Influence of Bank Innovative Strategies on Financial Performance of Listed Commercial Banks in Kenya


Damaseno Wechuli Khamala , Dr Hesbon Otinga ,

Download Full PDF Pages: 06-18 | Views: 835 | Downloads: 164 | DOI: 10.5281/zenodo.3974434

Volume 9 - July 2020 (07)


Evidence from existing literature indicate conflicting relationships between banks innovativeness and banks’ profitability, while other researches merely report on bank innovations without relating the effectiveness of the purported innovations on bank profitability. Therefore, lack of adequate empirical evidence on the relationship between emerging banks’ innovativeness and bank profitability motivated this study to examine the influence of payment innovations, crowd funding, agency banking and artificial intelligence predictive banking system on profitability of listed commercial banks in Kenya. The study was guided by Innovation Diffusion theory.This research adopted explanatory survey research design. This study targeted managers from listed commercial banks headquarters in Nairobi city county, Kenya. The study sample size was determined using Taro Yamane’s proportional sampling technique formula, which was drawn randomly from managers of commercial banks in Nairobi, Kenya. Primary data was collected by means of self-administered questionnaires. Data collected from the field was coded, cleaned, tabulated and analyzed using both descriptive and inferential statistics with the aid of specialized Statistical Package for Social Sciences (SPSS) software and presented using tables to make them reader friendly. Descriptive statistics were used. Data was organized into graphs and tables for easy reference. Further, inferential statistics such as regression and correlation analyses was computed to determine both the nature and the strength of the relationship between the dependent and independent variables. Both descriptive and inferential statistics showed that the study’s independent variable (agency banking) significantly influenced financial performance of listed commercial banks in Kenya. The study concluded that commercial banks that effectively utilize agency banking system attract huge customer’s base, save on transaction costs, thus boost bank’s financial performance. The study recommends that one, commercial banks should roll out feasible agency banking products and services to win customer trust and boost their financial performance.


Innovative Strategies, Financial Performance


                    i.            Aduda, J. & Kingoo, N., (2012), ‘The relationship between electronic banking and financial performance among commercial banks in Kenya’, Journal of Finance and Investment Analysis 1(3), 99–118.

      ii.            Agrawal, A. K., C. Catalini, and A. Goldfarb. (2011). “The Geography of Crowdfunding.” No. w16820. Cambridge, Mass.: National Bureau of Economic Research.

    iii.            Al-Ansari, Y., Pervan, S. & Xu, J., (2013), ‘Innovation and business performance of SMEs: the case of Dubai’, Education, Business and Society: Contemporary Middle Eastern Issues 6(3/4), 162–180.

     iv.            BCG, Boston Consulting Group. (2009). BCG Innovation 2009 Report.

       v.            Cainelli, G., Evangelista, R. & Savona, M., (2016), ‘Innovation and economic performance in services: A firm-level analysis’, Cambridge Journal of Economics 40(3).

     vi.            CBK Annual Report, (2017). CBK Bank Supervision Annual Reports. Available online;

   vii.            CBK Annual Report, (2018).CBK Bank Supervision Annual Reports. Available online;

 viii.            CBK, (2010).  Bank supervision annual report, Central Bank of Kenya, Nairobi.

     ix.            CBK, (2013). Bank supervision annual report, Central Bank of Kenya, Nairobi.

       x.            Cooper, D &Schinder, P. (2007). Business Research methods (8th Ed.). New Delhi: tata McGraw hill.

     xi.            Dash, S. (2017) ‘Significant banking changes due to tech innovation |’, Gulf News.

   xii.            Davis, F. D. (1989). Perceived usefulness, perceived ease of use, and user acceptance of information technology. MIS Quarterly 13(3): 319–340.

 xiii.            Deyoung, R., Lang, W.W. & Nolle, D.L., (2014), ‘How the Internet affects output and performance at community banks’, Journal of Banking & Finance 51(5).

 xiv.            Commission. (2016)  Crowdfunding in the EU Capital Markets Union. Brussels: European Commission.

   xv.            Freeman, C. (1994). The diffusion of information and communication technology in the world economy in the 1990s, In R. Mansell (Ed.), The Management of Information and Communication Technologies: Emerging Patterns of Control, Aslib, London, Pp. 8-41.

 xvi.            Gardachew, W. (2010). Electronic-banking in Ethiopia: Practices, opportunities and challenges. Journal of Internet Banking and Commerce,vol. 15.p for Financial Inclusion. Global Standard-Setting Bodies and Financial Inclusion: The Evolving Landscape.

xvii.            Hairr, J. F, Black, W, C, Babin, B. J, & Anderson, R. E. (2006).  Multivariate data analysis. 7th edition Prentice Hall NY.

xviii.            Harper, R.I. & Chan, T. (2016). The future of Banking; A Global Perspective. London, UK: Greenwood Publishing Group.

 xix.            Iftekhar, H., Schmiedel, H., & Song, L. (2009). Return to retail banking and payments. Working Paper Series 1135, European Central Bank.

   xx.            IOSCO (International Organization of Securities Commissions). (2014).  Crowdfunding 2014 Survey Responses Report. Madrid: IOSCO.

 xxi.            Jamall, A. (2017) Middle East Region: Industries - Banking & Capital Markets - PwC Middle East.

xxii.            KothariC.R., (2007), Research Methodology: Methods and Techniques, New Age International Publishers.

xxiii.            Kumar, Anjali, Ajai Nair, Adam Parsons and Eduardo Urdapilleta. (2006). “Expanding Bank Outreach through retail Partnerships: Correspondent Banking in Brazil.” World Bank Working Paper No.85 Washington, D.C,: World Bank.

xxiv.            Laforet, S. & Tann, J., (2013), ‘Innovative characteristics of small manufacturing firms’, Journal of Small Business and Enterprise Development 33(4).

xxv.            Malmendier, U. (2009). Law and finance at the origin. Journal of Economic Literature, 47, 1076-1108.

xxvi.            Manning, J. (2018) How AI Is Disrupting the Banking Industry, International Banker. Available on:

xxvii.            Mannino, A.  (2015) ‘Artificial Intelligence: Opportunities and Risks Policy paper’, Effective Altruism Foundation Inc.

xxviii.            Massoud, N., & Bernhardt, D. (2002). Endogenous ATM location and pricing. Working Paper, Dept. of Finance, School of Business, University of Alberta.

xxix.            Neuman, W, L (2005) Social Research Methods: Quantitative and Qualitative Approaches (6th Ed). Boston, MA; Ally & Bacon

Cite this Article: