Innovative Banking Practices and Financial Performance of Commercial Banks in Kenya
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Date
2021
Authors
Hillowle, Mohamud Hussein
Warui, Fredrick
Journal Title
Journal ISSN
Volume Title
Publisher
IJCAB
Abstract
Commercial banks serve as key financial intermediaries in facilitation of the flow of money in
the banking industry. Commercial banks offer credit to investment banks in order to offer
investment opportunities for risky investments especially for financial securities using
depositors’ money. Globally, banks are affected by broad difficulties in the operating
environment. The banking industry has embraced innovation to sustain competitiveness.
Financial innovations used by commercial banks revolve around the latest product, service
and its conveyance to consumers. Consequently, this information influenced the research with
its aim as; investigating innovative banking applications and monetary capability of banks.
Particular goals included examining how; real time gross settlements (RTGS), electronic fund
transfers (EFT), pay bill innovation in mobile banking and the extent of agency banking
influence monetary potential of banks. Research anchored on the Schumpeter theory of
innovations, the agency and bank-led theories. It was explanatory in nature and applied a
census approach to gather information. The targeted group included commercial banks
registered under the Central Bank totalling to 42 tiers 1. Raw and derived data was equally
utilized including, financial statements and face to face interviews with top level managers.
Collected information was examined by SPSS. Given conclusions were dispensed descriptively,
and by inferring to statistical presentations. The resulting conclusion was that; when RTGS,
agency banking, EFT, and mobile banking are solely brought up/down by a single unit,
financial performance increased/ decreased by 0.163, 0.27, 0.197, and 0.318 units. At a
constant however, financial performance remained at 0.236 out of 5 units. In conclusion,
commercial in banks have significantly relied on innovative banking practices to shift their
financial performance to new heights. The study has particularly placed both mobile and
agency banking at a more central position in driving financial performance to the desired level
than other factors including the RTGS and EFT. As part of the recommendations, managements
of commercial banks should consider scaling up their adoption of RTGS, agency banking, EFT,
and mobile banking as ways of reducing the operating cost of their respective banks reducing
banking hall congestions since most of the frequently sought banking services can be achieved
without one on one meeting with the bank tellers. Management should also consider adopting
more innovative banking practices besides those this research investigated
Description
Article
Keywords
Bank Innovation, Innovative Banking Practices, Automation Practices
Citation
Mohamud, H., & Warui, F. (2021). Innovative Banking Practices and Financial Performance of Commercial Banks in Kenya. International Journal of Current Aspects in Finance, Banking and Accounting, 3(1), 41-53. https://doi.org/10.35942/ijcfa.v3i1.180