise) 58
Source: -Primary data, 2017

The mean score of each constructs‟ in the above table indicates that the survey
respondents agreed with each constructs as key driving factors for adoption of agency
banking. The study revealed that agency banking reduces the cost incurred by customers
both in money(Mean 4.72)& time (4.76) to get bank branches by moving far distance. In
addition, the study finding shows adoption of agency banking is influenced by factors
related with ease of accessibility i.e. agents proximity to customers(Mean 4.19), financial
inclusion (Mean 4.47), flexible hours (Mean 4.52), increased market share through
presence to new areas (Mean 4.71).

32
The study finding is line with the study conducted in Kenya byWawira(2013) which
states that financial services accessibility through agency banking and costs involved in
agency banking have effects on adoption of agency banking & the study conducted by
Ndungu (2014) also revealed that convenience, extended hours of banking services
&bringing the banking service closer to the customers are among the factors that leads to
increased adoption of agency banking.

4.2.1.3 Environmental Factors

Environmental factors pertinent to this study are the prospects of National ICT
development, regulatory framework and competitive pressure.

Table 4.5 Driving Environmental Factors Enhancing Adoption of Agency Banking

Factors N Mean Std.
Deviation
The current level of ICT infrastructure development 58 3.34 .739
enhanced adoption agency banking.
The regulatory framework issued by NBE to regulate Mobile 58 3.74 .928
& Agency banking service has significantly contributed to
the adoption of agency banking.
Regulatory framework issued by NBE to regulate Mobile & 58 3.33 .825
Agency banking service is convenient & easy for retail
banks to implement agency banking service.
Stiff competition among banks in the industry has great 58 4.72 .451
contribution on adoption of agency banking.
Cumulative Driving Environmental Factors 58 3.78 .379
Valid N (list wise) 58
Source: -Primary data, 2017

As stated in table 4.5 above, from environmental factors raised in questionnaires,

respondents has agreed that the regulatory framework issued by NBE to regulate mobile
and agency banking service has imposed its own significant contribution to adoption of
agency banking (Mean 3.74) and the existence of stiff competition among banks in the
industry has also contributed for agency banking adoption (Mean 4.72) however, the
respondents feel neutrality on whether the current level of ICT infrastructure
development has contribution for agency banking adoption (Mean 3.34) and regarding

33
the ease and convenience of the regulatory frame work issued by NBE to regulate mobile
and agency banking service (Mean 3.33). The study finding is supported by findings of
research conducted in Ethiopia by Wondwossen and Tsegai(2005) &Gardachew(2010),
(Ayana, 2012) and Afework (2015) on the challenges & opportunities of E-banking & agency
banking.

Table 4.6 Agency Banking Adoption With Respect to Driving Factors

Factors N Mean Std.
Deviation
The growing interest in agency banking adoption by 58 4.05 .605
commercial banks is due to technological factors raised
above.
Agency banking adoption is highly determined by 58 4.21 .695
organizational factors raised above.
Adoption of agency banking depends on environmental 58 3.98 .848
factors raised above.
Agency Banking Adoption with respect to driving factors 58 4.24 .437
Valid N (list wise) 58
Source: - Primary data, 2017

As indicated in the above table, the respondents agreed that technological (Mean 4.05),
Organizational (Mean 4.21) and Environmental factors (3.98) influence adoption of
agency banking. The majority of respondents agreed that Organizational factors plays
significant contribution on agency banking adoption followed by Technological and
Environmental factors respectively based on their mean score values. This implies that as
adoption of technological innovation is strategic issue in nature, organizations should
have to look first their internal capability to adopt innovations. After assessment of
internal capability, they should have to see the relative advantages& disadvantages of
adopting the innovation followed by assessment of the external environment in which the
business operates for its compatibility.

34
4.2.2 Factors Challenging Commercial Banks in Agency
Banking Adoption

4.2.2.1 Technological Factors

Restraining technological factors pertinent to this study is related with perceived risks.
The data obtained from the survey study are shown in Table 4.7 as follows,

Table 4.7 Challenging Technological Factors Inhibiting Adoption of Agency Banking

Factors N Mean Std.

Deviation
Customers do not trust technology. 58 4.33 .825
Fear of technological risk/ Security risk affects adoption 58 4.22 .497
of Agency Banking.
Customers are not willing/resist to accept Agency 58 4.19 .907
Banking.
Network problem affects adoption of agency banking. 58 4.40 .748
Cumulative Challenging Technological Factors 58 4.28 .549
Valid N (listwise) 58
Source: - Primary data, 2017

As expressed by the mean score of each constructs, adoption of agency banking is

restrained by network interruption/low level of internet connectivity (Mean 4.4),
customers‟ this trust of technology (Mean 4.33),fear of security risk (Mean 4.22) and
customers‟ resistance to accept technological innovations. From this we can understand
that majority of respondents agreed that all the mentioned technological challenging
factors inhibit adoption of agency banking.

The findings of this study is supported by the findings of research conducted by Ayana
(2012)
&Afework (2015) in which they indicated that, technological barriers, such as security risk as
hindrance factor for the adoption of electronic banking/agency banking innovation.

4.2.2.2 Organizational Factors

35
Restraining organizational factors pertinent to this study are related with technical skill of
employees and agents on how to use agency banking and other operational related issues.
The data obtained from the survey study are shown in Table 4.8 as follows,

Table 4.8 Challenging Organizational Factors Inhibiting Adoption of Agency Banking

Factors N Mean Std.

