The Effect of financial innovation on the financial performance of commercial banks in Kenya

Abstract

For the last decade commercial banks in Kenya have evolved into financial innovations moving from the traditional banking in order to improve the services of their customers both local and international and also to increase their profitability. The main purpose of this study was to establish the effect of financial innovation on the performance of commercial banks in Kenya. The research studied top 16 commercial banks in Kenya by analysis their financial statements for the period 2013 to 2017. It made use of secondary data which was sourced through data mining from central Bank of Kenya. The independent variables analyzed were; Mobile Banking, Internet Banking, Agency Banking, Liquidity and Capital Adequacy The study revealed that; Mobile Banking, Internet Banking, Agency Banking, Liquidity and Capital Adequacy explained 98.6% of performance of commercial banks in Kenya. All the variables which presented financial innovations had a positive coefficient therefore revealing a positive relationship to performance of the commercial banks. From the research findings it was clear that financial innovations affect significantly and positively performance of commercial banks.