Nairobi — The shop near you could become your neighbourhood bank, if the agency banking model launched by Equity Bank takes root.

The model, which has been developed over a period of five years, will engage local shopkeepers as agents for financial transactions.

Equity Bank chief executive James Mwangi said the shopkeepers will be trained and provided with the necessary technology to handle all banking transactions - withdrawals, deposits, loans, account opening and advances, among other things.

In addition, the bank will train support staff to assist the shopkeepers in running the agencies.

According to Mr Mwangi, the bank borrowed the concept from Brazil, the only country in the world with a successful agency banking model.

Since it rolled out last December in Kenya, Equity Bank has opened 1,000 agencies countrywide and hopes to open another 20,000 by end of March, creating some 100,000 jobs, Mr Mwangi said.

Many of the agencies will be located in rural areas where, despite the advent of mobile phone money services, people still walk long distances to transact over-the-counter business.

The model will be introduced in countries in the region where the bank already has a presence - Southern Sudan and Uganda.

This year, Equity will start operations in Tanzania and Rwanda.

Mr Mwangi described the development as a milestone in terms of taking services and use of technology to the people, bringing those once locked out of the sector into the banking fold.

"It will also increase efficiency of the mobile money transfer business, because it allows withdrawals and deposits from MPesa, M-Kesho, Iko-Pesa and Yu-cash, the cellphone bank accounts networked with Equity Bank," Mr Mwangi said.

The push towards agency banking gained momentum last year when Finance Minister Uhuru Kenyatta proposed that the law be amended to allow commercial banks to give financial services through agents.

The move sought to deepen the penetration of financial services, which currently stands at only about 19 per cent of the adult population.

This will allow non-banking institutions to offer financial services especially in rural areas where it remains commercially unviable for banks to run full branches, and also allow banks to tap into the large networks of Saccos and microfinance institutions, to reach the unbanked millions.

Under the agency model, banks manage and guarantee deposits but rely on other outlets for front office operations where they have no presence.

At the M-Banking 2009 Conference in Nairobi, Mr Kenyatta said: "It is imperative that branchless banking and indeed the financial sector as a whole be founded on a sound legal regulatory framework."

Agency banking in Brazil has been credited with a steep reduction in the cost of financial services and robust revenue growth for commercial banks.

While Kenyan banks have in the past been keen on using Saccos and microfinance institutions as outpost agents, the Banking Act has limited their activities within the confines of brick and mortar offices.

With official data indicating that the informal sector contributes some 30-40 per cent to the national income, the government hopes to capture billions of shillings in the sector, as well as deepen the range of financial services available to the poor.