Process Innovation and Financial Inclusion of Microfinance Customers in North Rift Region of Kenya

Abstract

Conventional banking methods have failed to effectively address the problem of financial exclusion that contributes to poverty and income inequalities among low-income segments of the market. This study assessed the effect of processes innovation (mobile and internet banking) on financial inclusions of selected MFIs’ customers in Kenya. Specifically, the study tested if there was no statistically significant effect of mobile banking and internet banking on financial inclusions of selected MFI customers in Kenya. It was conducted among MFIs in Samburu and Turkana counties in North Rift Kenya. Explanatory research design with semi-structured questionnaires were used to collect data from customers of 10 MFIs in North Rift Kenya. Using Nassiuma’s formula, a sample of 418 respondents from a population of 2185 customers was drawn. Data was collected using questionnaires and analysed using descriptive (frequencies, percentages, mean and standard deviation) and inferential statistics (linear regression) with the aid of SPSS. The findings showed that mobile banking had a significant effect on financial inclusion, that internet banking had no significant effect on financial inclusion, and process innovation had a significant effect on financial inclusion. Subsequently, the study recommends that the government of Kenya should develop and implement policies that promote innovation and mobile banking in Kenya. Secondly, MFI and mobile service providers should invest in mobile infrastructure and networks. The study, therefore, seeks to improve MFI strategies and systems in addressing financial inclusion that promote growth opportunities that enhance persistent incomes and economic growth among the rural and marginal people.