dc.description.abstract | The purpose of the study was to establish effects of financial innovations on growth of
commercial banks in Kenya. Specifically the study sought to establish the effects of
mobile banking, online banking, automated cheques clearing and agency banking on
growth of commercial banks in Kenya. This study adopted descriptive design. The
population of study consisted of all the licensed commercial banks that were registered
with Central Bank of Kenya by December 2012. The study adopted a census study
approach since the population was small and the institutions were easily assessable to be
reached, hence the sample size was all commercial banks. The study collected secondary
data only; these data included past and immediate income statements, statements of the
financial position, cash flow statements, budget records, books and other publications in
relation to banking industry in Kenya. Data collected was from financial year 2007 to
2012. A multiple regression model was adopted to establish the form of relationship
between growth and the financial innovations.
The study found out that majority of the banks had adopted mobile banking and online
banking while a number of banks had adopted automated cheques clearing and agency
banking which have been one of the recent innovations among commercial banks in
Kenya. Financial innovation lowers the transaction cost of transferring funds. It was
concluded that adoption of the financial innovations had improved commercial banks
growth and improved their operations and earnings. Financial innovations not only
increased their market coverage but also improved their liquidity and also enabled them
to remain competitive in the market especially in the current turbulent business
environment.
The study recommends that there is need for commercial banks to adopt new financial
innovations since this has provided the benefit of constant access to certain core services
without necessarily visiting the banking hall. There is also need to adopt financial
innovations to improve liquidity in banks. The study had shown that commercial banks
that had adopted financial innovations had improved their liquidity. Adoption of financial
innovations enables operational efficiency of commercial banks through making financial
services more available and at reduced costs. | en |