Effect of Financial Innovation on the Growth of Commercial Banks in Eldoret Town, Uasin Ishu County (original) (raw)
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Financial Innovation and the Performance of Commercial Banks in Kenya
There has been slow growth in the profitability of commercial banks as a result of increased operating expenses as these banks transition to more innovative products. Local banks have been experiencing great losses and have not been able to realize more earnings as a result of competition from local mobile service transfer services like Mpesa and Airtel Money hence lowering their performance through low returns to investments action errors have reduced banks' credibility hence profitability. This study therefore sought to investigate the effect of financial innovation on the performance of commercial banks in Kenya. The study was founded on the resource based theory, the transaction cost innovation theory and the constraint-induced financial innovation theory. The study adopted a descriptive research design. The study targeted all the 16 commercial banks which have embraced all the financial innovations under the study in Kenya. The study used primary data collected using structured questionnaires which were administered to the senior management employees and secondary data obtained from the Central Bank of Kenya Bank Supervision reports. Descriptive statistics were used to describe the quantitative data. Pearson's correlation, analysis of variance and multiple regression analysis were used to establish the relationships among the study variables. The study found that agency banking, mobile banking, internet banking as well as ATM banking had a positive and statistically significant effect on the performance of commercial banks in Kenya. Based on the study findings, the study concluded that financial innovations namely agency banking, mobile banking, internet banking as well as ATM banking affected the performance of commercial banks positively and significantly through various channels such as increased profitability, reduced costs of banking and other infrastructural costs, increased productivity and efficiency, increased customer outreach and customer relationship management, increased accessibility to services as well as quality of services. The study recommends that commercial banks should expand the number of ATM outlets even as they expanded their bank branches; they should increase customer sensitization on the use of internet banking through making the aware of the benefits and how they can use them in making their banking transactions safely; they should increase the number of bank services and products provided by agency outlets since the number of customers using these outlets had continued to increase significantly over the years and that banks should invest adequate capital and knowledge resources towards improving existing financial innovations.
Financial Innovation Strategies and Performance of Commercial Banks in Kenya
Journal of Strategic Management
Purpose: The purpose of the study was to establish the impact of financial innovation strategies on performance of commercial banks. Methodology: The study used census approach and targeted all the 41 commercial banks in Kenya. This is because the population is small. Senior Operations and the Senior Finance managers working in the headquarters of the commercial banks were targeted. This was therefore a total of 82 respondents. The research adopted cross-sectional survey. The study used both primary and secondary data. Primary data was collected using questionnaires while Secondary information was acquired from the commercial banks' audited financial statements. After quantitative data was obtained through questionnaires, it was prepared in readiness for analysis and keyed into statistical package for social sciences (SPSS) computer software (version 22) for analysis. Findings: Results from both primary and secondary data showed that financial innovation strategies had a positi...
RELATIONSHIP BETWEEN FINANCIAL INNOVATION AND COMMERCIAL BANK PERFORMANCE IN KENYA
The need for innovation is precipitated by transaction and operational costs; this can be attained through use of branchless banking system through technological adoption. The current study sought to determine the contribution of mobile, internet, ATM, credit cards, and agency banking. The study was guided by Schumpeter and resources based theory. Using correlation research design, the examined the causal effect of innovation on commercial banks performance in 2012 to 2015. The target population of this study was all the 41 commercial banks in Kenya. Purposive sampling was used to select 11 commercial banks which are listed and actively trading in NSE. Secondary data which was collected from the published annual reports for commercial banks spanning four years (2012-2015). The data was analyzed through the use of STATA version 12. Descriptive statistics showed the average commercial banks performance was 23.7%. Correlation analysis showed that ATM banking had the highest influence on commercial bank performance and more ATM and banking services should more availed through use of it. Regression analysis showed that ATM, mobile banking, use of credit and debit cards, internet banking and agency banking all have positive significant influence on commercial banks performance in Kenya.
The Effect of Financial Innovations on the Financial Performance of Commercial Banks in Kenya
International Journal of Finance and Accounting, 2016
Purpose: The study sought to investigate the effect of financial innovations on financial performance of commercial banks in Kenya. The main problem was that there is an increase in the number of financial innovations, but whether the innovations in banking industry are the main determinants of financial performance is a hard to tell. Despite the significance of financial innovation, the effect of innovation on financial performance is still misunderstood. Methodology: The study adopted an explanatory research design. The population of the study was all the 43 commercial banks operating in Kenya in the study period. The study conducted a census on all the 43 commercial banks. The study used primary data. An ordinary linear regression model was used. The regressions were conducted using statistical package for social sciences (SPSS) version 20. Results: The study findings indicated that there is a negative and significant relationship between product innovation and ROA. The relations...
