The effect of financial innovations on non funded income of commercial banks in Kenya
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Date
2014Author
Mwangi, Elizabeth W
Type
ThesisLanguage
enMetadata
Show full item recordAbstract
To better apprehend the financial innovation process within the banking firm, this
study intend to study the two types of financial innovation most commonly cited by
the literature review, namely: product innovation and financial services innovation.
Financial innovation has been indicated to affect economic growth and financial
inclusion as well as boost the non funded income of commercial banks (CBK, 2011).
Studies on financial innovation have been based other financial markets with little
emphasis on the banking sector. This study aims at investigating the effects of
financial innovations on non funded income in commercial banks in Kenya This study
adopted descriptive design. Descriptive research design portrays an accurate profile of
persons, events, or situations. The population of study consisted of all the 43 licensed
commercial banks that registered with Central Bank of Kenya. The study adopted a
census study approach. Owing to the depth inquiry nature of the study, secondary data
was collected. The bank consolidated non funded income and exceptional items were
obtained from CBK’s annual bank supervision reports. Data to be collected was for 5
years from 2009 to 2013. Data was analyzed using the SPSS statistical package since
it is best suited for providing a means of establishing quantitative association between
variables. Given that the study, a multiple regression model of bank non funded
income as the dependent variable versus independent variables of financial
innovations such as online banking, mobile banking, automated cheques clearing and
RTGs. The study established that there existed strong significance, positive correlation
between financial innovation and non funded income (NFI) in commercial banks It
can be concluded that adoption of these financial innovations had improved
commercial banks income level and further improved their operations and earnings by
increasing level of Non Funded Income. The financial innovations are not only
adopted to increase their market coverage but also to improve the liquidity and also
remain competitive in the market in the current turbulent business environment. This
study also concluded that commercial bank investing in financial innovations has
improve on new products development and technological innovations such as mobile
banking, online banking, automated cheques clearing and agency banking increasing
interest earnings, deposit interest increase and increase to a great extent level of Non
funded Income. The study concluded that there existed a strong significant correlation
between online banking, Mobile banking, Automated Cheques clearing and Value of
sector RTGS commercial banks in Kenya. Based on the findings and conclusions of
the study the following recommendations have been suggested in relations to financial
innovations. There is need for commercial banks in Kenya to adopt new financial
innovations such as Mobile banking, Online banking, since this has provided the
benefit of constant access to certain core services reducing the need to interact with
bank staff for many people
Publisher
University of Nairobi