Effect of financial technology on financial development in Kenya

Abstract

The utilization of financial technology has significantly increased in the financial sector globally. Evidence shows that development practitioners are continually having the conviction that the outreach arising because of fintech will lead to financial development. In contrast, to the extent that accessibility to financial services is limited, the advantages of financial development are likely to be unavailable to individuals and enterprises. This research sought to determine how financial technology impacts financial development in Kenya. The independent variable for the study was financial technology operationalized as agency banking, mobile banking, internet banking and Mpesa. The control variables were economic growth represented by economic growth rate and interest rates measured as the average bank lending rate on a quarterly basis. The dependent variable was financial development in Kenya given by credit to the private sector as a % of GDP. A period of 10 years between January 2010 and December 2019 was studied through gathering of secondary data. Descriptive design was employed while multiple linear regressions model was useful in the analysis of the association between the variables. The data was analyzed by use of SPSS version 23. An R-Square value of 0.790 was produced from the study results which meant that 79% of the disparity in financial development in Kenya is attributed to the independent variables while 21% of variations of financial development in Kenya was related to other variables that were not part of this study. ANOVA findings showed the F statistic was substantial at 5% with a p=0.000. Henceforth, the model was appropriate in establishing the relation between the specified variables. In addition, it was revealed that volume of Mpesa transactions, economic growth rate and interest rate had positive substantial values for the investigation while agency banking, mobile banking and internet banking produced positive but insignificant values in the investigation. It is the recommendation of this study that measures should be adopted that will enhance Mpesa, economic growth rate and interest rate as these measures have a substantial influence on financial development in Kenya. The study suggests the need for future researchers to center on other determinants of financial development in Kenya such as institutional quality, political stability, inflation, trade openness among others