Deviation
Lack of employees‟ technical skills on the use of technological 58 2.41 .937
innovation affects adoption of agency banking.
Lack of agents‟ technical skills on the use of technological 58 4.22 .497
innovation affects adoption of agency banking.
Agency banking encounters challenge due to lack of 58 4.19 .907
professionalism while handling customers by agents.
Agency banking is challenging due to difficulty in cross- 58 2.28 .914
selling other bank products.
Customers are not familiar with Agency Banking service. 58 3.74 .739
Agency banking results in operational risk. 58 4.03 .748
Agency banking results in liquidity risk by agents. 58 3.21 1.005
Agency banking results in reputational risk. 58 3.02 1.177
Cumulative Challenging Organizational Factors 58 3.39 .341
Valid N (listwise) 58
Source: - Primary data, 2017

Agency banking adoption is restrained by lack of agents‟ technical skill on the use of agency
banking (Mean 4.22), lack of professionalism in customer handling by agents (Mean 4.19),
awareness level of customers regarding agency banking (Mean 3.74), Operational risk
associated with agents‟ operation (Mean 4.03). However, the respondents feel neutrality with
issues related to whether agency banking adoption creates liquidity risk (Mean 3.21) and
operational risk (Mean 3.02). On the other hand, respondents disagreed with statements lack
of employees‟ technical skill (Mean 2.41)and difficulty in cross selling other bank products
(Mean 2.28) challenges adoption of agency banking. The study finding is supported by
findings of Wawira (2013) &Ndungu (2014) which has been conducted in Kenya on
Agency banking adoption.

4.2.2.3 Environmental Factors

36
Challenging environmental factors pertinent to this study are related with ICT infra-
structure development& regulatory frame work. The data obtained from the survey study
are shown in Table 4.9 as follows,

Table 4.9 Challenging Environmental Factors Inhibiting Adoption of Agency Banking

Factors N Mean Std.

Deviation
Lack of sufficient ICT infrastructure development in the 58 4.62 .524
country hinders adoption of agency banking.
Remote location of agents from the base branch creates 58 4.22 .497
regulation obstacles.
Agency banking results in legal risk. 58 4.19 .907
Agency banking is challenging because of Bank standard 58 4.40 .748
operating procedures not adhered to.
Agency banking is risky venture with regard to compliance 58 4.40 .560
with rule of combating Money laundering & terrorism
financing.
Agency banking is risky venture with regard to the 58 3.64 1.071
regulatory requirement to undertake customer due
diligence on the spirit of KYC (know your customer).
Cumulative Challenging Environmental Factors 58 4.24 .384
Valid N (list wise) 58
Source: - Primary data, 2017

Challenging environmental factors also impose its share on preventing adoption of

agency banking as per the mean score of each constructs obtained from the responses of
58 respondents. The environmental factors hindering adoption of agency banking are lack
of sufficient ICT infrastructure development (Mean 4.62), no adherence to regulatory
framework with respect to banks‟ operational procedure (Mean 4.4), non-compliance
with the rule of combating money laundering & terrorism financing(Mean 4.4), under
taking customer due diligence on the spirit of Know Your Customer (KYC) (Mean 3.64),
regulation obstacle as a result of remote location of agents from base branch (Mean 4.22)
and, legal risk that arises from noncompliance with the regulatory requirements (Mean
4.19). The findings of this study is substantiated by the finding of Wondwossen and Tsegai
(2005), Gardachew(2010), (Ayana, 2012)&Afework (2015)

37
Table 4.10 Agency Banking Adoption With Respect to Challenging Factors
Factors N Mean Std.
Deviation
The above mentioned technological factors prevent 58 3.90 .583
adoption of agency banking by commercial banks.
Organizational factors listed above hinder Adoption of 58 3.46 .350
agency banking by commercial banks.
The environmental factors raised above, prevents 58 4.21 .585
commercial banks from Adoption of Agency banking.
Agency Banking Adoption with respect to challenging 58 3.86 .324
factors
Valid N (list wise) 58
Source: -Primary data, 2017

As it is clearly indicated in the above table, majority of respondents agreed that

challenges related with environmental factors restrains adoption of agency banking
(Mean 4.21) followed by technological factors (Mean 3.9). However, respondents feel
neutrality on whether challenging organizational factors hinders adoption of agency
banking or not (Mean 3.46) which implies that the raised organizational challenges can
be managed through training and awareness creation but issues related with technological
and environmental factors requires big deal since it is out of the banks domain.

4.2.3 Interview Result

Interview was made with concerned top management of the five banks not launched
agency banking service yet in Adama city during the study stay and their response was
analyzed based on content analysis i.e. by categorizing the common theme of the
responses. Accordingly, Commercial Bank of Ethiopia has been on project feasibility
study& that is why not launched agency banking service yetbut, currently the studywas
finalized and they are waiting for NBE approval to start agency banking through all of its
fifteen districts and all branches. Wegagen Bank S.Chas also been on project feasibility
study and currently started pilot on one of its branch in Adama city & full launch of the
service will be made in the coming periods by evaluating the progress of the pilot
study.On the other hand, Awash International BankS.C, Dashen Bank S.C and Bank of

38
Abyssinia have started agency banking in Addis Ababa and have planned to start agency
banking service in Adama city in the near future. The factors that restrained them to start
agency banking service in Adama city is highly related with organizational factors. The
mentioned banks have been on opening district offices in different major cities in the
country that is there focus was inclined on internal development i.e. opening district
offices & assignment of human resources for each districts. Even if organizational factors
took a line share in inhibiting those banks from launching agency banking in Adama city,
the risks associated with technology& environmental challenges like frequent network &
power interruption associated with poor development of infra- structure had also hindered
them in launching of agency banking service. In addition, the fear of outsourcing
customer contact point to third party retail outlet which is associated with lack of agents‟
customer service skill, technical knowhow on the use of technological innovations
&adherence to applicable rule and regulation are among the major factors that imposed it
effect on inhibiting agency banking adoption. However, conducting business is not a
risk free venture and the benefits associated with agency banking service gave rise to
plan for its adoption. Among the factors that gave rise to agency banking adoption is first
and foremost the decree of National Bank of Ethiopia issued to regulate mobile and
agency banking service. The existence of regulatory framework is the initial thing that
inspired Commercial Banks to start thinking about agency banking. Next to existence of
regulatory frame work, the perceived benefits of agency banking adoption like the
prospect of cost saving, customer service enhancement, decongesting bank branches,
customer base expansion, and increased accessibility issue played a great role in
enforcing banks to plan for its adoption. In addition, stiff competition among the
rival banks from the industry also played a significant role in its adoption. In general,
since adoption of agency banking is strategic issue in nature, the sampled banks have
been on feasibility study related with the available opportunities and challenges
of the environment in which they conduct business, the benefits and risks associated
with adoption as well as assessment of internal capability(personal communication with
higher officials of the sampled banks, 2017).

