Determinants of Mobile Fintech Uptake in Kenyan Microfinance Sector
Current Journal of Applied Science and Technology,
Page 102-114
DOI:
10.9734/cjast/2020/v39i2830943
Abstract
The Kenyan microfinance sector faces many challenges such as high operation costs, increased credit risk, low visibility and poor understanding of emerging technology opportunities and risks among others. These problems are persistent due to low levels of innovation and limited uptake of digital financial technologies. This research aimed to identify the determinants that influence uptake of mobile fintech and propose an appropriate model for uptake of mobile fintech within the sector. A descriptive survey of all 30 Microfinance institutions registered with Association of Microfinance Institutions (AMFI) 2018 in Kenya was carried out. Data was collected using questionnaires from 120 respondents. Data was analyzed using descriptive and inferential statistics. Based on correlation model, this study established that technology factors (r=0.862, P<.05), environmental characteristics (r=0.387, P<.05) and organizational factors (r=0.256, P<.05) have a strong influence on the uptake of mobile fintech. Using regression model, technology factors (β=.563, P<.05), organizational factors (β=.281, P<.05) and environmental characteristics (β=.562, P<.05) all have positive and significant influence on uptake of mobile fintech. These factors include technology availability, perceived technology benefits, organization size, resources availability, and competition, regulatory and legal environment among others. Uptake of mobile fintech was found to reduce operation costs and improve business operations efficiency. Understanding of the factors derived in this study will help microfinance institutions, software developers and policy makers as they develop strategies directed at promoting successful implementation of mobile fintech.
Keywords:
- Fintech
- microfinance
- digital innovations
- technological-organizational-environmental (TOE) model.
How to Cite
Ndungu, J. M., & Moturi, C. A. (2020). Determinants of Mobile Fintech Uptake in Kenyan Microfinance Sector. Current Journal of Applied Science and Technology, 39(28), 102-114. https://doi.org/10.9734/cjast/2020/v39i2830943
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ISSN 2305-7394
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Liébana-Cabanillas F, Lara-Rubio J. Predictive and explanatory modeling regarding adoption of mobile payment systems. Technological Forecasting and Social Change. 2017; 120:32-40.
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Available:https://scholarspace.manoa.hawaii.edu/bitstream/10125/50374/1/paper0487.pdf
Davis FD. Technology Acceptance Model for Empirically Testing New End-User Information Systems: Theory and Results. Ph.D. thesis, Massachusetts Institute of Technology, Massachusetts, USA; 1986.
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Munoz-Leiva F, Climent-Climent S, Liébana-Cabanillas F. Determinants of intention to use the mobile banking apps: An extension of the classic TAM model. Spanish Journal of Marketing-ESIC. 2017; 21(1):25-38.
Ahmed-Ishmel G, Onyeiwu C, Owopetu O. The Impact of Financial Technology in the Operations (Payments/Collections) of SMEs in Nigeria. International Journal of Innovative Research and Development. 2018;7(2).
Xie X, Huo J, Zou H. Green process innovation, green product innovation, and corporate financial performance: A content analysis method. Journal of Business Research. 2019; 101:697-706.
Oliveira T, Martins MF. Literature review of information technology adoption models at firm level. Electronic Journal of Information Systems Evaluation. 2011;14(1):110.
Baker J. The technology–organization–environment framework. In Information systems theory Springer, New York, NY. 2012;231-245.
Mugenda O, Mugenda A. Research Methods. Acts Press, Nairobi; 2003.
Mazer R, Rowan P. Competition in mobile financial services: Lessons from Kenya and Tanzania. The African Journal of Information and Communication (AJIC). 2016;17:39-59.
Wijesiri M, Meoli M. Productivity change of microfinance institutions in Kenya: A bootstrap Malmquist approach. Journal of Retailing and Consumer Services. 2015; 25:115-121.
Muthinja M, Chipeta C. What Drives Financial Innovations in Kenya’s Commercial Banks? An Empirical Study on Firm and Macro-Level Drivers of Branchless Banking. Journal of African Business. 2018;19(3):385-408.
