Effect of Technological Innovations on Financial Inclusion of Registered SMEs in Kisii County, Kenya

Abstract

In the past few years, a great deal of emphasis has been placed on expanding financial service and product uptake and use in an attempt to promote economic development and alleviate poverty by assuring simple and inexpensive access to credit and loans, savings and investment, and insurance. Due to the fact that nearly 2 billion adults worldwide, majority of whom reside in developing countries, are still unbanked and have limited access to financial services, there has been a deliberate effort to increase adoption of financial services. In this regard, the purpose of this study was to find out if technological innovations have enhanced financial inclusion. This study aims to examine the effect of technological innovations on financial inclusion of registered SMES in Kisii County, Kenya. Specifically, the study sought to establish the effect of mobile banking on financial inclusion among registered SMES in Kisii County, ascertain the effect of agency banking on financial inclusion among Registered SMES in Kisii County, to determine the effect of internet banking on financial inclusion among Registered SMES in Kisii County and establish the influence of electronic card banking on financial inclusion among Registered SMES in Kisii County. The finding of this research forms policy insights to the management of financial institutions, policy makers, and regulators, as well as to the National Government, the County Government of Kisii, and academics. The findings provide a basis for analysis for management of financial institutions on the best financial innovations to push forward by formulating strategic policies to support financial inclusion among SMEs. The theories informing the study include; disruptive innovation theory, Constraint theory of innovation and financial intermediation theory. Descriptive research design was used in this study. The study was conducted in Kisii County targeting 2,246 registered SMEs. The sample size for the study was 340 SMEs owners/managers. To cater for non-response rate, there was addition of 30% to the sample size. This raised the sample size to 486. The research used stratified random sampling to select participants from among the 486 registered SMEs. A structured questionnaire was used to gather the primary data for this study. A pilot study was carried out to determine reliability of the instrument which was then computed using Cronbach Alpha Coefficient. Descriptive and inferential statistics was used to analyze the quantitative data. Analysis of frequency, mean, standard deviation, and percentage was part of the descriptive analysis, while analysis of correlation and multiple linear regressions were part of the inferential analysis. Tables and figures were used to present the results. The study concluded that mobile banking, agency banking and internet banking had statistically significant effect on financial inclusion of SMEs.”