4.3. Factors Influencing Agents in Adoption of Agency Banking.

39
The factors influencing adoption of agency banking by agents were examined based on
the benefits and associated challenges with its adoption. The factors were discussed
below by segregating into driving and challenging factors.

Table 4.11 Factors Driving Agents to Adopt Agency Banking

Factors N Mean Std. Dev.

Agency Banking helps to perform banking task in 63 4.21 .652
a simple way/ease of use.
Agency banking generates extra income through 63 3.87 .833
commissions whenever agents perform
transactions on behalf of the bank.
Agency banking increases customer traffic/ the 63 4.17 .661
number of customer visiting your company.
As a result of increased customer traffic, more 63 3.95 .831
people getting to know your business.
Agency banking increases customer loyalty on 63 3.27 1.110
your company.
Agency banking results in good reputation for 63 3.37 .747
your company.
Agency banking helps in cross-selling your 63 4.51 .669
company products.
As a result of flexible hours, you can do your 63 3.14 1.330
transactions especially with people who are busy
during the day.
Agency banking helps to transact through account 63 4.95 .215
to account transfer & this will helps to minimize
the risk of receiving forgery notes.
Agency banking minimizes the need to hold huge 63 4.89 .406
amount of cash which in turn minimizes security
risk/robbery.
Cumulative Mean Score of Driving Factors 63 4.03 .454
Valid N (list wise) 63
Source: - Primary data, 2017

As indicated by the mean score of each constructs in the above table, agents were
motivated to become bank agents as a result of ease of use (Mean 4.21), increased
revenue through commission (Mean 3.87), increased customer traffic (Mean 4.17), more
people getting to know their business (Mean 3.95), cross selling their company products

40
(Mean 4.51), as agency banking helps to transact through account to account transfer
,minimized risk of receiving forgery notes (Mean 4.95 and minimized the need to hold
huge amount of cash which in turn minimizes security risk associated with robberies
(Mean 4.89).However, the respondents were neutral with issues related with whether
being bank agents increased customer loyalty (Mean 3.27) and reputation on their
company (Mean 3.37) as well as due to flexible hours, conducting business with people
who are busy during the day (Mean 3.14).The researcher couldn‟t get study conducted
from agents‟ perspective & some how substantiated by the findings of Ndungu (2014)
which has been conducted in Kenya with high emphasis given to banks‟ perspective
which states that commissions earned by agents& high quality of agents are among
factors signifying adoption and growth of agency banking.

Table 4.12 Factors Challenging Adoption of Agency Banking by Agents

Factors N Mean Std. Dev.

Customers do not trust technology to use Agency Banking. 63 3.56 .912
Lack of confidence with the security aspects (security risk) 63 3.84 .884
affects users‟ decision to use Agency Banking.
Low internet access/poor internet connectivity in the 63 3.84 1.537
country creates difficulty in delivering Agency Banking
service.
Agency banking encounters liquidity risk because of 63 3.27 .865
remote placement of retail agents from base branch.
Customers are not familiar with Agency Banking service. 63 4.17 1.171
The management of the bank doesn‟t support agents by 63 2.51 1.076
providing training/workshops about Agency Banking
services.
The management of the bank doesn‟t create awareness 63 3.48 1.366
about agency banking to the society.
Cumulative Mean Score of Challenging Factors 63 3.52 .702
Valid N (list wise) 63
Source; Primary data, 2017

From the mean score of 63 sampled respondents indicated in the above table, challenges
facing agents in agency banking operation were customers‟ distrust of technology (Mean
3.56), security risk associated with technology (Mean 3.84), network interruption (Mean

41
3.84), and low awareness level of customers (Mean 4.17). However, the respondents feel
neutrality on issues related with liquidity risk because of remote placement of agents
from the base branch (Mean 3.27) and lack of aggressive awareness creation by banks
(Mean
3.48). In addition, the respondents disagreed with lack of support and training by banks in
enabling agents (Mean 2.51).

4.4. Assumptions for correlation and regression Analysis

Before applying correlation and regression analysis, some tests were conducted in order
to ensure the appropriateness of data to assumptions of correlation and regression
analysis as follows:

4.4.1 Multi-co linearity Test

The correlation between Agency banking adoption and explanatory variables;

Technological, Organizational & Environmental factors have been presented and
analyzed. Multi- co linearity exists when the independent variables are highly correlated
with r= 0.9 and above (Pallant, 2005). Thus, as it has been analyzed under correlation
analysis in table 4.15, the correlation coefficient (r) of study variables were well situated
except for driving organizational factor with driving technological factor with r value of
0.90 which shows sign for existence of multi-co linearity. However, even if r value of 0.9
shows a warning sign for existence of multi- co linearity,a test called „co linearity
diagnostics‟ was performed on variables as part of the multiple regression procedure. In
doing so, it can pick up on problems with multi-colinearity that may not be evident in the
correlation matrix. In the result from Collin earity diagnostic test, two values are given:
Tolerance and VIF. Toleranceis an indicator of how much of the variability of the
specified independent is not explained by the other independent variables in the model
2
and is calculated using the formula 1–R for each variable. If this value is very small (less
than .10), it indicates that the multiple correlation with other variables is high, suggesting
the possibility of multicollinearity. The other value given is the VIF (Variance inflation
factor), which is just the inverse of the Tolerance value (1 divided by Tolerance).The

42
most commonly used cut-off points for determining the presence of multi
collinearity
(tolerance value of less than .10, or a VIF value of above 10).

As indicated in the table 4.13 below, the tolerance value for each independent variable is
greater than 0.10 which shows the multicollinearity assumption was not violated. This is
also supported by the VIF value, which is less thanthe cut-off point of 10. Therefore,
even if the variables were suspected for multi collinearity, as per the analysis made the
assumption of multi collinearity was not violated and hence no variable should be
excluded from the regression model to control multi-co linearity problem.

