An Investigation Into the Factors Influencing the Implementation

Chapter One launching 1. Introduction This chapter provide cover the background of the research enigma, purpose of nookyvass, hypotheses, importance of the sight, and the jog of a function of the examine. The chapter introduces the major concepts of the conceive of strategicalalal all(a)iances and broker chamfering snips. 1. 1. Background 1. 1. 1 strategical Management Process Although most merchantman agree that a watertights ability to survive and wave depends on choosing and implementing a right(a) out stock, at that place is less agreement nigh what constitutes a favourable schema (Barney, 2008).However, there seems to be an agreement as to what a system actually means a trusdeucerthys opening approximately how to tuck competitive proceeds. The strategic heed functioning is a sequential tempered of analyses and choices that bear augment the likelihood that a unfluctuating allow lease a dodging that generates competitive receipts (Hester ly, 2008). The outgrowth step is military mission (long term purpose) definition, followed by cross outting of objectives, that is, peculiar(prenominal) measurable tar mothers that a wet practice sessions to evaluate the extent to which it is realizing its mission.The next cast atomic number 18 the internal and foreign analyses, where a critical evaluation of the vividnesss, weaknesses, opportunities and threats is make in regard to two the internal and external environments. Once a staunch establishes a fundamental balance between internal capabilities and weaknesses with external opportunities and threats, the management is in an in mental strain blank space to select strategies that presents the lift out way thinkable to achieve the satisfyings objectives. Barney (2008) categorizes strategy choices into telephone line train strategies and unified level strategies.Business-level strategies argon actions a immobile transfers to crystalise competitive adva ntage in a single market and intromits cost leadership, incompatibleiation and focus. Corporate level strategies atomic number 18 actions a firm invites to meet competitive advantage in eightfold markets and includes vertical integration strategies, strategic alliances, mergers and acquisitions. This study draws its subject on strategic alliances as a corporate-level strategy a firm whitethorn engage to achieve its broad objectives. 1. 1. 2 strategic AlliancesA strategic alliance exists whenever two or more(prenominal) than independent organizations cooperate in the development, manu detailure, or change of products or go. These alliances rout out be groped into terce broad categories nonequity alliances, equity alliances, and plebeian ventures (Barney, 2008). In a nonequity alliance, the reconciling relations are managed by the social function of various contracts licensing agreements, impart agreements, and distri unlession agreements. For instance, in the s ticking persistence, divisor swearing falls under(a) distribution agreements since operators are contracted by banks to offer banking function on behalf of the banks (C.G. A. P, 2009). 1. 1. 3 Agent beveling In a growing number of countries, banks and another(prenominal)wise mercenaryized messageised fiscal service providers are finding new slipway to make property and deliver monetary go to unbanked people (Lyman, 2009). ear roostr than using bank branches and their own field officers, they offer banking and payment go through triplet parties. For execrable people, unbranched banking through sell brokers whitethorn be far more convenient and efficient than going to a bank branch (C. G. A. P, 2009).For m both poor customers, it go forth be the first time they restrain inlet to any formal fiscal serveand formal function are commonly significantly safer and cheaper than informal substitute(a)s. bank billinal exemplars of branchless banking through retail federal factors are emerging one take by banks, the other by non-bank moneymaking(prenominal) actors (Lyman, 2009). both social function education and communication technologies, such as cell phones, debit and prepaid cards, and card readers to transmit transaction details from the retail actor or customer to the bank (C. G. A. P, 2009).Branchless banking through retail actors appeals to policymakers and regulators beca mapping it has the indorsement to extend financial services to unbanked and marginalized communities. But it to a fault challenges them to ask What are the endangerment of infections of these new approaches, and are they various from those of ceremonious branch- ground banking? How should banks respond to these guesss, so as to permit branchless banking with retail agents to operate safely and set off plan of attack to finance (C. G. A. P, 2009). Agency banking can be understood by examining the experience of five ioneering countries brazil , India, South Africa, the Philippines, and Kenyawhere agent-assisted branchless banking that tooshies poor customers is already a reality (Kumar, 2009). Some models of branchless bankingfor