Financial Innovation Adoption and Financial Performance of Tier Three Commercial Banks in Kenya
Strategic Journal of Business & Change Management, 2023
The study's overarching goal was to learn how different financial innovations have affected the efficiency of Kenya's third-tier commercial banks. A descriptive methodology was used for this study. Data was analyzed using the Statistical Software for the Social Sciences. A descriptive analysis was performed, including measures of central tendency, dispersion, and frequency, on the data set. Tables of frequencies and percentages, bar charts, and scatter plots were utilized to display the information. Multimodal regression analysis was utilized as a statistical method to examine the connection between financial growth and prosperity. According to the findings, the bank relied heavily on the convenience of internet banking. One positive effect of internet banking is the rise in commission income at Tier 1 financial institutions. The findings suggested that commercial banks' interest-based revenue was only somewhat affected by the rise of online banking. The research found that the introduction of pay bill innovations increased the commercial bank's commission service charge income. According to the numbers, financial institutions had implemented biometric authentication for their customers. The biometric has a positive effect on commercial banks' interest-based income to a little extent. The results showed that customers may get instant online loans from banks anytime, anywhere thanks to digital lending. In addition, it let people check their own financial accounts, which simplified banking and saved money. Most people who were asked about bank interest costs claimed that they were all over the place. The bank has seen a fall in income from financial assets such as shares, CDs, notes, and bonds, as well as an increase in the cost of borrowed money from sources such as customers' deposits and wholesale financing. The use of online banking has a substantial, positive impact on business results. Biometric client identification was shown to have a large and beneficial impact on financial results. In Nairobi County, Kenya, it has been shown that mobile-based lending affects the profitability of microfinance. This is why mobile lending has to be a top priority for bank management. The government should thus prioritize the use of mobile lending for all aspects of the lending process, including loan distribution, loan evaluation, repayment schedules, and mobile bank loans.
Financial Innovation and Financial Performance of Tier 3 Commercial Banks in Kenya
Banks play very important role in economic development of nations despite that they face a myriad of challenges including financial innovation in establishing and maintaining financial performance. General objective was to assess financial innovation on financial performance of Tier 3 Commercial Banks in Kenya. Specifically, study was to establish moderating effect of bank regulatory framework on financial innovation and financial performance. Schumpeterian growth theory adopting explanatory research design. Target population constituted all managers drawn from Tier 3 commercial banks in Kenya. Proportionate sampling and simple random sampling were employed in picking managers. Questionnaire was used in collecting data for financial innovation while secondary data was collected for financial performance from published annual returns obtained from Central Bank of Kenya. Pearson product moment correlation analysis and multiple regression analysis were employed. Sample size was 129. Findings indicated that correlation matrix of financial innovation (r=0.365, p=0.000) had linear relationship with financial performance. Regression results indicated that coefficient of financial innovation was 2145.08, p=0.000<0.05implying positive and significant while bank regulatory framework, had a model where F=8.033,p=0.006<0.05 implying positive and significant at 5% level. Findings of study indicated that financial innovation influenced financial performance while bank regulatory framework moderated relationship between financial innovation and financial performance. Commercial banks should implore financial innovations by including budgets specifically for transaction bank cards, agency banking, mobile banking, internet banking and electronic payment so as to increase financial performance.
Financial Innovations and Performance of Commercial Banks in Kenya
International Journal of Current Aspects in Finance, Banking and Accounting, 2020
Commercial banks in Kenya have embraced alternative banking channels which represent a shift in delivery of banking and financial services since the alternative banking have become synonymous with commercial banks in Kenya. While banks have succeeded in leveraging available technology and provide alternative avenues to customers for banking services, the challenge it faces today is optimizing the usage of these channels so as to improve on their performance. The general objective of this study was to investigate the effects of financial innovations on the performance of commercial banks in Kenya. The specific objectives of the study were to examine the influence of internet banking, mobile banking, agency banking and ATM banking on the performance of commercial banks in Kenya. The study was guided by agency theory, balanced score card and diffusion of innovation theory. This study employed a descriptive research design. The study targeted44 commercial banks in Kenya as at 2017. The ...