Table 4. 13 Col linearity Test With Respect to Driving Factors

Correlations Collinearity Statistics

Model Zero-order Partial Part Tolerance VIF

1 (Constant)

Driving Technological
.702 .288 .201 .127 7.845
Factors

Driving Organizational
.686 .050 .033 .123 8.109
Factors

Driving Environmental
.383 .322 .228 .909 1.100
Factors

a. Dependent Variable: Agency Banking Adoption with respect to driving factors

4.4.2 Linearity Test

43
Linearity refers to the degree to which the change in the dependent variable is related to
the change in the independent variables. To maintain linearity assumption, the residuals
should have a straight-line relationship with the predicted dependent variable scores.
In our case, to determine whether the relationship between the dependent variable
Adoption of Agency Banking and the independent variables; Technological,
Organizational & Environmental factors are linear, plots of the regression residuals by
SPSS version 22 software had been used. The scatter plot of residuals shows no large
difference in the spread of the residuals as you look from left to right on figure 2 & 3 on
appendix. This result suggested the relationship we are trying to predict is proved to be
linear.

4.4.3 Normality Test

As per the Classical Linear Regression Models assumptions, the error term should be
normally distributed or expected value of the errors terms should be zero (E(ut)=0),for
normality assumption to be hold. Figure 1 & 2 on appendix, showed the frequency
distribution of the standardized residuals compared to a normal distribution. As you can
see, most of the scores concentrated in the center (along the 0 point) & others are fairly
close. Moreover the histogram is bell shaped which lead to infer that the residual
(disturbance or errors term) are normally distributed. Thus, no violations of the
assumption normally distributed error term. Thus, from an examination of the
information presented in all the three tests, it was concluded that there are no significant
data problems that would lead to violation of the assumptions of multiple regressions.

44
4.5.Correlation Analysis
To find out the relationship between agency banking adoption and its determinant factors,
Pearson‟s correlation coefficient (r) which measures the strength and direction of a linear
relationship between two variables is used. Values of Pearson‟s correlation coefficient are
always between -1 and +1. A correlation coefficient of +1 indicates that two variables are
perfectly related in a positive sense; a correlation coefficient of -1 indicates that two
variables are perfectly related in a negative sense, and a correlation coefficient of 0
indicates that there is no linear relationship between the two variables. A low correlation
coefficient; 0.1-0.29 suggests that the relationship between two items is weak or non-
existent. If r is between 0.3 and 0.49 the relationship is moderate. A high correlation
coefficient i.e. >0.5 indicates a strong relationship between variables (Pallant, 2005).
Accordingly, the correlation analysis was performed using bivariate analysis after
computing the mean value of each dimension.

Table 4.14Correlations between Agency Banking Adoption & Its Driving Factors

1 2 3 4
Driving Pearson Correlation 1
Technological Sig. (2-tailed)
Factors (1) N
**
Driving Pearson Correlation .90 1
Organizational Sig. (2-tailed) .000
Factors (2) N 58 58
*
Driving Pearson Correlation .209 .273 1
Environmental Sig. (2-tailed) .115 .038
Factors (3) N 58 58 58
** ** **
Agency Banking Pearson Correlation .702 .686 .383 1
Adoption with respect Sig. (2-tailed) .000 .000 .003
to driving factors (4) N 58 58 58 58
**. Correlation is significant at the 0.01 level (2-tailed).Where 1= driving technological factors,
2=driving organizational factors, 3=driving environmental factors & 4= Agency Banking
adoption with respect to driving factors

45
From the above correlation table, driving technological& organizational factors have
positive significant correlation with adoption of agency banking with r value
of
0.702&0.686 respectively and p<= 0.01. However, driving environmental factors have
positive moderate relationship with adoption of agency banking with r value of 0.383 and
p<= 0.01&Correlation is significant at 2 tailed with N=58.From this we can understand
that as driving technological, organizational & environmental factors increases, adoption
of agency banking also increases proportionately in the same direction. Therefore,
adoption of agency banking can be predicted by driving technological, organizational &
environmental factors.

Table 4.15Correlations between Agency Banking Adoption & Its Challenging Factors

1 2 3 4
Challenging Pearson Correlation 1
Technological Sig. (2-tailed)
Factors (1) N 58
Challenging Pearson Correlation .240 1
Organizational Sig. (2-tailed) .069
Factors (2) N 58 58
**
Challenging Pearson Correlation .795 .146 1
Environmental Sig. (2-tailed) .000 .276
Factors (3) N 58 58 58
** ** **
Agency Banking Pearson Correlation .413 .358 .467 1
Adoption with Sig. (2-tailed) .001 .006 .000
respect to N 58 58 58 58
challenging factors
**. Correlation is significant at the 0.01 level (2-tailed).Where 1= challenging technological
factors, 2= challenging organizational factors, 3= challenging environmental factors & 4=
Agency Banking adoption with respect to challenging factors

As shown in the above table, the challenging technological, organizational &

environmental factors have moderate relationship with adoption of agency banking with
respect to challenges with r value of 0.413, 0.358 and 0.467 respectively with p<=0.01 at
2tailed with N=58.

From this we can understand that as challenging technological, organizational &

46
environmental factors increases, adoption of agency banking is inhibited
proportionately.

47
4.6. Regression Analysis

Regression analysis helps one to understand how the typical value of the dependent
variable changes when any one of the independent variables is varied keeping the other
independent variables constant. In this study, standard multiple regression analysis is
used to identify the magnitude of effect of driving and challenging factors on Adoption
of Agency banking. Tables which are relevant with the study objectives are
presented below.

