Effects of Financial Innovations on Performance of Commercial Banks in Kenya

Authors

  • Victor Kombe ngao43@gmail.com Author

DOI:

https://doi.org/10.59413/ajocs/v2.i1.2

Keywords:

Internet Banking, Mobile Banking, Electronic Fund Transfers, Financial Performance

Abstract

Understanding how financial innovations affect Kenya's commercial banks' performance is the main goal of the current study. The United States has long been a leader in financial innovation. However, in terms of financial innovation, China and African nations like Kenya and Nigeria have taken the lead globally. Kenya presently leads the world in mobile money services. The conflicting results of the positive and negative performance of commercial banks as a result of financial innovations served as the impetus for the current study. A literature review technique was adopted in the research. The study's overall conclusions demonstrate that financial innovations improve financial performance, as seen by an increase in transactions, the creation of convenience, and decreased maintenance costs. Banks that are incorporating financial innovations are therefore better positioned to boost their   revenue and customer satisfaction, both of which are linked to increased performance. According to the report, authorities should make sure that there are laws in place that can foster an environment where banks may keep innovating.

Downloads

Download data is not yet available.

References

Abaenewe, Z. C., Ogbulu, O. M., & Ndugbu, M. O. (2013). Electronic banking and bank performance in Nigeria. West African journal of industrial and academic research, 6(1), 171-187. Retrieved from https://www.ajol.info/index.php/wajiar/article/view/87447

Aduda, J., & Kingoo, N. (2012). The relationship between electronic banking and financial performance among commercial banks in Kenya. Journal of finance and investment analysis, 1(3), 99-118. Retrieved from http://www.scienpress.com/Upload/JFIA/Vol%201_3_6.pdf

Akamavi, R. K. (2005). A research agenda for investigation of product innovation in the financial services sector. Journal of Services Marketing, 19(6), 359-378. doi:https://doi.org/10.1108/08876040510620148 DOI: https://doi.org/10.1108/08876040510620148

Al-Ansari, Y., Pervan, S., & Xu, J. (2013). Innovation and business performance of SMEs: the case of Dubai. Education, Business and Society: Contemporary Middle Eastern Issues, 6(3/4), 162-180. doi:https://doi.org/10.1108/EBS-04-2013-0012 DOI: https://doi.org/10.1108/EBS-04-2013-0012

Alber, N. (2011). The effect of banking expansion on profit efficiency of Saudi Arabia Commercial Banks. Journal of Global business and Economics, 3(1), 11-23. Retrieved from https://econpapers.repec.org/RePEc:grg:01biss:v:3:y:2011:i:1:p:11-23

Arnaboldi, F., & Claeys, P. (2010). Innovation and performance of European banks adopting Internet. Università degli Studi di Milano . Retrieved from https://air.unimi.it/handle/2434/139384

Artz, K. W., Norman, P. M., Hatfield, D. E., & Cardinal, L. B. (2010). A longitudinal study of the impact of R&D, patents, and product innovation on firm performance. Journal of product innovation management, 27(5), 725-740. doi:https://doi.org/10.1111/j.1540-5885.2010.00747.x DOI: https://doi.org/10.1111/j.1540-5885.2010.00747.x

Cainelli, G., Evangelista, R., & Savona, M. (2006). Innovation and economic performance in services: a firm-level analysis. Cambridge journal of economics, 30(3), 435-458. doi:https://doi.org/10.1093/cje/bei067 DOI: https://doi.org/10.1093/cje/bei067

Central Bank of Kenya. (2015). Payment Systems Statistics. Retrieved from Mobile Payments: https://www.centralbank.go.ke/national-payments-system/mobile-payments/

Chitavi, M., Cohen, L., & Hagist, S. C. (2021). Kenya Is Becoming a Global Hub of FinTech Innovation. Harvard Business Review, 21. Retrieved from https://hbr.org/2021/02/kenya-is-becoming-a-global-hub-of-fintech-innovation

Cracknell, D. (2012). Policy innovations to improve access to financial services in developing countries: Learning from case studies in Kenya. Centre for global development, 1-75. Retrieved from https://cgdev.org/sites/default/files/archive/doc/LRS_case_studies/Cracknell_Kenya.pdf

DeYoung, R., Lang, W. W., & Nolle, D. L. (2007). How the Internet affects output and performance at community banks. Journal of Banking & Finance, 31(4), 1033-1060. doi:https://doi.org/10.1016/j.jbankfin.2006.10.003 DOI: https://doi.org/10.1016/j.jbankfin.2006.10.003

Economist Intelligence Unit. (2012). Global microscope on the microfinance business environment 2012. Inter American Development Bank. Retrieved from https://publications.iadb.org/publications/english/viewer/Global-Microscope-on-the-Microfinance-Business-Environment-2011.pdf

Goetzmann, W. N. ( 2009). Financing Civilization. mimeo: Yale University.

