FIRM SIZE, MOBILE BANKING TECHNOLOGY AND FINANCIAL PERFORMANCE OF MICROFINANCE INSTITUTIONS IN KENYA

Abstract

Mobile banking technology has revolutionized the financial sector globally, driving significant improvements in financial inclusion, operational efficiency, and customer satisfaction and contributing significantly to the financial performance of financial institutions. However, as many financial institutions embraced the technology and more of the previously unbanked population started using it, the fraudsters saw an opportunity to infiltrate the systems through cyber-attacks. These eroded the gains brought by Mobile Banking Technology and raised concerns over the optimal firm size to maximize gains. The study sought to determine the effect of mobile banking technology on the financial performance of Microfinance Institutions in Kenya. And the moderating effect of firm size on the relationship between the two variables. The study used a descriptive research design and a questionnaire to collect data from 204 staff of 13 Microfinance Institutions licensed in Nairobi, Kenya. The study obtained Secondary data from the Central Bank of Kenya Supervisory Reports of 2017 to 2022. The data was analyzed using descriptive and inferential statistics. The study findings showed that mobile banking technology positively and significantly affected the financial performance of Microfinance Institutions. Additionally, firm size positively and significantly affected the relationship between mobile banking technology and financial performance with large firms benefited more than smaller firms. The study recommended that firms invest more in mobile banking technology to boost financial performance and increase their capital base, outlets and market share to reap higher benefits from the economies of scale.