Table 4.16 Model Summary with Respect Driving Factors

Model R R Square Adjusted R Square Std. Error of the Estimate

a
1 .743 .553 .528 .300

a. Predictors: (Constant), Driving Environmental Factors, Driving Technological Factors,

Driving Organizational Factors

b. Dependent Variable: Agency Banking Adoption with respect to driving factors

From the above table, the column labeled R squares shows the amount adoption of agency
2
banking is explained by the independent variables. Thus, 55.3% (R = 0.553) shows agency
banking adoption is explained by driving technological, organizational and environmental
factors included in the study and as indicated in the table 4.17 with sig value of 0.00 the model
is significant.

Table 4.17 ANOVA Table With Respect to Driving Factors

Model Sum of Squares df Mean Square F Sig.

b
1 Regression 6.019 3 2.006 22.235 .000

Residual 4.872 54 .090

Total 10.891 57

48
a. Dependent Variable: Agency Banking Adoption with respect to driving factors

b. Predictors: (Constant), Driving Environmental Factors, Driving Technological

Factors, Driving Organizational Factors

Table 4.18 Coefficients of Regression Model With Respect to Driving Factors

Un standardized Standardized
Coefficients Coefficients

Model B Std. Error Beta t Sig.

1 (Constant) -.358 .578 -.619 .538

Driving Technological
.676 .305 .564 2.214 .031
Factors

Driving Organizational
.112 .308 .094 .364 .717
Factors

Driving Environmental
.276 .110 .239 2.502 .015
Factors

On the above coefficient table, we find the beta value which measures how strongly each
independent variable influences the dependent variable. Thus a unit increase in driving
technological factors leads to a 0.564 increases in adoption of agency banking if other
things being constant. As driving environmental factors increases by 1 unit,
adoption of agency banking also increases by 0.239 units if the effects of other variables
being constant. However, driving organizational factors has no statistical significant
contribution in explaining adoption of agency banking as it is not statistically significant
with significance value of 0.717 which is above 0.05. Therefore, driving technological
factors took a lion share in influencing adoption of agency banking.

49
From the above table, the regression equation is derived as:
Y = a + bX1 + bX2 + …
ABA = -0.358 + 0.676DTF + 0.276DEF
Where,
ABA= Agency banking Adoption DEF= Driving Environmental Factors
DTF= Driving Technological Factors

Table 4.19 Model Summary With Respect to Challenging Factors

Model R R Square Adjusted R Square Std. Error of the Estimate

a
1 .551 .304 .265 .278

a. Predictors: (Constant), Challenging Environmental Factors, Challenging Organizational

Factors, Challenging Technological Factors

b. Dependent Variable: Agency Banking Adoption with respect to challenging factors

As indicated in the above table, the column labeled R squares shows the amount adoption of
2
agency banking is restrained by the independent variables. Thus, 30.4% (R = 0.304) shows
agency banking adoption is restrained 30.4 % by challenging technological, organizational and
environmental factors included in the study. From this we can conclude that the remaining 69.6
% will be assigned for variables not included in the study. The researcher highly recommends
banks to conduct research and search for those factors hindering adoption of agency banking
and as indicated in the table 4.20 with sig value of 0.00 the model is significant.

50
 Table 4.20 ANOVA Table With Respect to Challenging Factors

Sum of
Model Squares df Mean Square F Sig.
b
1 Regression 1.816 3 .605 7.860 .000

Residual 4.160 54 .077

Total 5.976 57

a. Dependent Variable: Agency Banking Adoption with respect to challenging

factors

b. Predictors: (Constant), Challenging Environmental Factors, Challenging

Organizational Factors, Challenging Technological Factors

Table 4.21Coefficientsof Regression Model With Respect to Challenging Factors

Un standardized Standardized
Coefficients Coefficients

Model B Std. Error Beta t Sig.

1 (Constant) 1.396 .527 2.648 .011

Challenging
.008 .113 .013 .070 .945
Technological Factors

Challenging
.279 .111 .294 2.508 .015
Organizational Factors

Challenging
.349 .158 .414 2.202 .032
Environmental Factors

As challenging organizational factors increases by 1 unit, adoption of agency banking is

inhibited by 0.294if other things held constant as well as a unit increase in challenging
environmental factors inhibits adoption of agency banking by 0.414 if the effects of other
variables being constant.

51
However, challenging technological factors has no statistical significant contribution in
inhibiting adoption of agency banking as it is not statistically significant with significance
value of 0.945 which is above 0.05. Challenging environmental factors took a line share
in preventing adoption of agency banking. Therefore, since managing/minimizing the
challenging factors enables adoption of agency banking, stake holders should have to
work hard to mitigate the challenges so as to enhance adoption of agency banking that
enables banks to render their services to the community at a low cost. From the
table
above, the regression equation is derived as:
Y = a + bX1 + bX2 + …
AAB = 1.396 + 0.279COF + 0.349CEF
Where,
AAB= Adoption of Agency banking CEF= Challenging Environmental Factors
COF= Challenging Organizational Factors

52
 CHAPTER FIVE
SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATION

This chapter presents the summary of the findings, the conclusion drawn by the
researcher, recommendations made and areas for further research.

5.1 Summary of Findings

The basic interest of this study is to Assess Factors Influencing Adoption of Agency
Banking: With Emphasis to Selected Commercial Banks in Adama city. The study is
guided by technological, organizational & environmental factors (TOE model). The data
obtained from the respondents was analyzed using various statistical tools. The
respondents participated in the study are of two types which is composed of employees of
Commercial Banks and Agents participated in its implementation. The result of
background information of employees of Commercial Banks indicated that most of
respondents‟ participated in the study were male. With regard to age group, majority of
respondents fall in the age range from 24-29 which are youngsters. From educational
qualification point of view, most of respondents were BA degree holders. Majority of
respondents participated in the study were employees of Cooperative Bank of Oromia
S.C. Regarding respondents‟ position, most of them were Customer Service Officers.
With respect to service year of respondents‟ in the bank they are currently working,
majority of them falls in the service years that ranges from 6-10 years. On the other hand,
the result of background information of agents indicated that most of respondents were
females. With regard to age group, majority of them falls in the age that ranges from 31-
40. With respect to educational qualification, majority of them are diploma holders.
Regarding respondents‟ business type, majority of them were from internet cafe & retail
shop. From the mean result, it is observed that adoption of agency banking by
Commercial Banks with respect to driving factors is most influenced by organizational
factors followed by technological & environmental factors respectively. On the other
hand, adoption of agency banking by Commercial Banks with respect to challenging

53
factors is most inhibited by environmental factors followed by technological &
organizational factors respectively.

