Financial Innovations and Sustainability Moderated By Government Regulations Among Commercial Banks In Kenya.

Abstract

The financial sector plays a key role in the growth and development of any country. The commercial banks are key players in the financial sector and hence their performance is crucial to ensure the growth of the economy. In Kenya the commercial banks performance has been declining and recently have been showing signs of financial distress. The average performance of commercial banks has been reducing for the last couple of years and the non- performing loans (NPLs) have been on the rise which are their major sources of incomes. On the other hand, the Fintech with its financial products is however on the rise, threatening the sustainability of commercial banks. Hence, the purpose of this study which was aimed at examining the influence of financial innovations on sustainability of commercial banks in Kenya. Specifically, the study focused on examining the influence of mobile money, agency banking, internet banking and mobile banking on sustainability of commercial banks. A descriptive survey research design guided the study. From the target population of 210 respondents a sample of 120 was selected using a simple random sampling. The study randomly selected 384 users who had used new financial products to verify the commercial banks' claims. The information was gathered through the use of self-administered surveys and content analysis of existing documents. Both bank personnel and those who really use financial innovations filled out questionnaires for the research. To determine if the chosen variables significantly affected commercial bank sustainability, the obtained data was cleaned, edited, and analyzed using SPSS(23). To determine if financial innovation significantly affects the long-term viability of commercial banks in Kenya, a regression model comprising predictors of financial innovation was run against the measures of sustainability. The study findings revealed that agency banking, internet banking and mobile banking had a significant influence on sustainability of commercial banks while mobile money had negative insignificant influence. Commercial banks were shown to be resilient despite the fact that government controls did not act as a strong moderating factor. Commercial bank sustainability was found to be affected by mobile money, agency banking, internet banking, and mobile banking individually, but not by mobile money aggregated together. In order to maintain customers and attract new ones, commercial banks were urged by the study's authors to extend their hours of operation, with the extra hours concentrated in high-population areas or regions with a high concentration of business clients. Since internet banking is so widely used by businesses, it was also suggested that banks promote it to individual customers. The study suggests more investigation into how SACCOs and micro- finances might be affected by the impact of financial innovations. It was also suggested that more study be done on the impact of mobile banking and mobile money on the long-term viability of Kenya's publicly traded financial institutions.