Customer Perceptions Drive Agency Banking Adoption in Tanzania, Study Finds
A new study by Julius Macha from the Institute of Finance Management (IFM), Tanzania, finds that convenience, security, and social influence strongly shape how bank customers adopt agency banking services in Dodoma. The research, published in 2026 in the International Journal of Business and Management Practices, analyzed survey responses from 200 bank customers and highlights how customer perceptions can determine the success of financial inclusion strategies.
The findings matter because agency banking has become a key tool for expanding financial services in regions where traditional bank branches are limited. By allowing local businesses to act as banking agents, financial institutions can reach communities that are otherwise underserved by the formal banking sector.
Expanding Financial Access Through Agency Banking
In many developing countries, access to banking services remains uneven. Building and maintaining bank branches requires significant investment, and rural or low-population areas often lack the infrastructure needed to support traditional banking facilities.
Agency banking offers a practical alternative. Instead of relying only on physical bank branches, banks partner with local businesses—such as retail shops, kiosks, or post offices—to deliver essential financial services. These agents can process transactions on behalf of banks using secure digital systems.
Through agency banking outlets, customers can typically perform a range of transactions, including:
-Cash deposits and withdrawals
-Money transfers
-Bill payments
-Account balance inquiries
-Mobile banking support
For governments and financial institutions, this model provides a cost-effective way to expand financial inclusion. For customers, it reduces travel time and transaction barriers.
However, adoption of agency banking depends heavily on public trust and perception. Understanding how customers view these services is therefore critical for banks and policymakers.
Survey of Bank Customers in Dodoma
Julius Macha conducted the study in Dodoma, Tanzania’s administrative capital. The research used a quantitative survey design to examine how different perceptions influence customer decisions to use agency banking services.
The study collected data from 200 bank customers, who responded to structured questionnaires about their experiences and attitudes toward agency banking.
To analyze the data, Macha used Partial Least Squares Structural Equation Modeling (PLS-SEM) with SmartPLS software. This statistical approach allows researchers to evaluate relationships between different factors influencing behavior.
The analysis focused on four key variables affecting customer adoption:
-Perceived transaction cost
-Perceived convenience of financial services
-Perceived security of agency banking transactions
-Subjective norms, or social influence from family, friends, and community
By examining these factors together, the research aimed to identify which perceptions most strongly encourage customers to use agency banking services.
Convenience Emerges as the Strongest Factor
The results show that convenience is the most influential factor driving the adoption of agency banking.
Customers were more likely to use agency banking services when the agents were easy to reach and transactions could be completed quickly. Accessibility and time efficiency significantly increased the likelihood that customers would rely on these services instead of visiting a traditional bank branch.
Security also played a critical role. Customers were more willing to use agency banking when they believed their transactions and funds were protected.
In addition, subjective norms—or social influence—significantly shaped customer behavior. Recommendations from friends, family members, or community figures helped build trust in the service.
Interestingly, the study found that perceived transaction costs did not significantly affect adoption. Customers appeared less concerned about fees than about convenience and security.
In other words, even if small transaction costs exist, customers are willing to accept them when services are accessible and trustworthy.
Social Influence Shapes Financial Behavior
The study also highlights the role of community influence in financial decisions. When people observe others in their social circle using agency banking successfully, they are more likely to adopt the service themselves.
Julius Macha notes that social trust can accelerate the spread of financial innovations.
According to Macha of the Institute of Finance Management, customer perceptions of convenience and security are critical for increasing agency banking adoption, while community influence helps shape positive attitudes toward the service.
This insight suggests that financial institutions should not rely solely on technology or infrastructure. Community engagement and education also play an essential role in expanding financial access.
Implications for Banks and Policymakers
The findings offer several practical recommendations for banks operating agency banking networks.
First, expanding the number of agent outlets can significantly improve accessibility. When customers can easily find nearby agents, they are more likely to adopt the service.
Second, banks should invest in strong security measures to protect both customers and agents. Clear security protocols, reliable transaction systems, and effective monitoring mechanisms can help build customer confidence.
Third, banks should strengthen public awareness campaigns. Educational outreach, community engagement, and word-of-mouth promotion can encourage more people to try agency banking services.
Financial institutions may also benefit from working with trusted community figures to promote these services and explain how they work.
For policymakers, the research highlights the importance of regulatory frameworks that support secure and reliable agency banking systems. Well-regulated networks can expand financial inclusion while maintaining consumer protection.
Strengthening Financial Inclusion
Agency banking continues to play a vital role in extending financial services to underserved communities across Africa and other developing regions.
By reducing geographic barriers and lowering operational costs, the model allows banks to reach customers who may never visit a traditional branch.
The study by Julius Macha provides new evidence that customer perceptions—especially convenience, security, and social influence—are key to successful adoption.
As digital financial services continue to grow, understanding these behavioral factors will remain essential for expanding access to banking and strengthening economic participation.
Author Profile
Julius Macha, MSc, is a researcher and academic at the Institute of Finance Management (IFM), Tanzania. His research focuses on financial inclusion, digital banking systems, and consumer behavior in financial services. Macha’s work examines how innovative banking models can improve access to financial services in developing economies.
Source
Macha, Julius. “Bank Customers’ Perception on the Adoption of Agency Banking Services in Dodoma, Tanzania.”
International Journal of Business and Management Practices, Vol. 4, No. 1, 2026, pp. 31–48.
DOI: https://doi.org/10.59890/ijbmp.v4i1.147
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