The finding from the correlation result reveals that there is a positive and significant
relationship between agency banking adoption & its determinant factors. Driving
technological factor is found to have the highest correlation with adoption of agency
banking with respect to driving factors followed by organizational & environmental
driving factors respectively. On the other hand, challenging environmental factors have
the highest correlation in inhibiting adoption of agency banking followed by
technological & organizational challenging factors.

The finding from the regression result indicates driving technological & environmental
factors have a positive statistically significant influence on adoption of agency banking
and technological factor is the dominant driving factor. On the other hand, the
challenging organizational & environmental factors have positive statistically significant
impact in inhibiting adoption of agency banking and environmental factor is the dominant
challenging factor. From the R square value with respect to driving factors of agency
banking adoption by Commercial Banks, it is depicted that 55.3% of variation in agency
banking adoption by Commercial Banks is explained by technological, organization &
environmental factors included in the study. On the other hand, agency banking adoption
by Commercial Banks is inhibited 30.4% by technological, organizational &
environmental challenges included in the study. Thus, the findings are important to
enable banks to have a better understanding of factors influencing adoption of agency
banking by Commercial banks & Agents.

54
5.2 Conclusions
The following conclusions were drawn by the researcher based on objectives of the study.

Advancement in technology, ease of use/user friendliness, the prospects of cost saving,

service enhancement, accessibility issues, financial inclusion, regulatory framework
issued by NBE &stiff competition among rival banks in the industry are among the
major factors driving Commercial Banks to adopt agency banking. On the other hand,
Customers‟ d is trust, low awareness level& resistance to accept technology, lack of
professionalism in customer handling, no adherence to regulatory requirement by agents
& lack of sufficient ICT infrastructure development are among the factors that inhibit
Commercial Banks from adopting agency banking.

Incentive packages given by banks like commission on transactions made and associated
benefits like increased customer traffic, cross-selling their products, being known by
more customers& minimized risk of accepting forgery notes are among the major factors
motivated Agents to adopt agency banking. However, customers‟ distrust of technology,
security risk associated with technology, network interruption, & low awareness level of
customers are among the challenges agents faced while operating agent banking.

Driving technological & organizational factors have positive significant correlation&

driving environmental factors have positive moderate relationship with adoption of
agency banking. On the other hand, the challenges related with technological,
organizational & environmental factors have moderate positive correlation in inhibiting
adoption of agency banking.

2
Adoption of agency banking by Commercial Banks is explained 55.3 % (R = 0.553) by
variables included in the study i.e. driving technological, organizational and
environmental factors. Driving technological factors is the most influential factor in
agency banking adoption with β of 0.564.

55
 On the other hand, adoption of agency banking by Commercial Banks is inhibited 30.4%
2
(R = 0.304) by variables included in the study with respect to challenges. Challenging
environmental factors has the most influence in restraining adoption of agency banking
with β value of 0.414.

5.3 Recommendations
Agency banking system which has the effect of extending the banking services to its customers
beyond the restriction of time and spaceis at its infant stage in Ethiopian Banking
industry. As a result of the finding, the researcher recommends the following points:

 Banking industry in Ethiopia is heavily reliant on traditional branch based

banking system &opens branches aggressively with huge amount of
investment to mobilize resources &increase their presence to new unbanked and
banked areas. Therefore, banks in Ethiopia are highly recommended to
capitalize on opportunities of branch less banking through agency banking
which increases their presence to new unbanked & banked areas with less cost.
 Agency banking adoption is highly challenged by customers‟ distrust &
resistance to accept technology as well as security risks associated with
technological innovations. Therefore, banks are advised to launch campaign&
work in close collaboration with Medias and stakeholders in order to promote &
create awareness about agency banking to clear ambiguity in customers‟ mind
using different appropriate channels.

 Lack of sufficient ICT infra-structure development& network interruption are

among the major environmental factors inhibiting adoption of agency banking
by Commercial banks. Therefore, Ethio telecom has to support banking industry
by investing on ICT infrastructure development & improve service of the
telecom especially on network reliability.

56
  As lack of agents‟ skill on the use of technology and customer handling affects
adoption of agency banking, banks should have to provide technical, operational
and customer handling trainings to their respective agents based on need/gap
assessment.

5.4 Suggestions for Further Research

This study described factors influencing agency banking adoption by Commercial Banks
and agents participated in its implementation: with emphasis to selected Commercial in
Adama city. But it did not consider the customers‟ perspective. Therefore, the researcher
would like to recommend further research be made on the area by capturing the
customers‟ perspectives.

57
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62
 APPENDICES

A) Data Collection Instruments

LEADSTAR COLLEGE OF MANAGEMENT AND LEADERSHIPFACULTY OF BUSINESS&

LEADERSHIP GRADUATE DEPARTMENT OF BUSINESS ADMINISTRATION

My name is Alemayehu Nigusu. I am a student of LEADSTAR COLLEGE OF

MANAGEMENT AND LEADERSHIP, Pursuing a Master of Business Administration
(MBA). I have identified your organization as a source of the required data to assist in the
study on “Assessment of factors influencing adoption of agency banking: With
emphasis to selected Commercial banks in Adama City”. I wrote this introduction letter
to introduce myself and request your endorsement during data collection process.
Your involvement is regarded as a great input to the quality of the research results. Data
will be used for study purposes only and respondents‟ confidentiality is highly
assured. The results of the study are anticipated to supply to the understanding of the basic
driving and restraining forces influencing adoption of agency banking by Commercial Banks
& Agents participated in its implementation in Ethiopia. Thank you for your participation!

General Instruction

1
This questionnaire contains two sections and five pages that will be expected to take
approximately 20 to 30 minutes to complete. You are kindly requested to respond to the
questions based on the instructions under each section. If you have any comments or
want to provide further explanations, please use the space provided at the end of the
questionnaire.

