The Relationship between Mobile Banking Deepening and Financial Performance of Commercial Banks in Kenya

The objective of this study was to investigate the relationship between mobile banking deepening and financial performance of commercial bank in Kenya. The banking sector in Kenya has experienced turbulent times following the collapse of many banks in the 1990s. In order to minimize their operational costs, commercial banks have adopted internet banking including ATMs, mobile banking and internet banking where customer can access their accounts on their personal computers. Mobile banking offers millions of people a potential solution in emerging markets that have access to a cell phone, yet remain excluded from the format financial mainstream. The study applied descriptive research design. The target population included six mobile phone service providers who provide mobile phone services and 43 commercial banks operating in Kenya as at June 2014. The total amounts transferred via the mobile for the past five years were collected and the number of mobile banking users was regressed against bank performance as measured by the return on assets. The study used secondary data from the Central bank of Kenya, Mobile phone Companies and Kenya National Bureau of Statistics. During the study period, the amount of money transacted through the mobile money transfers increased steadily from 27.07 billion in 2009 to 207.08 billion by the last month of the analysis. The growth was motivated by the convenience offered by the service. The study however found that there exist a weak positive relationship between mobile banking and the financial performance of commercial banks in Kenya. The study recommends that the policy makers take mobile banking awareness creation into consideration when drafting policies on the operations of banks in Kenya. This was because of the weak relationship of mobile banking and financial performance especially as the industry moves into a technologically competitive environment. The study also recommends that policy makers keep a keen eye on the developments of mobile banking as it is a new platform for competition among commercial banks as the world moves into a digital age to ensure it does not lose its regulatory role. Keywords: Mobile Banking Deepening, Financial Performance, Commercial Bank

The Effect of Financial Deepening on the Performance of Smallholder Farmers in Homa Bay County, Kenya

Theory shows that financial sector deepening has a positive impact on performance of and could widen access to financial services for the Small Holder Farmers (SHF). However there is no consensus on empirical relationship between financial deepening and performance of SHF. This study aimed at analyzing the empirical relationship between financial deepening and the performance of SHF in Homa Bay County, Kenya. The research covered two years starting from 2011/2012 to 2012/2013 because records for previous periods were not easily accessible. The study used the multiple regression analysis. The dependent variable was performance of SHF while total assets, deposits, loans and share capital were the regressors. The research established that the performance of farmers would still grow by Ksh. 2,155.92 annually independent of any factors determining SHF performance. However, SHFs’ average assets, loans, share capital and deposits do significantly influence the performance of SHF. The coefficient of determination indicated that 65% of variation in SHF was attributed to assets, loans, share capital and deposits. It was found that a 1% rise in share capital would result in 1.74% drop in performance of SHF and that increasing deposits by 1% would lead to 1.71% drop in performance of SHF if all other variables remain constant. Hence, share capital and deposits are negatively related to performance of SHF. It was also found that 1% rise in Loans would lead to 0.96% rise in performance of SHF and that 1% rise in private credit would drive 1.03% rise in performance of SHF. Therefore, loans and other forms of private credit negatively influence the performance of SHF. Thus, it is recommended that strategies to enhance financial deepening be put in place as a mechanism of stimulating performance of SHF in Homa Bay County. Keywords: Financial Deepening, Financial Performance, Smallholder Farmers, Credit Access, Agricultural Finance, Agricultural Development, Economic Growt