DOI: 0.1080/15228916.2017.1405705
Klapper L, El-Zoghbi M, Hess J. Achieving the sustainable development goals: The role of financial inclusion. Washington, DC: CGAP. 2016.
Accessed 15th March 2019
Available:https://www.cgap.org/research/publication/achieving-sustainable-development-goals
Soriano M. How Fintech Startups succeed in financial inclusion. Asian Management Insights. 2018;5(1):58-63.
Available:https://ink.library.smu.edu.sg/ami/73
Association of Microfinance Institutions- Kenya (AMFI-K). Microfinance Sector Report 4th Edition 2018; 2018.
Accessed 29th November, 2018
Available:https://amfikenya.com/reports/
Tornjanski V, Marinković S, Săvoiu G, Čudanov M. A need for research focus shift: Banking industry in the age of digital disruption. Econophysics, Sociophysics& Other Multidisciplinary Sciences Journal (ESMSJ). 2015;5(3):11-5.
Deloitte. Impact of digital transformation on Banking Operating Models; 2015.
Available:https://www2.deloitte.com/lu/en/pages/banking-and-securities/articles/(Retrieved 13th November, 2017)
Central Bank of Kenya. Consultative Paper on The Review of The Microfinance Legislations; 2018.
Available:https://www.centralbank.go.ke/2018/02/23/consultative-paper-review-microfinance-legislations/(Retrieved 13th November, 2018)
The Global Findex Database: Measuring Financial Inclusion and the Fintech Revolution. Washington, DC: World Bank; 2017.
Available:http://documents.worldbank.org/curated/en/332881525873182837/(Retrieved 19th November, 2018)
Leong K, Sung A. FinTech (Financial Technology): what is it and how to use technologies to create business value in fintechway? International Journal of Innovation, Management and Technology. 2018;9(2):74-8.
Kavuri AS, Milne A. FinTech and the future of financial services: What are the research gaps? (February 13, 2019). CAMA Working Paper No. 18/2019. Available at SSRN:
https://ssrn.com/abstract=3333515
Omarini A. The Digital Transformation in Banking and The Role of FinTechs in the New Financial Intermediation Scenario. Int J Finance, Economics and Trade. 2017; 1(1):1-6.
Lee DKC, Teo GSZJ. Emergence of FinTech and the LASIC Principles. Journal of Financial Perspectives. 2015;3(3):1-26.
Available:https://ink.library.smu.edu.sg/lkcsb_research/5072
Gomber P, Koch JA, Siering M. Digital Finance and FinTech: Current research and future research directions. Journal of Business Economics. 2017;87(5):537-80.
Laukkanen T. Mobile banking. International Journal of Bank Marketing. 2017;35(7): 1042-1043.
Available: https://doi.org/10.1108/IJBM-10-2017-0218
Mohamad SA, Kassim S. Adoption of Electronic Payment System in Islamic Microfinance Institutions. 4th International Conference on Ecommerce ICoEC 2017 18-20 September 2017, Putrajaya, Malaysia.
DiLorenzo V. Fintech Lending: A Study of Expectations Versus Market Outcomes. Forthcoming in Review of Banking & Financial Law; 2018.
Available at SSRN: https://ssrn.com/abstract=3247112 or http://dx.doi.org/10.2139/ssrn.3247112
Choi G. Fintech as a Catalyst for Financial Inclusion. KIF working paper. 2016;(2):1-56.
Ray S, Paul S, Miglani S. Innovation, Efficiency and Inclusion: Integration of digital technologies in the Indian microfinance sector. No. 366. Working Paper, 2018. © Indian Council for Research on International Economic Relations.
Accessed on 23th February 2019
Available:http://hdl.handle.net/11540/9098.
Elliot E, Ngugi B, Malgwi C. Mitigating microfinance marketing channels inefficiencies with customization of mobile technology. International Marketing Review. 2018;35(4):619-636.
Available:https://doi.org/10.1108/IMR-11-2015-0256
Visconti R. Leveraging development with technology and microfinance. ACRN Journal of Finance and Risk Perspectives Special Issue of Social and Sustainable Finance. 2015;18-32.