2
Questionnaire for Employees of selected Commercial Banks found in Adama City.

Section I: Demographic profile of respondents & General questions.

Please indicate the following by ticking (√) on the spaces provided for the response
options:

Part One: Demographic profile of respondents

1. Sex: 1. Male 2. Female

2. Age in years:
1. 18-23 3. 30- 34
2. 24-29 4. 35 & above

3. Educational level:
1. Diploma/TVET 3.Master degree

2. BA degree 4. PhD & above

4. Monthly income (in Ethiopian Birr):

1. 3,000- 6,000 3. 9,001- 12,000

2. 6,001-9,000 4. Above 12,000

5. Marital status:
1. Single 3. Divorced
2. Married 4. Widowed

Part Two: General Questions

1. Name of the bank-------------------------------------------------------------------

2. What is your job position? --------------------------------------------------------
3. Service years in the bank
1.1-5 3. 11-15

2. 6-10 4. 16 & above

3
Section II: Questionnaires related with driving and restraining forces influencing
Adoption of Agency Banking.

Instruction: The under listed statements are pertaining to adoption of Agency Banking
by integrating Technology, Organization & Environmental factors (TOE Model) as well
as Technology Acceptance model (TAM) . Please indicate your level of agreement with
each statement by ticking (√)from the options that range from “strongly agree to
“strongly disagree”. Each choice was identified by numbers ranged from 1 to 5. Note: - SA-
Strongly Agree = 5, A- Agree = 4, N- Neutral = 3, DA- Disagree = 2, SD- Strongly Disagree = 1

Part one: Questionnaires related with driving forces influencing adoption of Agency
Banking.

Code Items SA A N D SD
5 4 3 2 1
I. Technological Factors(perceived benefits)
DTF1 1 Advancement in technology enhanced adoption of agency
banking.
DTF2 2 Agency banking is easy for use/user friendly.
DTF3 3 Agency banking improves branch productivity indirectly
by reducing congestion in bank branches.
DTF4 4 Agency banking is less costly than opening conventional
bank branches.
DTF5 5 Agency banking improves efficiency of the bank.
DTF6 6 Agency banking improves quality of service.
DTF7 7 Agency banking creates cashless society.
II. Organizational factors
DOF1 1 Agency banking brings financial inclusion.
DOF2 2 Agency banking increases market share through presence to
new areas.
DOF3 3 Agency Banking is convenient in terms of flexible hours.
DOF4 4 Proximity of agents to customers eased accessibility.
DOF5 5 Agency Banking saves customers‟ time from moving far
distance to get bank branches.
DOF6 6 Agency Banking saves customers‟ cost by reducing
transportation cost to visit bank branches.
III. Environmental factors
DEF1 1 The current level of ICT infrastructure development
Enhanced adoption of agency banking.
DEF2 2 The regulatory framework issued by NBE to regulate
Mobile & Agency banking service has
significant
4
 contribution to the adoption of agency banking.

DEF3 3 The regulatory framework issued by NBE to regulate Mobile &

Agency banking service is convenient & easy for retail banks to
implement agency banking service.
DEF4 4 Stiff competition among banks in the industry has great
Contribution on adoption of agency banking.
Agency Banking
DAB1 1 The growing interest in agency banking adoption by commercial
banks in Ethiopia is due to technological factors raised above
which falls in to advancement in technology, their perceived
benefits & perceived ease of use.
DAB2 2 Agency banking adoption is highly determined by
organizational factors raised above which are
categorized in to HR perspectives, Financial perspective
& Accessibility issues.
DAB3 3 Adoption of agency banking depends on environmental
factors raised above which are classified in to regulatory
frame work (Control issues), ICT infra-structure
development & Competitive pressure.
Please specify any other driving forces if any.

Part Two: Questionnaires related with restraining forces influencing adoption of Agency
Banking.

SA A N DA SD
5 4 3 2 1
I. Technological factors (Perceived risk)
CTF1 1 Customers do not trust technology.
CTF2 2 Fear of security risk affects adoption of Agency Banking.
CTF3 3 Customers are not willing to accept Agency Banking.
CTF4 4 Network problem affects adoption of agency banking.
II. Organizational factors
COF1 1 Lack of employees’ technical skills on the use of technological
innovation affects adoption of agency banking.
COF2 2 Lack of agents’ technical skills on the use of technological
innovation affects adoption of agency banking.
COF3 3 Agency banking encounters challenge due to lack of
professionalism while handling customers by agents.
COF4 4 Agency banking is challenging due to difficulty in cross-
selling other bank products.
COF5 5 Customers are not familiar with Agency Banking service.

5
 SA A N DA SD
5 4 3 2 1
COF6 6 Agency banking results in operational risk.
COF7 7 Agency banking results in liquidity risk by agents.
COF8 8 Agency banking results in reputational risk.
III. Environmental factors
CEF1 1 Lack of sufficient ICT infrastructure development in the
country hinders adoption of agency banking.
CEF2 2 Remote location of agents from the base branch creates
regulation obstacles.
CEF3 3 Agency banking results in legal risk.
CEF4 4 Agency banking is challenging because of Bank standard
operating procedures not adhered to.
CEF5 5 Agency banking is risky venture with regard to compliance
with rule of combating Money laundering & terrorism
financing.
CEF6 6 Agency banking is risky venture with regard to the
regulatory requirement to undertake customer due
diligence on the spirit of KYC (know your customer).
Agency Banking
CAB1 1 The above mentioned technological factors prevent adoption
of agency banking.
CAB2 2 Organizational factors discussed above inhibits Adoption
of agency banking
CAB3 3 The environmental factors discussed above, prevents
commercial banks from Adoption of Agency banking.
Please specify any other challenges/restraining forces if any.

Questionnaire for Agents of Selected Commercial Banks Found in Adama City

Section I: Demographic profile of respondents & General questions.

