Operations Strategy Decisions and Financial Inclusion by Commercial Banks in Kenya

Abstract

Financial institutions are the catalyst in the economic growth and progress in the modern era. In this respect, there is a rapid thrust for financial inclusion, more so in emerging economies, such as Kenya. The objectives of the study were: To determine operations strategy used by Commercial Banks in Kenya; to establish the extent of financial inclusion in Kenya: to determine the relationship between operations strategy and the extent of financial inclusion by commercial banks in Kenya. All the 44 licensed commercial banks that are recognized by Central Bank of Kenya were involved in this study (Central Bank of Kenya annual report, 2012). Data was collected from primary and secondary sources. The primary source was done using questionnaires; semi structured questionnaire that has both open and closed ended questions were used. Descriptive statistics were used; data was entered into SPSS and presented in percentages, proportions and frequency distribution. Qualitative data was checked and edited for completeness, uniformity, consistency and accuracy through Content analysis. The study concluded that the failure of formal banks to be inclusive is due to the high capital investments required, lack of FI strategic plans within the banks, high illiteracy level amongst the targeted population, the regulations governing the banking system in Kenya is not congruent with FI as CBK is yet to come up with favourable steps and implement it. and under developed technology to support FI. Based on the findings, the study recommended that policymakers should work with market participants to eliminate barriers and identify gaps in the institutional infrastructure relevant to small-scale supply. This includes ensuring that payments and collateral systems and hard infrastructure elements for retail transactions are available and have a low unit cost. In particular, collateral and information infrastructures need modern supportive legislation and regulations. The state has a central role in ensuring the availability and maintenance of much of this infrastructure. While some permanent element of subsidy can in some cases be necessary to foster access. the design of subsidies should, where possible, be timebound and aimed at making institutions and access self-financing and sustainable. The taxation of financial services should be access-friendly.