International Journal of Humanities and Social Science

ISSN 2220-8488 (Print), 2221-0989 (Online) 10.30845/ijhss

Effects of Financial Innovations on the Financial Performance of Commercial Banks in Kenya
James Kamau MuiruriDr. James Mark Ngari

The commercial banking industry in Kenya has in the last ten years involved itself in financial innovations, moving from the traditional banking to better meet the growing complex needs of their customer and globalization challenges. Despite the recognized importance of financial innovation and an extensive descriptive literature, there have been surprisingly few empirical studies. This situation has denied the banks the much needed information regarding this important area of financial innovations sometimes leading to reverse causality in the innovation-financial performance relationship. The study was guided by the following specific objectives; establish whether credit cards affect the financial performance of commercial banks in Kenya; examine the effects of mobile banking on the financial performance of commercial banks in Kenya; determine the influence of internet banking in financial performance of banks in Kenya; determine the influence of agency banking on profitability in financial performance of banks. The population of the study consisted of forty four commercial banks that are currently operating in Kenya, The target population was Sixteen banks and at least four members of the management team with representations in the following dimensions; locally incorporated banks, banks incorporated elsewhere but operating in Kenya, banks in which the government has some shareholding and also based on size. Thus sixty questionnaires were dispatched. Secondary data was collected from the bank’s for the periods 2008-2012. Analyzed data was summarized and presented in the form of simple frequency tables of the ratio counts and graphs. The study found that some banks in Kenya had adopted some financial innovations such as credit cards, mobile, internet and agency banking. The financial innovations had great impact on the financial performance of the banks.

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