ISSN 2305-7394
Park H, Choi SO. Digital innovation adoption and its economic impact focused on path analysis at national level. Journal of Open Innovation: Technology, Market, and Complexity. 2019;5(3):56.
Kauffman RJ, Riggins FJ. Information and communication technology and the sustainability of microfinance. Electronic Commerce Research and Applications. 2012;11(5):450-68.
Ammar A, Ahmed EM. Factors influencing Sudanese microfinance intention to adopt mobile banking. Cogent Business & Management. 2016:3(1):1154257.
Bultum AG. Factors affecting adoption of electronic banking system in Ethiopian banking industry. Journal of Management Information System and E-commerce. 2014;1(1): 1-17.
Chuang Liu C, Kao HK. The adoption of fintech service: TAM perspective. International Journal of Management and Administrative Sciences. 2016;3(7):1-15.
Kim Y, Park YJ, Choi J, Yeon J. An Empirical Study on the Adoption of “Fintech” Service: Focused on Mobile Payment Services. Advanced Science and Technology Letters. 2015;114(26):136-140.
Mbogo M. The impact of mobile payments on the success and growth of micro-business: The case of M-Pesa in Kenya. Journal of Language, Technology & Entrepreneurship in Africa. 2010;2(1):182-203.
Liébana-Cabanillas F, Lara-Rubio J. Predictive and explanatory modeling regarding adoption of mobile payment systems. Technological Forecasting and Social Change. 2017; 120:32-40.
Ryu HS. Understanding Benefit and Risk Framework of Fintech Adoption: Comparison of Early Adopters and Late Adopters. In Proceedings of the 51st Hawaii International Conference on System Sciences; 2018.
Available:https://scholarspace.manoa.hawaii.edu/bitstream/10125/50374/1/paper0487.pdf
Davis FD. Technology Acceptance Model for Empirically Testing New End-User Information Systems: Theory and Results. Ph.D. thesis, Massachusetts Institute of Technology, Massachusetts, USA; 1986.
Rogers EM. Diffusion of Innovations. 4th Edition, the Free Press, New York; 1995.
Tornatzky L, Fleischer M. The process of technology innovation. Lexington, MA: Lexington Books. 1990;165.
Munoz-Leiva F, Climent-Climent S, Liébana-Cabanillas F. Determinants of intention to use the mobile banking apps: An extension of the classic TAM model. Spanish Journal of Marketing-ESIC. 2017; 21(1):25-38.
Ahmed-Ishmel G, Onyeiwu C, Owopetu O. The Impact of Financial Technology in the Operations (Payments/Collections) of SMEs in Nigeria. International Journal of Innovative Research and Development. 2018;7(2).
Xie X, Huo J, Zou H. Green process innovation, green product innovation, and corporate financial performance: A content analysis method. Journal of Business Research. 2019; 101:697-706.
Oliveira T, Martins MF. Literature review of information technology adoption models at firm level. Electronic Journal of Information Systems Evaluation. 2011;14(1):110.
Baker J. The technology–organization–environment framework. In Information systems theory Springer, New York, NY. 2012;231-245.
Mugenda O, Mugenda A. Research Methods. Acts Press, Nairobi; 2003.
Mazer R, Rowan P. Competition in mobile financial services: Lessons from Kenya and Tanzania. The African Journal of Information and Communication (AJIC). 2016;17:39-59.
Wijesiri M, Meoli M. Productivity change of microfinance institutions in Kenya: A bootstrap Malmquist approach. Journal of Retailing and Consumer Services. 2015; 25:115-121.
Muthinja M, Chipeta C. What Drives Financial Innovations in Kenya’s Commercial Banks? An Empirical Study on Firm and Macro-Level Drivers of Branchless Banking. Journal of African Business. 2018;19(3):385-408.
DOI: 0.1080/15228916.2017.1405705
Klapper L, El-Zoghbi M, Hess J. Achieving the sustainable development goals: The role of financial inclusion. Washington, DC: CGAP. 2016.
Accessed 15th March 2019
Available:https://www.cgap.org/research/publication/achieving-sustainable-development-goals
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