Adoption of mobile banking and financial performance of micro small and medium enterprises in Bungoma county, Kenya

Abstract

The main purpose of the study was to establish the relationship between adoption of mobile banking and financial performance of MSMES in Bungoma County. The specific objectives were to: determine effect of mobile payment on financial performance of MSMES in Bungoma County, establish influence of mobile credit on financial performance of MSMES in Bungoma County and to establish influence of mobile saving on financial performance of MSMES in Bungoma County. The study was guided by the technology acceptance model and diffusion of innovation theory. Descriptive research design was adopted. The study’s population comprised of 470retail traders/managers in Jua Kali sector (MSMES) in Bungoma town in Bungoma County. Using random sampling method, 148 retail traders were sampled.Data was collected using a questionnaire. Cronbach’s alpha for internal consistency was used to test reliability. The analysis of data was done with the use of frequencies, percentages, means and standard deviation. The hypotheses were tested at 95% confidence level using regression analysis. The findings indicated that mobile payment helps the MSMEs in conducting business transactions and conducting purchase from other retailers. Besides, due to clear lending terms of digital credit, it is easier for the MSMEs to access loans from digital lenders. Also, mobile banking has afforded MSMEs the opportunity to deposit their saving conveniently using their mobile phones and access them whenever the need arises. The multiple regression analysis indicated that mobile payment had a positive and significant influence on financial performance of MSMES in Bungoma County (β = 0.872, p < 0.05). Similarly, mobile credit had a positive influence on financial performance of MSMES in Bungoma County (β = 0.717, p < 0.05). Moreover, mobile saving had a positive and significant influence on financial performance of MSMES in Bungoma County (β = 0.776, p < 0.05). The study recommended that, there is need to incorporate mobile payment and ensuring that the legal and technological structures adequately protect MSMEs from payment problems. Moreover, there is need for MSMEs to utilize their mobile phones to access credit to expand their business. Finally, it is important for MSMEs to utilize their mobile phones in depositing savings to their account so that they are in a position to grow their limit to the extent of borrowing more funds