Chapter One — 1.1 Background to the Study

Agency Banking has increasingly attracted the attention of researchers, regulators, and practitioners concerned with profitability of deposit money banks. This growing interest reflects the recognition that agency banking does not operate in isolation, but interacts with a wider set of institutional and market conditions found within Kano State.

Kano State presents a useful setting for examining this relationship precisely because the conditions there — structural, regulatory, and behavioural — differ from those typically assumed in the broader literature, most of which draws on evidence from more developed economies.

1.2 Statement of the Problem

Despite a growing body of literature on agency banking, there remains limited consensus on the precise nature of its relationship with profitability of deposit money banks, particularly within Kano State. Many organizations continue to make decisions about agency banking without a clear, evidence-based understanding of how those decisions ultimately affect profitability of deposit money banks. This gap between practice and empirical understanding is the central problem this study seeks to address.

1.3 Objectives of the Study

1. To examine the effect of Agency Banking on profitability of deposit money banks in Kano State.
2. To assess the extent to which agency banking influences profitability of deposit money banks within the study area.
3. To identify the challenges associated with agency banking in relation to profitability of deposit money banks.
4. To recommend strategies for optimizing agency banking in order to improve profitability of deposit money banks.

1.4 Research Questions

1. What is the effect of agency banking on profitability of deposit money banks in Kano State?
2. To what extent does agency banking influence profitability of deposit money banks within the study area?
3. What challenges are associated with agency banking in relation to profitability of deposit money banks?
4. What strategies can be adopted to optimize agency banking in order to improve profitability of deposit money banks?

1.5 Significance of the Study

This study is significant to a range of stakeholders. For policymakers and regulators, the findings offer evidence to guide the design of frameworks that support healthier outcomes around profitability of deposit money banks. For managers and practitioners within Kano State, the study provides practical insight into how agency banking can be better managed. Finally, it contributes to the academic literature on finance / banking by extending existing knowledge into a specific empirical context, and offers a reference point for future researchers.

1.6 Scope of the Study

In terms of scope, this MSc study confines itself to Kano State, focusing specifically on how agency banking relates to profitability of deposit money banks within that setting. Findings are interpreted within these boundaries rather than as universal claims applicable to every organization or market.