Effect of agency banking on financial inclusion in Uganda: A case study of ABSA bank (formerly Barclays)

Abstract

This study examined the effect of agency banking on financial inclusion in Uganda. Specifically, the study assessed the relationship between agency banking and financial inclusion; ascertained the relationship between the number of agency transactions and distance from bank branches; performed a regional analysis of agent banking growth; performed a time series analysis of growth in Agency transactions; evaluated the relationship between commission earned and agency transactions and measured the correlation between the most frequent transaction type and number of transactions. The study was based on data covering the period from November 2018 to November 2019 obtained from the Agent Banking Company (U) Limited. The study relied on Linear Regression for estimating empirical results and findings revealed that Agency transactions have increased significantly in the one-year period. A strong positive relationship between the number of agency transactions and the distance from the bank branches was recorded. However, a weak relationship between the number of agency transactions and number of agents domiciled to the branch also manifested. The regression results revealed that there is a positive relationship between distance of agents from the bank branch and the number of transactions undertaken. There is a significant increase in the number of transactions per agent overtime attributed to factors such as number of agents domiciled to bank branches, distance from bank branches and region. There is a positive correlation between number of transactions and the commissioned earned. The analysis between most frequent transaction type and number of transactions also revealed a strong positive relation. The researcher recommended that Uganda Bankers Association should adopt a risk-based approach to supervise agency-banking operations and scale up agency sensitisation campaigns across the country.