Financial Inclusion Innovations and Financial Performance of Commercial Banks in Kenya
Nzyuko, Joseph Mutinda
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Financial inclusion is the process of expanding access to financial services to those currently not accessing them which is an important objective in many developing countries. This study represents an investigation into financial inclusion innovations adopted by commercial banks in Kenya. The study majored on use of technology such as Automatic Teller Machines (ATMs), mobile phone banking internet banking and agency banking and its impact on financial performance of commercial banks in Kenya and how these inclusion innovations have moved us closer to branchless banking. The study was based on the fact that there is ground to cover in expanding access to financial services, given that about 25% of the population remains totally excluded and Financial services touch points are located away from areas of high poverty levels, with 69% of all financial access touch points being located in areas with the least likelihood of poverty. The threat posed by cybercrime to individuals, banks and other online financial service providers is real and serious hence the need for the study. The target population of the study was 42 commercial banks licensed in Kenya by 2010. The study used time series data from central bank of Kenya (CBK) and Kenya bankers’ association (KBA) annual bank supervisory reports (2010-2016). Through multiple regressions and correlation analysis the study found out that there is a strong positive relationship between financial inclusion strategies and financial performance. Based on these results, the study recommends that financial inclusion innovations should be emphasized in the financial sector through regulatory and advisory bodies since it leads to improved financial efficiency. In addition, the study also recommends that financial institutions to embrace agency, internet banking and ATM banking to include the excluded people in financial services and products throughout the country since they proved significant in influencing financial performance. The study recommends further research on financial inclusion on microfinance institutions in Kenya and their impact on micro and small business organizations.