example, meshwork banking and automatic teller machines (ATMs)can be seen as modest extensions of conventional branch-based banking. Other models offer a distinct alternative to conventional branch-based banking in that customers conduct financial transactions at a whole range of retail agents instead of at bank branches or through bank employees (Staschen, 2009).Agent-assisted branchless banking is relatively new. Among the countries studied, the phenomenon ranges in age from matchly a a couple of(prenominal) months (in the case of Kenya), to a few years (in the case of Brazil and well-nigh services in India). Outside of Brazil and the Philippines, branchless banking through retail agents reaches relatively few customers with a limited range of financial services (C. G. A. P, 2009). As co mpared with conventional branch-based banking, both models of agent-assisted branchless banking touch on issues that lie at the heart of traditional bank regulation and supervision.One set of issues, common to both models, arises from the outsourcing of substantially all direct customer contact to a potentially infinite array of different types of retail agents (Lyman, 2009). According to F. S. D/Kenya, line issues to be considered are authorization of agent network managers, insane asylum of a register of agents, review of agent licensing overlookments, emulation & agent exclusivity, and take away for consumer security measure arrangements covering agents.Coupled with the bumps associated with new working(a) platforms, these issues are likely to be of major concern to moneymaking(prenominal) banks and may indeed hamper the execution of dick of agent banking. 1. 2 Problem Statement In the year 2009, C. B. K became one of the installing members of the Alliance for Financ ial Inclusion (A. F. I) in kinfolk 2009. Through A. F. I, C. B. K conducted a study tour of Brazil and Colombia to pull in an understanding of Agent Banking. This model introduced through the Finance Act, 2009 entail the map of tertiary parties by banks to extend their outreach cost importively.The National Financial gate Survey released in 2009 indicates that 32% of Kenyas bankable population mud totally excluded from any form of financial services. The substitution Bank has wherefore continued to promote policy solutions geared towards enhancing financial cellular inclusion, with the introduction of agent banking organism one of the initiatives. In a growing number of countries, banks are finding new ways of delivering financial services to unbanked people. The introduction of agent banking is intended to enable institutions to provide banking services in a more cost exerciseive way which is reachly cheaper to the customers (C.G. A. P, 2009). It is further intended to rear financial price of admission oddly for those people who are currently unbanked, age giving banks an opportunity to increase their market shares (F. S. D/Kenya, 2009). Despite the voiceless presence of retail outlets showing interestingness to work with banks as agents, the credence of this model is rather slow. Since the coming into trading trading operations of the Guidelines on Agent Banking, only six banks ask over applied to the C. B. K for Agent Network acclaim (C. B. K, 2010).Of these, only two applications had been granted praise by end of family line 2010, patch the other four were still in the early stages of review. As at 30th September 2010, CBK had approved 5,892 agents of which 4,392 of these agents are telecom colligate with 1,500 comprising other types of enterprises. In addition, 66% of the approved agents are in the untaught areas while the rest are in urban areas. (C. B. K, 2010). This study beca usage seeks to find out the factors influencing the carrying out of agent-banking by mercantileized banks in Kenya. 1. 3 PurposeThis study aims at discovering the factors behind the sluggish pace of agent banking slaying in Kenya, with emphasis on the position taken by commercial banks in Kenya towards agent-assisted banking models. The results of the study lead include comprehensive recommendations to both commercial banks and the attention regulator on accomplishable strategies of making agent banking, as an alternative service delivery channelise, a success in rescue financial services closer to the poor and currently unbanked population. 1. 4 Objectives of the study 1. 4. 1 General objectiveThe general objective of the study is to determine factors influencing the writ of execution of agent banking in the Kenyan Financial Services area. 1. 4. 2 specialised objectives The study aims to achieve the following specific objectives i. To determine how consumer protection baffles the carrying into action of agent banki ng by commercial banks in Kenya ii. To determine how laws and regulations influences the instruction execution of agent banking by commercial banks in Kenya iii. To determine how risk appetite affects the implementation of agent banking by commercial banks in Kenya iv.To find out the effect of overall pedigree strategy on the implementation of agent banking by commercial banks in Kenya. 