Effect of investment in financial innovations on financial performance of commercial banks in Kenya

Abstract

The use of financial innovation in commercial banking in Kenya is on the rise in as a policy of mitigating the challenges posed by the dynamic banking environment. This study aims at establishing the contribution of this use of financial innovation on the financial performance of the commercial banks in Kenya. The dependent variable are institutional innovation, product innovation and marketing innovation. The dependent variable is financial performance (Return on Asset). The previous research work did not use all the independent variable but most on specific individual innovations. The study adopts a descriptive study where use of panel data was used in the data analysis of the secondary data collected from published financial records or from the finance departments of commercial banks in Kenya. The target population included the41commercial banks in Kenya. It adopted a census survey where 41banks were used in the study and there was no sampling since the population size was small. Regression and correlation analysis was used to study the relationship between the dependent and the independent variables of the study. These were employed to analyze the data and find out whether there was any effect of financial innovations on financial performance of commercial banks.The study used descriptive statistics such as mean and standard deviation to describe the data with regard to the variables. The effect of each type of innovation on financial performance will be assessed using regression analysis.The findings would beused to make recommendations regarding the use of financial innovation as policies of ensuring competitiveness in the commercial banking sector in Kenya.