Relationship Between Financial Inclusion and Profitability of Commercial Banks in Kenya

Abstract

In order to establish a connection between financial inclusion efforts and Kenyan commercial banks' profitability, the study sought to: determine the link between Kenyan commercial banks' profitability through the use of agency banking, internet banking, mobile banking, and ATM banking, with bank size being the moderating factor. Financial intermediation theory, contemporary portfolio theory, agency theory, and technological acceptance model theory were the principles that acted as the study guide. Targeting 41 commercial banks in Kenya, an explanatory descriptive research approach and a census were utilized. Auxiliary information from financial statements was obtained on a period starting with 2016 all through to 2020. The obtained data was examined descriptively (means and standard deviations) and inferentially (correlation and regression analysis. In conducting the analysis, the SPSS. It emerged that ATM banking (β=0.130, p<0.05), (β=0.021, p<0.05) as well as mobile banking (β=0.261, p<0.05), (β=.034, p<0.05) had a large impact on returns on assets and equity, respectively while Internet banking (β=0.016, p<0.05) and agency banking (β=0.008, p<0.05) only significantly affected return on assets among commercial banks in Kenya and this is significantly moderated by bank size. The study recommends that senior management team of the commercial banks in Kenya should modernize and modify the existing ATM machines by including more features like the capability to deposit cash and cheque. The sales and marketing of those who manage commercial banks in Kenya ought to give attention on creating awareness for the uptake of internet banking to improve on ROA. The Central Bank of Kenya's decision-makers should establish a level ground by formulating and enacting relevant financial inclusion rules and regulations while considering the smaller, medium and large stable commercial banks operating in Kenya. The inquiry will contribute to literature on interplay between financial inclusion strategies and profitability.