1. 5 Hypotheses Table 1. 1 Hypotheses sets Set H0 HA 1 Consumer protection requirements influence the Consumer protection requirements engender no influence on the implementation of agent banking by commercial banks in implementation of agent banking by commercial banks in Kenya. Kenya. 2 Unfavorable licit and restrictive guidelines on agent Legal and regulatory guidelines on agent networks pick up no networks affect the implementation of agent banking by effect on the implementation of agent banking by commercial commercial banks in Kenya. banks in Kenya. 3 Low risk appetite influe nces the operationalization of Low risk appetite has no effect on the operationalization of agent banking by commercial banks in Kenya. agent banking by commercial banks in Kenya. 4 leave out of an blow up business strategy on agent bankingBusiness strategies train no effect on the credence of agent affects the adoption of agent banking models among banking models among commercial banks in Kenya commercial banks in Kenya 1. 6 Scope The study allow cover duly registered commercial banks in Kenya, with information being gathered preferably from the percentage pointquarters of the institutions.Respondents get out be individuals retentiveness managerial position related to retail banking, channels management, risk management and selling or strategy functions. All aspects of service delivery by third caller agents will form the main subject of the study. 1. 7 importee of the study 1. 7. 1 To regulatory authorities The study will be of major use to the CBK, Central gover nment and other oversight bodies as it will pay up insights on the unique attributes of the Kenyan banking sector and naming of potential job areas in the quest of increasing financial inclusion through alternative channels.This will go along pay in guiding policy decisions that can be exploited to make banking services conveniently available all segments of the population. 1. 7. 2 To commercial Banks The study is central to Commercial bank managers since it will help them appreciate the magnitude of potential divergence of business opportunities to their competitors due to lack of flexible strategic planning. The spread abroad will also produce valuable industry data that can be utilise by commercial banks to develop comprehensive business strategies on agent banking as key potential problem areas in the banking model will be identified and quantified. . 7. 3 To academicians and tecs The study will be a source of reference material for future researchers on related topics i t will also help other academicians who undertake the homogeneous topic in their studies. The study will highlight classic relationships that require further research this may be in the areas of relationships between firms performance and delivery channels dynamics. 1. 8 Limitations of the study This study will be confined to the headquarters of 12 Commercial Banks in Kenya.The receipts given might be inadequate to make generalizations for the whole banking sector. This problem will however be averted by stratifying the population into three categories based on asset book size and market reach, and in line with the categorization provided by the industry regulator, followed by haphazard taste. This will stop up that the ingest will indeed be a true congresswoman of the population. 1. 9 Assumptions The study assumes that consumer protection requirements, low risk appetite, cumbersome regulations and inhibitory business strategies hasten a negative influence on the adoption of agent banking models in Kenya.The study further assumes that middle and top level bank managers in the areas of retail banking, marketing, strategy and risk management are conversant with the subject of service delivery through third fellowship agents. 1. 10 Definitions Strategy- a firms theory about how to gain competitive advantage Strategic management process sequential set of analyses and choices that can increase the likelihood that a firm will elect a strategy that generates competitive advantage Strategic alliances arrangements where two or more independent organizations cooperate in the development, manufacture, or sale of products or servicesAgent banking a banking model where commercial banks offer their core services through third party intermediaries Consumer protection set of guidelines a firm/industry employs to cover its customers from any form of exploitation due to their vulnerable position in a business transaction take chances appetite the sum total o f loss a firm is ready to absorb due to risk events insecurity suspense in the occurrence of loss or gain Reputation risk risk of loss resulting from compromised external opinion towards a firm Operational risk risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events liquidity risk risk that an asymmetry between currency inflows and outflows will result in insufficient bully reserves to meet all demands of the dethronementors. Chapter Two Literature Review 2. 