Deepening Financial Inclusion and Stability of Commercial Banks in Kenya: Synergies and Trade-Offs.
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Date
2022
Authors
Musau, Salome
Journal Title
Journal ISSN
Volume Title
Publisher
Full Length Research
Abstract
There are important trade-offs and
synergies between financial inclusion and
stability. Poorly implemented financial
inclusion policies can impair stability, and
also, there may be important synergies
brought by broad use of financial services
which help financial institutions diversify
risk and hence aid stability. Financial
stability can enhance financial inclusion
through trust build in stable financial
systems and hence increase the use of
financial services. Excessive emphasis on
financial stability can prolong involuntary
financial exclusion especially in times of
regulatory tightening in an attempt to
boost profits and cut off risky segments. It
is therefore important for financial
institutions to understand the interlinkages
in advancing financial inclusion and
stability. This study analyzed the effect of
financial inclusion on commercial banks
stability with a view of establishing the
significant relationship between them. The
specific objectives were to analyze the
effect of Branch networks, ATMs, Agents
and Mobile banking on the stability of
commercial banks in Kenya. The research
design was explanatory non –
experimental. The target population was
all the 42 commercial banks in Kenya and
the study used secondary data. Descriptive
statistics were used to establish the trend
of financial inclusion and stability of
commercial banks while inferential
statistics were used for testing the
hypotheses. The results revealed that
financial inclusion had a statistically
significant effect on the stability of
commercial banks in Kenya during the
study period between 2007-2015. Increase
in Branches, ATMs, Agents and Mobile
banking were found to support stability
(synergy) due to increased deposit
mobilization and access to credit. Overall,
the results point to the role of financial
inclusion and bank stability in Kenya.
Moreover, the state of financial inclusion
is a major factor that determines Kenyas
vision 2030. Therefore, the study
recommends increasing the banking
customers, advancing affordable and
accessible banking services to
disadvantaged groups in different regions
in the country. In this regard, reforms in
financial sector should aim at increasing
financial inclusion through digital finance
which is a cost cutting measure and to
ensure that bank stability indicators
commensurate in the role of deepening
financial intermediation and hence
forming an all-inclusive and stable
financial sector over time.
Description
Article
Keywords
Financial Inclusion, Unbankable Stability, Synergy, Trade-off, Financial Deepening
Citation
Musau, S. (2022). Deepening financial inclusion and stability of commercial banks in Kenya: synergies and Trade-offs. International Academic Journal of Economics and Finance, 3 (7), 143, 155, 2.