Gopalakrishnan, S. (2000). Unraveling the links between dimensions of innovation and organizational performance. The Journal of High Technology Management Research, 11(1), 137-153. doi:https://doi.org/10.1016/S1047-8310(00)00024-9 DOI: https://doi.org/10.1016/S1047-8310(00)00024-9

Hamilton, R., Jenkinson, N., & Penalver, A. (2007). Innovation and integration in financial markets and the implications for financial stability." The Structure and Resilience of the Financial System, Proceedings of a Conference, Reserve Bank of Austral. The Structure and Resilience of the Financial System, Proceedings of a Conference. Sydney: Reserve Bank of Australia. Retrieved from https://ho.website.rba.gov.au/publications/confs/2007/pdf/conf-vol-2007.pdf

Heikkinen, P., & Korhonen, K. (2006). Technology-driven efficiencies in financial markets. Retrieved from https://helda.helsinki.fi/bof/handle/123456789/9445

Hernando, I., & Nieto, M. J. (2007). Is the Internet delivery channel changing banks’ performance? The case of Spanish banks. Journal of Banking & Finance, 31(4), 1083-1099. doi:https://doi.org/10.1016/j.jbankfin.2006.10.011 DOI: https://doi.org/10.1016/j.jbankfin.2006.10.011

Ho, S. J., & Mallick, S. K. (2010). The impact of information technology on the banking industry. Journal of the Operational Research Society, 61(2), 211-221. doi:https://doi.org/10.1057/jors.2008.128 DOI: https://doi.org/10.1057/jors.2008.128

Hughes, N., & Lonie, S. (2007). M-PESA: mobile money for the “unbanked” turning cellphones into 24-hour tellers in Kenya. Innovations: technology, governance, globalization, 2(1-2), 63-81. doi:https://doi.org/10.1162/itgg.2007.2.1-2.63 DOI: https://doi.org/10.1162/itgg.2007.2.1-2.63

Iman, N. (2011). The diffusion of electronic banking in Indonesia. SSRN e-Journal. doi:https://dx.doi.org/10.2139/ssrn.1747746 DOI: https://doi.org/10.2139/ssrn.1747746

Jacquemin, A. (1999). Theories of Industrial Organization and Competition Policy. In Competition, Efficiency, and Welfare. Springer. doi:https://doi.org/10.1007/978-1-4615-5559-9_11 DOI: https://doi.org/10.1007/978-1-4615-5559-9_11

Jepkorir, S. (2011). Challenges of implementing financial innovations by commercial banks in Kenya. University of Nairobi. School of Business. Retrieved from http://erepository.uonbi.ac.ke:8080/xmlui/handle/123456789/12216

Jiménez-Jiménez, D., & Sanz-Valle, R. (2011). Innovation, organizational learning, and performance. Journal of business research, 64(4), 408-417. doi:https://doi.org/10.1016/j.jbusres.2010.09.010 DOI: https://doi.org/10.1016/j.jbusres.2010.09.010

Kamau, C. G., Asser, J. H., Ibua, M. P., & Otiende, I. O. (2023). User Reviews, Ratings and Adoption of Accounting Mobile Apps in Kenya. AfricArXiv, 1-11. doi:https://doi.org/10.31730/osf.io/m6t7p DOI: https://doi.org/10.31730/osf.io/m6t7p

Laforet, S., & Tann, J. (2006). Innovative characteristics of small manufacturing firms. Journal of Small Business and Enterprise Development, 13(3), 363-380. doi:https://doi.org/10.1108/14626000610680253 DOI: https://doi.org/10.1108/14626000610680253

Makini, S. O. (2010). The relationship between financial innovation and financial performance of commercial banks in Kenya . University of Nairobi. Retrieved from http://erepository.uonbi.ac.ke:8080/handle/123456789/5427

Malhotra, P., & Singh, B. (2010). An analysis of Internet banking offerings and its determinants in India. Internet research, 20(1), 87-106. doi:https://doi.org/10.1108/10662241011020851 DOI: https://doi.org/10.1108/10662241011020851

Misati, R., Osoro, J., Odongo, M., & Abdul, F. (2022). Does digital financial innovation enhance financial deepening and growth in Kenya? International Journal of Emerging Markets. doi:https://doi.org/10.1108/IJOEM-09-2021-1389 DOI: https://doi.org/10.1108/IJOEM-09-2021-1389

Murori, C. K. (2022). Challenges Affecting Financial Performance of Small and Medium Sized Firms in Kenya. African Journal of Commercial Studies, 1(1), 9-17. doi:https://doi.org/10.59413/ajocs/v1.i1.2 DOI: https://doi.org/10.59413/ajocs/v1.i1.2

