Microfinance Innovations, Intrapreneurial Process And Financial Inclusion Of Selected Microfinance Institutions’ Customers In North Rift Region, Kenya

Abstract

Evidence show that innovation and entrepreneurial interventions have accelerated access to financial services to many poor households and many businesses across the globe. However, this fact has remained unclear among microfinance institutions operating in marginalized areas in Sub-Saharan Africa. Microfinance institutions haven’t embraced intrapreneurial process that accelerate financial inclusion. But financial inclusion is still at 11% in North Rift region. The reason is suspected to be the MFI’s poor uptake of emerging financial innovations. The purpose of the study, therefore, was to analyse the moderating role of intrapreneurial process on the relationship between microfinance innovations and financial inclusion of microfinance institutions’ (MFIs) customers in North Rift Region in Kenya. The study was guided by the following specific objectives, to: - determine the effect of product innovation on financial inclusion, establish the effect of market innovation on financial inclusion and assess the effect of process innovation on financial inclusion of MFIs in Kenya. The study was anchored on Schumpeter’s theory of innovation and financial intermediation theory. Explanatory design guided the study. A self- constructed semi structured questionnaire was used to collect data from 419 customers from 10 formal MFIs that operated in Turkana and Samburu counties. The researcher used multistage sampling with Nassiuma’s (2017) formula to draw the sample. West Pokot County was selected for piloting due to its similarity in conditions with the target population. The reliability results for the questionnaire had a Cronbach Alpha of 0.816 which is above the acceptable 0.7 cut off value. Data was analysed using descriptive statistics; that is, frequencies, and percentages, mean and, standard deviation. Inferential statistics; that is, simple linear regression and hierarchical multiple regression were used to predict the relationship between the study variable. Pearson correlation was used to determine the strength of the relationship between variables. The findings indicated that product and process innovations significantly influenced financial inclusion but market innovation did not. Further, the findings revealed that, intrapreneurial process did not have a significant moderating effect on the relationship between microfinance innovations and financial inclusion in the MFI institutions in Turkana and Samburu counties. The study suggested that MFIs invest in product and process innovations that is increasing the number of agents and ATMs as well as mobile and internet banking so as to expand and deepen financial inclusion among the marginalised groups. On market innovation, the study recommended that MFIs not to exclusively focus on marginalized people and unbaked businesses. Equally the study recommended that MFI needed to create demand for mobile banking and internet banking among the marginalised and the government should develop policies that create enabling environment that promoted innovation among MFIs. The Central Bank of Kenya should deregularise MFI sector and only avail policies that support MFIs’ innovation. Further studies should be done on commercial banks’ innovation and their impact on financial inclusion among the marginalized communities. In addition, other studies should be done on informal MFIs not registered by CBK.