Please indicate the following by ticking (√) on the spaces provided for the response
options:

Part One: Demographic profile of respondents

1. Sex: 1.Male 2. Female

2. Age in years:
1. 20-30 3. 41-50
2. 31-40 4. 51 and Above

6
 3. Educational level:
1. Diploma/TVET 3.Master degree

2. BA degree 4. PhD and above

4. Monthly income (in Ethiopian Birr):

1. 1,000-3,000 3. 5,001- 7,000

2. 3,001-5,000 4. Above 7,000

5. Marital status:
1. Single 3. Divorced
2. Married 4. Widowed

Part Two: General Questions

1. Type of your business ……………………………………………………

2. Name of the bank & branch the agent operates under………………………

7
Section II: Questionnaires related with driving and restraining forces of Agency
Banking Adoption.

Instruction: The under listed statements are pertaining to adoption of Agency Banking.
Please indicate your level of agreement with each statement by ticking (√)from the
options that range from “strongly agree”to “strongly disagree”. Each choice was
identified by numbers ranged from 1 to 5.

Note: - SA- Strongly Agree = 5, A- Agree = 4, N- Neutral = 3, DA- Disagree = 2, SD-

Strongly Disagree = 1

Part one: Questionnaires related with driving forces influencing adoption of Agency
Banking.

Code The following are some of the perceived benefits derived SA A N DA SD

from the adoption of Agency Banking, please indicate your
5 4 3 2 1
level of agreement.
DF1 1 Agency Banking helps to perform banking task in a
simple way/ease of use.
DF2 2 Agency banking generates extra income through
commissions whenever agents perform transactions on
behalf of the bank.
DF3 3 Agency banking increases customer traffic/the number
of
DF4 4 customer
As a resultvisiting your company.
of increased customer traffic, more people
getting to know your business.
DF5 5 Agency banking increases customer loyalty on your
company.
DF6 6 Agency banking results in good reputation for your
company.
DF7 7 Agency banking helps in cross-selling your company
products.
DF8 8 As a result of flexible hours ,i.e. for as long as the
business premise remains open, you can do your
transactions especially for people who are busy during
the day.
DF9 9 Agency banking helps to transact through account to
account transfer & this will helps to minimize the risk
of receiving forgery notes.
DF10 10 As agency banking facilitates transaction through
account to account transfer, it minimizes the need to
hold huge amount of cash which in turn minimizes
security risk/robbery.
Please specify any other driving forces that caused your company to venture agency
banking if

8
any.

Part Two: Questionnaires related with restraining forces influencing adoption of

Agency Banking.

Code The following are some challenges influencing SA A N DA SD

adoption of Agency Banking; please indicate your level
of agreement.
5 4 3 2 1
CF1 1 Customers do not trust technology to use Agency
Banking.
CF2 2 Lack of confidence with the security aspects (security
risk) affects users‟ decision to use Agency Banking.
CF3 3 Low internet access/poor internet connectivity in the
country creates difficulty in delivering Agency
Banking service.
CF4 4 Agency banking encounters liquidity risk because of
remote placement of retail agents from base branch.
CF5 5 Customers are not familiar with Agency Banking
service.
CF6 6 The management of the bank doesn‟t support agents by
providing training/workshops about Agency Banking
services.
CF7 7 The management of the bank doesn‟t create awareness
about agency banking to the society.
Please specify any other challenges you encountered while implementing agency
banking service if any----------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------

AB Given the above Strongly Recommend Neutral Don‟t Strongly

situation, do you Recommend Recommend don‟t
recommend others to Recommend
become agents of
Commercial banks?

9
Interview Guide with Business development head of Selected Commercial Banks at
their respective head quarter.

1. What caused your bank not to venture agency banking yet?

2. Have you planned to adopt agency banking? If so, when? &what drives your

bank to venture agency banking?

3. How you see the role of Technological factors in adoption of agency banking

in terms of:-

 Technological advancement?

 Benefits of agency banking & associated risk?

4. How you see the role of Organizational factors in adoption of agency banking in

terms of:-

 Human resource perspective with regard to staff needs, technical skill etc.

 Financial perspective in terms of financial inclusion, promoting cashless

society, cross selling other bank products & risks associated with it?

 Accessibility with regard to customer base expansion, increasing market

share & enhancing customer service?

5. How you see the role of Environmental factors in adoption of agency banking in

terms of:-

 Regulatory frame work/control issues?

 ICT infrastructure? &

 Competitive pressure?

6. Please would you have any other things you add related with driving &

restraining forces influencing adoption of agency banking?

10
 B) List of Retail Commercial Banks in Ethiopia

S.No Name Year of Opening (EC)

1
Commercial Bank of Ethiopia 1963
2
Awash International bank 1994
3
Dashen Bank S.C 1995
4
Bank of Abysinia 1996
5
Cooperative bank of Oromia S.C 1996
6
Wegagen Bank S.C 1997
7
United Bank S.C 1998
8
Lion International Bank S.C 1998
9
Nib International bank 1999
10
Zemen Bank S.C 2000
11
Oromia International Bank 2000
12
Buna International bank S.C 2001
13
Birhan International bank S.C 2001
14
Abay Bank S.C 2002
15
Addis International bank S.C 2003
16
Debub Global bank S.C 2004
17
Enat bank S.C 2004
Source: -http://www.nbe.et.com

11
 C) SPSS Data Output

Table 1Collinearity Test With Respect to Challenging Factors

Correlations Collinearity Statistics

Model Zero-order Partial Part Tolerance VIF

1 (Constant)

Challenging
.413 .010 .008 .352 2.842
Technological Factors

Challenging
.358 .323 .285 .937 1.068
Organizational Factors

Challenging
.467 .287 .250 .366 2.736
Environmental Factors

a. Dependent Variable: Agency Banking Adoption with respect to challenging factors

12
Figure 1 Normality Test with Respect to Driving Factors

12
Figure 2 Normality Test With Respect to Challenging Factors

13
Figure 3 Linearity Test with Respect to Driving Factors

14
Figure 4 Linearity Test With Respect to Challenging Factors

15