Effect of Financial Innovation on the Growth of Commercial Banks in Eldoret Town, Uasin Ishu County

Abstract

The study sought to assess the effect of financial innovation on the growth of financial institution in commercial banks in Eldoret town. The objective of the study was; to determine the effect of internet banking on growth of commercial banks, to determine the effect of M- banking innovation on growth of commercial banks, to examine the role Agency banking on growth of commercial banks and to determine the effect of Insurance on growth of commercial banks in Eldoret Town. The study was guided by the Silber's constraint theory of innovation, Kane's theory and Merton's market efficiency theory of innovation. The research adopted a descriptive research design. The target population consisted of 27 commercial banks in Eldoret town that are registered with Central Bank of Kenya. The target population was 648 respondents and 213 respondents were used as the sample size. The study used 5-point likert questionnaires as the method data collection instruments. Cronbach alpha was used to test reliability of the research instrument. The findings of the study indicated that all the predictor showed that there was statistical significant effect on the dependent variable growth of commercial bank. The study recommends that the management of commercial banks should ensure that they fully support internet banking policies by allocating enough resources to them in order to gain a competitive edge. It is further, recommended that the management at the banks should be dedicated to encourage customer training on the use of internet banking to enhance their capabilities. The banks should also recruit knowledgeable programmers to ensure efficiency in the internet banking services. The empirical study has indicated a number of relevant issues that the research project did not investigate, but which might be important for further research on financial innovations application to create a sustainable competitive advantage. This study was conducted in commercial banks in; other studies should involve other financial institutions in Kenya and explore the financial innovation strategies in order to obtain more holistic information.