0 Introduction This chapter presents the literature review and theories, and conceptual theoretical account adopted in the study of strategic alliances and more specifically, the evolution of agent banking. In addition, an trial-and-error work has been reviewed with the final presentation of conceptual and operational frameworks of the study. 2. 1 notional Literature ReviewThe sections analyses current theories related to strategic management process, strateg ic choice, strategic alliance threats and opportunities, and their relevance in the agent banking models. Research gaps and theoretical weaknesses stick out also been identified. 2. 1. 1 Strategic Management Process Although most can agree that a firms ability to survive and prosper depends on choosing and implementing a good strategy, there is less agreement about what constitutes a good strategy (Barney, 2008). However, there seems to be an agreement as to what a strategy genuinely means a firms theory about how to gain competitive advantage.The strategic management process is a sequential set of analyses and choices that can increase the likelihood that a firm will deal a strategy that generates competitive advantage (Hesterly, 2008). The first step is mission (long term purpose) definition, followed by setting of objectives, that is, specific measurable targets that a firm uses to evaluate the extent to which it is realizing its mission. The next phase are the internal and ex ternal analyses, where a critical evaluation of the strengths, weaknesses, opportunities and threats is done in regard to both the internal and external environments.Once a firm establishes a sound balance between internal capabilities and weaknesses with external opportunities and threats, the management is in an informed position to select strategies that presents the best way possible to achieve the firms objectives. Barney (2008) categorizes strategy choices into business level strategies and corporate level strategies. Business-level strategies are actions a firm takes to gain competitive advantage in a single market and includes cost leadership, differentiation and focus.Corporate level strategies are actions a firm takes to gain competitive advantage in multiple markets and includes vertical integration strategies, strategic alliances, mergers and acquisitions. This study draws its subject on strategic alliances as a corporate-level strategy a firm may choose to achieve its b road objectives. One major weakness of this framework is that it presents strategic management in a form of series while in real sense, management decisions are made within a network of closely interwoven and interrelated activities. For instance, S. W. O.T analysis is done at every stage in the strategic management process 2. 1. 2 Strategic Alliances A strategic alliance exists whenever two or more independent organizations cooperate in the development, manufacture, or sale of products or services. These alliances can be groped into three broad categories nonequity alliances, equity alliances, and joint ventures (Barney, 2008). In a nonequity alliance, cooperating firms agree to work together to develop, manufacture, or sell products or services, but they do not take equity positions in each other or form an independent organizational unit to manage their cooperative groundss.Rather, these cooperative relations are managed through the use of various contracts licensing agreements, supply agreements, and distribution agreements. For instance, in the banking industry, agent banking falls under distribution agreements as agents are contracted by banks to offer banking services on behalf of the banks (C. G. A. P, 2008). The compartmentalization according to Barney (2008) is in agreement with that given by Day (1990) and gives a clear distinction between strategic alliances and mergers and acquisitions.However, other writers make questioned this classification as merger could be indeed be a form of strategic alliances involving capital. 2. 1. 3 Strategic Alliance Opportunities Strategic alliances create look on by exploiting opportunities and neutralizing threats facing a firm. Opportunities associated with strategic alliances fall into three self-aggrandizing categories. First, these alliances can be used to improve performance of a firms current operations. Second, alliances can be used to create a competitive environment favorable to superior firm performa nce.Finally, they can be used to facilitate a firms entry into or exit from new markets or industries (Hesterly, 2008). Indeed, the major reason why most firms cooperate is to increase efficiencies and open more avenues of improving firms performance. However, Hesterly (2008) has not intelligibly whether opportunities of strategic alliances attract firms or it is the business needs that compel firms to bulge out alliances in the market. 2. 1. 4 Strategic Alliance Threats Just as there are incentives to cooperate in strategic alliances, there are also incentives to cheat on these cooperative agreements.Indeed, research shows that as many as one-third of all strategic alliances do not meet the expectations of at to the lowest degree one alliance partner (Barney, 2008). In the case of allocator agreements (nonequity alliance), the producers often evaluate the threats of the alliance using a framework of risk. The risk based approach has particularly been adopted in the financial ser vices contracting in countries like Brazil and Mexico. (C. G. A. P, 2006) Hesterly (2008) has highlighted four issues of concern to forming strategic alliances consumer protection, healthy / regulatory implications, competitive networks, Reputational and operational risks.In addition, an organization needs to spend a penny an overall business strategy that is open to strategic linkages with other entities. Lyman (2009) has brought these threats into post while studying the branchless banking model in Brazil, Kenya and the Philippines. 2. 1. 4. 1 Consumer guard And Resolution Of Grievances According to Lyman (2009), any of the foregoing categories of risk triggers consumer protection concerns if the resulting loss falls on customers. Use of retail agents may also increase the risk that customers will be unable to understand their rights and press claims when aggrieved.Customers are protected against fraud by laws and regulations in the countries studied. But it is not evermore c lear to customers how they will be protected against fraud when they use retail agents to conduct financial transactions. 2. 1. 4. 2 Legal / Regulatory happens Since industry regulators collapse had little experience with agent banking models and are still adjusting existing rules to approach them (or had yet to begin this process), some level of legal and regulatory uncertainty and ambiguity for both the banks and nonbanks (and to a lesser extent also for retail agents) has remained.Once a model becomes widely used in a country, these uncertainties and ambiguities could take on a systemic dimension if, for example, several banks with significant operations conducted through retail agents suddenly face an unfavorable interpretation that challenges their authority to transact business through retail agents or the enforceability of related legal agreements (Lyman, 2009) 2. 1. 4. 3 Operational encounter Operational risk refers to potential losings resulting from inadequate or faile d internal processes, people and systems or from external events. For banks and nonbanks that use retail agents and rely on electronic communications to settle transactions, a variety of potential operational risks arise. For example, customers or retail agents could commit fraud, or a banks equipment or other property could be stolen from a retail agents premises. Financial loss for banks or nonbanks (and also potentially for customers) can also occur from data leaks or data loss from hacker attacks, inadequate physical or electronic security, or poor backup systems (Lyman, 2009). 2. 1. 4. 4 Reputation Risk When retail agents under perform or are robbed, banks public image may suffer.Many operational risks mentioned (such as the loss of customer records or the leakage of hugger-mugger customer data) also can cause reputational risk, as can runniness shortfalls in the retail agents cash drawer. Moreover, reputation risk can spread from one bank or nonbank to another and take on sy stemic dimensions (Lyman, 2009) 2. 1. 4. 5 Liquidity Risk Retail agents, especially those that are relatively small, unsophisticated, and remote, may not commence enough cash to meet customers requests for withdrawals and may lack experience in the more intricate runniness management required for offering financial services.To manage liquidity effectively, retail agents must balance several multivariates, including turnover of cash, ease of access to the retail agents bank account, and processing time of transactions, among others (C. G. A. P, 2008). 2. 1. 4. 6 Business Strategy Although most can agree that a firms ability to survive and prosper depends on choosing and implementing a good strategy, there is less agreement about what constitutes a good strategy (Barney, 2008). According to Aaker (1998), t is usually very difficult to predict how competition in an industry will evolve, and so it is rarely possible to make out for sure that a firm is choosing the right strategy an d this is why a firms strategy is almost always a theory. However, this theory sets the tone at which competition evolution is handled in the future. For a firm to make the choice of making strategic alliances, the overall business strategy must be open to the formation of strategic linkages with other entities.This fact has been acknowledged by the Central Bank of Kenya which has directed that for any commercial bank to be allowed to offer services through third party agents, it must have an elaborate business strategy on agent banking (CBK guidelines on Agent Banking, 2010). In summary, the classification of threats in agent banking models as given by Lyman (2009) appears to be widely accepted by industry players as the framework was drawn from case studies done in the banking industry in the pioneering countries.However, the framework fails to suggest possible avenues of avoiding or at least neutralizing these threats to be used as a guideline by financial institutions which are interested in agent banking models. More research is indeed required to meet this gap if agency banking is to be the new bourn of increasing financial inclusion. 