Financial Inclusion and Bank Stability of Commercial Banks Listed in Nairobi Securities Exchange, Kenya
Kinyua, Daisy Wairimu
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Listed Commercial Banks still control financial intermediation channel in emerging market economies such as Kenya. After the 2007-2009 global financial crisis, financial institutions, regulators, and policy makers, in recent years have heavily invested in reforms aimed at improving bank stability. The study sought to evaluate the effect of financial inclusion on bank stability of commercial banks listed in Nairobi Securities Exchange, Kenya. Evidence indicates that financial inclusion has been highly embraced though bank stability remains an issue among listed commercial banks in Kenya. The specific objectives were: to establish the effect of financial availability, financial accessibility, financial usage, and service delivery on bank stability. Agency theory, financial intermediation theory, financial asymmetry theory and competitive stability theories formed the foundation for the study. The study employed a descriptive research design. The target population encompassed 11 commercial banks listed in Nairobi Securities Exchange, Kenya. The period scope was year 2014 to year 2018. A total of 55 respondents were targeted (finance managers, credit managers and bank investment managers). Purposive sampling was used in picking a sample of 55 respondents. Multiple regression analysis, correlation analysis, and descriptive statistics were adopted in data analysis. Primary data was collected using questionnaires; secondary data was gathered utilizing a document review guide. Statistical Package for Social Sciences (SPSS) software package was then utilized in the data analysis phase. Hypothesis were tested at significance level of 0.05. The study found that financial availability(p=0.033) had a significant effect on bank stability; financial accessibility(p=0.015) had a significant effect on bank stability; financial usage(p=0.039) had a significant effect on bank stability whereas service delivery(p=0.023) had a significant effect. Collectively, these findings demonstrated that financial availability, financial accessibility, financial usage, and service delivery have a significant effect on the bank stability of listed commercial banks in Kenya. The study recommends that central bank should ensure compliance on CBK policies that govern capital adequacy to avert risks associated with Non-Performing Loans. Commercial banks listed in Nairobi Securities Exchange need to embrace latest technologies in service provision. Financial institutions need to invest in customer service by first providing employees with the right skills and technology so as to provide exceptional customer service. Most of the banks were striving to improve in service delivery owing to the fact that time taken on processing of transactions has an impact on bank stability. Banks should put in place strong lending policies as well as debt recovery measures. Financial institutions should also adopt TQM strategies.