Influence of Innovation on The Performance of Commercial Banks in Nakuru Central Business District
IOSR Journal of Business and Management, 2016
Kenyan commercial banks have continued to use huge investments in innovations and Training of manpower to handle new technologies. The fast-changing competitive environment, globalization, economic changes, regulation, privatization and the like demands that commercial banks are run efficiently and effectively by continuously engaging in innovations. The relationship between the growing investment in bank innovations and bank financial performance in Kenya needs to be studied. If an organization is not capable of introducing innovations on an ongoing basis, it risks that it will lag behind and the initiative will be taken over by other entities. The main objective of the study was to establish the effect of financial innovations on financial performance of commercial banks in Kenya. The specific objectives of the study were to; find out the impact of mobile technology on financial performance of commercial banks, to examine the effect of agent banking on financial performance of commercial banks, to find out the effect of internet banking on financial performance of commercial banks and to investigate the effects of banc assurance on financial performance of commercial banks in Kenya. Population of study comprised of 45 commercial banks employees from 9 banks that use mobile banking, agent banking, internet banking and banc assurance in Nakuru. These banks are Cooperative bank, Kenya Commercial bank, Equity bank, Family bank, Chase bank, National Bank of Kenya, NIC bank, consolidated bank and DTB. Primary data was obtained through questionnaires which was carried out in commercial banks in Nakuru town and was evaluated using explanatory research design while a questionnaire was used to gather primary data. Secondary data was obtained from Central Bank of Kenya and banking survey manuals. The research adopted census technique where every element in the population was included; hence the population was 45. The analysis of the quantitative data was done using statistical package of social science (SPSS) software version 21. Multiple regression analysis was used to test the relationship between bank innovations and financial performance among commercial banks in Kenya. In addition, the Pearson Product Moment Correlation Coefficient was used to test the direction and magnitude of the relationship between the dependent and independent variables.
Journal of business and strategic management, 2022
The current study sought to establish the relationship between strategic adoption of technological innovations and competitive advantage of commercial banks in Kenya. Specific objectives were to establish the influence of E-Money transfer technologies, telephone banking technologies, internet banking technology and internal controls on competitive advantage of Commercial Banks in Kenya. Theories adopted include: Resource-Based View Theory, Innovation diffusion theory, Competitive advantage theory and Disruptive Innovation Theory. The study design employed was descriptive research design. The target population comprised of 43 commercial banks operating in Kenya where the unit of analysis comprised of 1 Branch Manager, 1 Head of Customer Service, 1 Head of IT Support and 2 Relationship officers from each bank making a total of 215 respondents. The primary data collection instruments used was a semi-structured questionnaire containing both closed and open-ended questions and issued to 215 study population respondents. The collected data was analyzed by employing both inferential analysis and descriptive statistics using Statistical Package for Social Science (SPSS) V25 and Microsoft Excel. A random pilot study carried on 21 respondents was done to assess the data collection instrument on validity and reliability. Out of the issued 215 questionnaires to the respondents, 192 were completed and successfully returned. This equates to 89.3% response rate, an appropriate for conducting analysis and making inferences. Tables and figure formats were used in presenting the study results and findings. The study findings were that the adoption of innovative technologies (E-Money transfer, Telephone banking, Internet banking and, Internal controls) had positive and significant influence on competitive advantage of Commercial banks in Kenya. The study recommended the use of credit cards to make online transactions like Cardless payments to improve access to financial services, Commercial banks to consider adapting mobile-based innovative Fintech to increase overall reach of the banking services to the populace, commercial banks to incorporate automated alert systems in case of theft at the ATMs and finally, appropriate systems authenticating user identity be put in place in remote areas to enhance security and increase user confidence in using internet technologies.
FINANCIAL INNOVATIONS AND PERFORMANCE OF TIER III COMMERCIAL BANKS IN KENYA
the Strategic journal of business & change management, 2022
The CBK reports pointed out a number of commercial banks facing issues with their financial performance to include Eco Bank, Equatorial Commercial Bank, Consolidated bank and Credit Bank. Other institutions like Chase, Dubai and Imperial bank have been placed under receivership. The belief in the sector is that introducing innovations will improve performance. This study sought to establish the effect of financial innovation on the financial performance of tier III commercial banks in Kenya. Specifically, the study looked at i-banking and agency banking and their effect on the financial performance of tier III commercial banks in Kenya with Central Bank of Kenya regulation as the moderating variable. The innovation diffusion theory, the agency theory and the regulatory capture theory were used to underpin the study. The study adopted causal research design and census to a population of 21 tier III commercial banks in Kenya. Secondary data was collected over a period of 2016 to 2020 using a data collection sheet. Content and face validity were adopted with the help of the supervisor. Reliability was established through Cronbach Alpha Coefficient with the 0.7 taken as the threshold. Diagnostic tests were conducted on the secondary data covering multicollinearity, autocorrelation, normality test and heteroskedasticity test. In order to test the formulated hypotheses, inferential statistics covering regression analysis was conducted and the deductions were drawn based on pvalues that were interpreted at 5% level of significance. The analyzed findings were presented through tables and figures. The study established that i-banking and agency banking all have a positive and statistically significant effect on financial performance partially moderated by Central Bank of Kenya regulations. The study concluded that financial innovations have a significant effect on financial performance and this is partially moderated by CBK regulation. The study recommended that ICT managers of the tier III commercial banks in Kenya should partner with telecommunication companies like Safaricom and Airtel to subsidize the costs of accessing banking services through the internet The direct sales representatives of the Tier III commercial banks in Kenya should increase marketing efforts of agency banking so as to significantly contribute to financial performance.