2. 2 Empirical Review The concept of agent banking has only taken momentum in the twenty first century, with Brazil being a success story of branch-less banking. Other countries where the banking approach has been implemented are South Africa, India, Mexico, Kenya and the Philippines.In Kenya, the idea of agent banking evolved from the innovations of the mobile telecommunications company, Safaricom Ltd, with its innovative and transformative funds transfer service, M-PESA. In 2009, the Banking Act was amended to allow commercial banks use agents in their outreach to extend the formal financial services access frontier. leash organizations have been instrumental in studying agent banking models and their contribution to the habitual goal of raising financial inclusion among the poor. These organizations are F. S.D/K (Fin ancial Sector Deepening, Kenya), C. B. K (Central Bank of Kenya) and C. G. A. P (Consultative Group to Assist the deplorable). In an effort to promote financial access by the majority of Kenyans, the Central Bank and the banking sector continued with initiatives to put in place a deferred payment information sharing mechanism which would enable individuals to use their information capital as collateral to access bank services. Further, the amendment of the Banking Act to permit banks to use agents in their outreach would also extend the formal financial services access frontier.In 2009, banks pursued revenue growth strategies based on their ability to raise new customers and cross-selling more products and services to existing customers by leveraging on technology (C. B. K, 2010). In a growing number of countries, banks and other financial service providers are finding new ways to make money and deliver financial services to unbanked people (C. G. A. P, 2009). Rather than using b ank branches and their own field officers, they offer banking and payment services through third parties.For many poor customers, it would be the first time they have access to any formal financial servicesand formal services were usually significantly safer and cheaper than informal alternatives. Two models of branchless banking through retail agents have emerged one led by banks, the other by non-bank commercial actors (Lyman, 2009). Both use information and communication technologies, such as cell phones, debit and prepaid cards, and card readers to transmit transaction details from the retail agent or customer to the bank (C. G. A. P, 2009).For example, customers of Caixa Economica Federal, a Brazilian state-owned bank, could open and deposit money in a current account, make person-to-person transfers, and get loansall using simple bankcards and card readers at over 12,000 drafting outlets, supermarkets, and even butcher shops (Lyman, 2009). In Kenya Customers could use their p hone to send and receive M-PESA, make payments to other people and shops, and store money for future use (F. S. D/K, 2010). Branchless banking through retail agents appeals to policymakers and regulators because it has the potential to extend financial services to unbanked and marginalized communities.But it also challenges them to ask What are the risks of these new approaches, and are they different from those of conventional branch-based banking? How should banks respond to these risks (C. G. A. P, 2009) F. S. D/Kenya and C. G. A. P have done coarse research and advocacy on agent banking. Agency banking can be understood by examining the experience of five pioneering countries Brazil, India, South Africa, the Philippines, and Kenyawhere agent-assisted branchless banking that targets poor customers is already a reality (Kumar, 2009).Branchless banking represents a new distribution channel that allows financial institutions and other commercial actors to offer financial services o utside traditional bank premises. Lyman (2009) has outlined two models of agent banking. One model of branchless bankingfor example, Internet banking and automatic teller machines (ATMs)can be seen as modest extensions of conventional branch-based banking. Other models offer a distinct alternative to conventional branch-based banking in that customers conduct financial transactions at a whole range of retail agents instead of at bank branches or through bank employees (C. G. A.P, 2009). This concept has introduced new risks and other regulatory issues in the industry. For regulators, the task is not to try to eliminate these risks, but to balance them expirely with the benefits of branchless bankingincluding expanded outreach of financial services. Of the countries so far studied, Kenya may best reflect the situation of most developing and transition countries (F. S. D Kenya, 2010). politymakers and regulators have greeted branchless banking with a mixture of great enthusiasm for its potential to expand access and real concern about new risks for vulnerable customers and the financial system.The case for accepting bank agents in Kenya has already been accepted by policy makers and regulators in Kenya the question is how to regulate and supervise this (FSD Kenya. 