Muthinja, M. M., & Chipeta, C. (2018). What drives financial innovations in Kenya’s commercial banks? An empirical study on firm and macro-level drivers of branchless banking. Journal of African Business, 19(3), 385-408. doi:https://doi.org/10.1080/15228916.2017.1405705 DOI: https://doi.org/10.1080/15228916.2017.1405705

Mwando, S. (2013). Contribution of agency banking on financial performance of commercial banks in Kenya. Journal of Economics and Sustainable Development, 4(20), 26-34. Retrieved from https://core.ac.uk/download/pdf/234646179.pdf

Mwangi, J. (2020). Equity Group—Financing Innovation in Kenya. Global Innovation Index 2020: Who Will Finance Innovation, 171-176. Retrieved from https://www.wipo.int/edocs/pubdocs/en/wipo_pub_gii_2020-chapter15.pdf

Niehans, J. (1983). Financial innovation, multinational banking, and monetary policy. Journal of banking & Finance, 7(4), 537-551. doi:https://doi.org/10.1016/0378-4266(83)90011-0 DOI: https://doi.org/10.1016/0378-4266(83)90011-0

Nyangosi, R., & Arora, J. S. (2011). Antecedents and obstacles to e-banking adoption: a comparative study of India and Kenya. International Journal of Indian Culture and Business Management, 4(2), 123-137. doi:https://doi.org/10.1504/IJICBM.2011.038913 DOI: https://doi.org/10.1504/IJICBM.2011.038913

Ovia, J. (2001). Internet Banking: practices and potentials in Nigeria, A paper presented at a seminar organised by the Institute of Chartered Accountants of Nigeria (ICAN) Lagos Sheraton Hotel & Towers, Ikeja. International Journal of Banking Technology, 209-218.

Rosenbusch, N., Brinckmann, J., & Bausch, A. (2011). Is innovation always beneficial? A meta-analysis of the relationship between innovation and performance in SMEs. Journal of business Venturing, 26(4), 441-457. doi:https://doi.org/10.1016/j.jbusvent.2009.12.002 DOI: https://doi.org/10.1016/j.jbusvent.2009.12.002

Rotchanakitumnuai, S., & Speece, M. (2003). Barriers to Internet banking adoption: a qualitative study among corporate customers in Thailand. International journal of bank marketing, 21(6/7), 312-323. doi:https://doi.org/10.1108/02652320310498465 DOI: https://doi.org/10.1108/02652320310498465

Ruan, Y., & Li, Z. (2009). How Commercial Banks Implement Financial Innovactions-A Case From Retail Operation of the Bank of China. International Conference on Pacific Rim Management. Retrieved from http://www.myacme.org/ACMEProceedings09/p22.pdf

Schumpeter, J. A. (1934). The Theory of Economic Development. Cambridge: Harvard University Press. Retrieved from https://www.hup.harvard.edu/catalog.php?isbn=9780674879904

Siedek, H. (2008). Extending Financial Services with Banking Agents. Washington, DC.: World Bank. Retrieved from http://hdl.handle.net/10986/9523

Simiyu, R. S., Ndiang'ui, P. N., & Ngugi, C. C. (2014). Effect of financial innovations and operationalization on market size in commercial banks: A case study of Equity Bank, Eldoret branch. International Journal of Business and Social Science, 5(8), 227-249. Retrieved from https://citeseerx.ist.psu.edu/document?repid=rep1&type=pdf&doi=ec3038dc430f0fdb50706bd5590a3f14c4e5d125

Tavallaei, M., & Talib, M. A. (2010). A general perspective on role of theory in qualitative research. Journal of International Social Research, 3(11), 570-577. Retrieved from https://web.p.ebscohost.com/ehost/pdfviewer/pdfviewer?vid=0&sid=873b8780-5f38-4413-ac33-3ca577bf4b22%40redis

Wairagu, G. P. (2011). The relationship between financial innovation and profitability of Commercial banks in Kenya. University of Nairobi. School of Business. Retrieved from http://erepository.uonbi.ac.ke:8080/xmlui/handle/123456789/12516

Wangui, M., & Nzuki, D. (2021). The Effect Of Electronic Money Transfer Systems On The Financial Performance Of Financial Institutions In Kenya (Case Study Of Sumac Deposit Taking Microfinance Ltd). International Research Journal of Business and Strategic Management, 2(1), 50-61. Retrieved from https://www.irjp.org/index.php/irjbsm/article/view/16

Yermack, D. (2018). FinTech in sub-saharan Africa: What has worked well, and what hasn't. National Bureau of Economic Research. Retrieved from https://ssrn.com/abstract=3246830 DOI: https://doi.org/10.3386/w25007

Downloads

Published

2023-01-14

How to Cite

Kombe, V. (2023). Effects of Financial Innovations on Performance of Commercial Banks in Kenya. African Journal of Commercial Studies, 2(1), 12–26. https://doi.org/10.59413/ajocs/v2.i1.2

Most read articles by the same author(s)

1 2 3 > >>