Digital Lending and Technical Efficiency of Commercial Banks in Kenya
DOI:
https://doi.org/10.47941/ijf.1321Keywords:
Digital Lending, Technical Efficiency, Commercial BanksAbstract
Purpose: The financial sector is being revolutionized as a direct result of technological progress, with banks and other financial institutions embracing new technologies to better serve their customers online. Technological developments in the financial sector are simplifying access to financial services. The study set out to dissect the effects of Fintech on Kenya's commercial banking sector. The general objective was to establish the effect of digital lending on technical efficiency of commercial banks in Kenya. The study was anchored on Theory of Financial Intermediation.
Methodology: The entire study relied on collecting empirical data and evaluating hypothesis in a positivist way. A causal-comparative research design was used in this research. The study targeted population of Seventeen Kenyan commercial banks from the first and second tiers. The analysis relied on secondary sources of information. The gathered quantitative data was analyzed using both descriptive and inferential statistics. Numbers, medians, and standard deviations were used to characterize the data, and frequency distributions were used to determine the sample size. Models for analyzing correlations and regressions are inferential statistics. STATA was used for the data analysis.
Findings: The study established that digital lending has a positive and significant effect on technical efficiency of commercial banks in Kenya.
Unique contributions to theory, practice and policy: The results suggests that conventional banks might benefit from forming partnerships with FinTech firms that specialize in digital lending.
Downloads
References
Abbasi, T., & Weigand, H. (2017). The impact of digital financial services on firm's performance: a literature review. arXiv preprint arXiv:1705.10294.
Achugamonu, B. U., Adegbite, E. O., Omankhanlen, A. E., Okoye, L. U., & Isibor, J. A. (2020). Dynamics of Fintech and financial inclusion nexus in sub-Saharan Africa.
Adusei, M. (2019). Determinants of bank technical efficiency: Evidence from rural and community banks in Ghana. Cogent Business & Management, 3(1).
Alakwe, K. O. (2017). Positivism and knowledge inquiry: From scientific method to media and communication research. Specialty Journal of Humanities and Cultural Science, 2(3), 38–46.
Alemu, F. Z. (2016). Evaluating the technical efficiency of commercial banks in Ethiopia: A data envelopment analysis. European Journal of Business and Management, 8, 37-45.
Ali, A. A. (2018). Impact of Online Banking on Technical efficiency of Commercial Banks: A Case Study of Barclays Bank of Kenya. United States International University-Africa.
Banker, R. D., Charnes, A., & Cooper, W. W. (1984). Some models for estimating technical and scale inefficiencies in data envelopment analysis. Management science, 30(9), 1078-1092.
Bell, A., & Jones, K. (2015). Explaining fixed effects: Random effects modeling of time-series cross-sectional and panel data. Political Science Research and Methods, 3(1), 133-153.
Beloke, N. B., & AP, M. E. S. (2021). The Influence of Fintech Services on the Technical efficiency of Commercial Banks in Cameroon.
Bryman, A. (2013). Introduction:'Inside'accounts and social research in organizations. In Doing Research in Organizations (RLE: Organizations) (pp. 11-30). Routledge.
Central Bank of Kenya [CBK] (2021). Retrieved on June 2022 from https://www.centralbank.go.ke/reports/cbk-reports-and-financial-statements/
Chanias, S., Myers, M. D., & Hess, T. (2019). Digital transformation strategy making in pre-digital organizations: The case of a financial services provider. The Journal of Strategic Information Systems, 28(1), 17-33.
Charnes, A., Cooper, W. W., & Rhodes, E. (1978). Measuring the efficiency of decision making units. European journal of operational research, 2(6), 429-444.
Chauhan, S., Akhtar, A., & Gupta, A. (2022). Customer experience in digital banking: A review and future research directions. International Journal of Quality and Service Sciences. 11(7), 1979-1984.