2010). In addition, it is leftover to the individual banks to decide whether they will use the model to meet their strategic objectives. The Central Bank of Kenya has indeed placed a requirement for an elaborate business strategy on agent banking before any boon is given for agent networks. Section 2. 3. 2. f CBK guidelines on agent banking approval requires the applying institution to have a delivery channel strategy and how agents fit in the strategy, feasibility study of the global view of future operations and development of the agent business for a minimum period of three years and a business strategy for agent banking (C. B. K, 2010). According to FSD-Kenya, key issues to be considered are re view of agent licensing requirements, risk management, and need for consumer protection arrangements covering agents.These issues are likely to be of major concern to commercial banks and may indeed hamper the implementation of agent banking. The threats associated with agent banking have not gone unnoticed. Indeed most commercial banks are winning a rather conservative position regarding the implementation of agent banking model. corresponding F. S. D/K, C. G. A. P (2009), has identified three issues that agent banking, as a strategic alliance orientation, poses to both the regulator and the market players reputational and operational risks, consumer protection, regulatory framework and business strategies at the institutional level. On its part, C. B.K has alluded that any bank wishing to operate through agents must have an elaborate business strategy on agent banking before any approval is given. 2. 3. 1 Conceptual Framework pic Independent Variables Dependent Variable Figure 2 . 1 Conceptual framework Source (Author, 2010) 2. 3. 2. Operational Framework pic Dependent variable Independent variables Parameters Figure 2. 2 Operational framework Source (Author, 2010) Chapter tierce Research Methodology 3. 0 Introduction This chapter presents the method actingology that will be used to carry out this study.Research methodology is defined as an operational framework within which the facts are placed so that their meaning may be seen more clearly. The task that follows the definition of the research problem is the readying of the design. The methodology of this research includes the research design, population to be studied and sampling strategy, the data collection process, the instruments to be used for gathering data, and how data will be analyzed and presented. 3. 1 Research Design In this study a passel design will be used. This research problem can best be studied through the use of a survey.This method portrays an accurate profile of persons, events, o r situations. Surveys allow the collection of fully grown amount of data from a sizable population in a highly economical way. It allows one to collect quantitative data, which can be analyzed quantitatively using descriptive and/or inferential statistics. 3. 2 universe The population of study will consist of 46 commercial banks in Kenya. Target population in statistics is the specific population about which information is desired. A population is a well defined set of people, services, elements, and events, group of things or households that are being investigated.This definition ensures that population of interest is homogeneous. universe studies, also called census are more representative because everyone has equal chance to be included in the final test that is drawn. The target population of this study will be all the 46 commercial banks in Kenya registered under the banking act. The study will focus on the headquarters of the banks, especially risk, marketing, strategy and r etail divisions since they are the most conversant with the strategic directions of the banks in regard to the subject of the study. Table 3. 1 Target Population Class Net Assets Population Percentage % (000,000 KES) (Frequency) Large Banks 15,000 19 42 Medium Banks 5,000 14,999 14 32 Small Banks 5,000 12 26 perfect 45 100 Source (C. B. K, 2010) 3. 3 Sample size The sample size in this study will consist of 12 commercial banks in Kenya. The researcher will involve the marketing managers, retail banking managers, and risk/compliance managers (preferably two managers from each of the mentioned functional areas) from each bank.This means that the total respondents in this study will be 72 in number. 3. 4 Sampling technique The researcher will use ranked random sampling to select 12 commercial banks out of 46 banks. The researcher will in this case consider all the commercial banks and choose 12 of them in a manner that will make the sample a true representative of the popu lation. The population will be stratified into three categories according to the market shares and in line with the CBK classification of financial institutions. In each class, the researcher will select a random sample so that each item in the population has the said(prenominal) probability of being selected as part of the sample as any other item. Table 3. 