Effect of Online Banking on Performance of Microfinance Banking in Kenya

Abstract

Purpose: The purpose of this study was to establish the effect of online banking on performance of microfinance banks in Kenya.
 Methodology: The study adopted positivism philosophy approach and descriptive research design was used. The study used census survey and the target population was the thirteen Microfinance Banks regulated by the Central Bank of Kenya. Primary data was collected using self-administered questionnaires. Data was analysed using the Statistical Package for Social Science. Descriptive and inferential statistics were used for preliminary analysis. Factor analysis was conducted to reduce the number of factors and Kaiser Meyer Olkin and Barlett’s test of Sphericity were tested, total variance explained, scree plot and rotated component matrix were drawn.
 Findings: The descriptive statistics findings disclosed that online banking has a positive effect on performance of MFBs. The overall standard deviation was 1.47, an indication of reasonably high deviation from the mean. This shows that the respondents had fairly varied view on online banking. The relationship between online banking and performance was positive with a p value of 0.018 showing that the model was statistically significant for the data set. Online banking explains 22.6% of the variation in performance of MFBs.
 Unique Contribution to Theory, Practice and Policy: The MFBs needs to invest more on online banking to improve performance. Partnership with government institutions and telecommunication companies would provide the network connections and training to the population on the use of online banking services.