Choi, S., Oh, G., & Jung, W. S. (2008). Hurst exponent and prediction based on weak-form efficient market hypothesis of stock markets. Statistical Mechanics and its Applications, 387(18), 4630-4636.
Hurni, T., Palmié, M., & Miehé, L. (2020). Striving for Trust in Ecosystems: How Cooperation Emerges Between Competitors. In Research Policy Special Issue Conference. Elsevier.
Islam, S., Kabir, M. R., Dovash, R. H., Nafee, S. E., & Saha, S. (2019). Impact of online banking adoption on bank’s profitability: Evidence from Bangladesh. European Journal of Business and Management Research, 13(5), 1-45.
Khanboubi, F., Boulmakoul, A., & Tabaa, M. (2019). Impact of digital trends using IoT on banking processes. Procedia Computer Science, 151, 77-84.
Kothari, D. P. (2012). Power system optimization. In 2012 2nd National conference on computational intelligence and signal processing (CISP) (pp. 18-21). IEEE.
Loureiro, Y. K., & Gonzalez, L. (2019). Competition against common sense: insights on peer-to-peer lending as a tool to allay financial exclusion. International Journal of Bank Marketing.
Malterud, K., Siersma, V. D., & Guassora, A. D. (2016). Sample size in qualitative interview studies: Guided by information power. Journal of Qualitative Health Research, 26(13), 1753-1760.
McLachlan, C. J., & Garcia, R. J. (2015). Philosophy in practice? Doctoral struggles with ontology and subjectivity in qualitative interviewing. Journal of Management Learning, 46(2), 195–210.
Ngalyuka, C. (2021). The relationship between ICT utilization and fraud losses in commercial banks in Kenya. University of Nairobi.
Ntwiga, D. B. (2020). Technical efficiency in the Kenyan banking sector: Influence of fintech and banks collaboration. Journal of Finance and Economics, 8(1), 13-20.
Padilla-Díaz, M. (2015). Phenomenology in educational qualitative research: Philosophy as science or philosophical science? Journal of Educational Excellence, 1(2), 101–110.
Peake, W. O., Cooper, D., Fitzgerald, M. A., & Muske, G. (2017). Family business participation in community social responsibility: The moderating effect of gender. Journal of Business Ethics, 142(2), 325-343.
Potrac, P., Smith, A., & Nelson, L. (2017). Emotions in sport coaching: An introductory essay. Sports Coaching Review, 6(2), 129–141.
Risman, A., Mulyana, B., Silvatika, B., & Sulaeman, A. (2021). The effect of Fintech on financial stability. Management Science Letters, 11(7), 1979-1984.
Singh, K. D. (2015). Creating your own qualitative research approach: Selecting, integrating, and operationalizing philosophy, methodology and methods. Journal of Business Perspective, 19(2), 132–146.
Suryawati, R. F., & Nurdana, D. P. P. (2021). The Impact of Peer-to-Peer (P2P) Lending on Business Development of Small and Medium-Sized Enterprises. TIJAB (The International Journal of Applied Business), 5(2).
Thaker, M. A. B. M. T., Thaker, H. B. M. T., Rahman, M. P. B., Amin, M. F. B., Pitchay, A. B. A., & Olaniyi, N. O. (2019). Factors Affecting Investors' Intention to Invest in Peer-to-Peer Lending Platform in Malaysia: An Extended Technology Acceptance Model.
Vu, H. T., & Turnell, S. (2010). Cost efficiency of the banking sector in Vietnam: A Bayesian stochastic frontier approach with regularity constraints. Asian economic journal, 24(2), 115-139.
Yeo, E., & Jun, J. (2020). Peer-to-peer lending and bank risks: A closer look. Sustainability, 12(15), 6107.
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2023 Joyce Chepkoech Getugi , Dr. Cliff Osoro, Prof. Allan Kihara
This work is licensed under a Creative Commons Attribution 4.0 International License.
Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution (CC-BY) 4.0 License that allows others to share the work with an acknowledgment of the work’s authorship and initial publication in this journal.