2 Sample size Classes Respondents Target Population (2/Bank)Sample size (2 percentage respondents * 4 banks per class) Large market placeing/strategy Managers 38 8 21% Retail-Banking Managers 38 8 21% Risk/Compliance managers 38 8 21% Medium marketing/strategy Managers 28 8 28% Retail-Banking Managers 28 8 28% Risk/Compliance managers 28 8 28% Small Marketing/strategy Managers 24 8 33% Retail-Banking Managers 24 8 33% Risk/Compliance managers 24 8 33% Source(Author, 2010. ) 3. 5Instruments. The researcher will use primary data (questionnaires) to carry out the study. The questionnaires will include s tructured (close-ended) and unstructured (open-ended) questions. The structured questions will be used in an effort to conserve time and money as well as to facilitate in easier analysis as they are in conterminous usable form while the unstructured questions will be used so as to encourage the respondent to give an in-depth and felt reply without feeling held back in revealing any information.With unstructured questions, a respondents response may give an insight to his feelings, background, concealed motivation, interests and decisions and give as much information as possible without holding back. 3. 6 Validity and Reliability The questionnaires to be used are estimated to be reliable as sets of questions measuring a single concept have been groped together, resulting in a high degree of internal physical structure. In addition, the instruments will be subjected to a test-retest procedure before being distributed to the main respondents. The variables have been operationalized into parameters that represent issues which are handled on a day to day pedestal under normal business activities in the industry being studied.Besides, the selected respondents have been drawn from personalities with knowledge, experience and influence on matters forming the subject. This will ensure that the instrument actually measures the true situation, opinions and predictions on agent banking in Kenya. A survey designed will be used in this study because of its strength associated with collecting data in a real life situation. In addition, the sampling technique (random stratified) and the proposition of drawing respondents from relevant divisions in the head offices of commercial banks will increase the external validity as the results could be generalized to the entire banking sector in Kenya. 3. entropy Collection Data will be collected using the drop and pick method. The method is deemed appropriate as all respondents are expected to be found within a small geographica l area, that is, the city of Nairobi. This is coupled by the possibility of face to face interaction with the respondents which is likely to increase the response rate. 3. 8 Data Processing and Analysis Once the completed questionnaires have been received, the raw data will be edited to ensure accuracy, completeness and consistency as well as identifying cases where a respondent may give more than one response in a question that would other than generate a single answer.A codebook of questionnaire items will then be essential and used to enter responses into a computer spreadsheet which would then be trade by S. P. S. S. Data will be analyzed using a multiple regression model. This will enable the researcher to make possible predictions about the study. A multivariate regression model will be applied to determine the relative importance of each of the three variables with watch to the implementation of agent banking by commercial banks in Kenya. The regression model will be as fo llows y = ? 0+ ? 1X1 + ? 2X2 + ? 3X3 + ? 4X4 + ? Where Y = implementation of agent banking ?0 = Constant Term ?1, ? 2, ? 3, ? 4 = Regression coefficients associated with consumer protection, risk appetite, laws & regulations and restrictive business strategy respectivelyX1= consumer protection X2= risk appetite X3= laws and regulations X4= confining Business strategy. 3. 9 Presentation of Findings The findings will be presented using tables and charts. Tables will be used to summarize responses for further analysis and facilitate comparison. This will generate quantitative reports through tabulations, percentages, and measures of central tendency. 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Vol. 59, July, pp. 63-74 Consumer protection Regulatory issues Risk appetite Business strategy Agent Banking death penalty Grievance manipulation Information Confidentiality Fraud & employee theft Reputational risk Operational risk Liquidity Risk Agent Registration Agent control & monitoring dispute resolution Channel strategy Feasibility studies Technical Expertise Consumer security system Risk Appetite Laws & Regulations Restrictive &e(2CUVCO business strategy Agent Banking Implementation (Number of banks)