The effect of information and communication technology investment on financial performance of micro-finance banks in Kenya

Abstract

The study sought to determine the effect of ICT investment on financial performance of microfinance banks in Kenya. The study did a descriptive survey of nine (9) microfinance banks that had been in operation for five years (2010-2014). The study used secondary sources of data that was obtained from central bank of Kenya audited reports of the nine microfinance banks. Data analysis involved descriptive statistics, correlation analysis and regression analysis. The study concluded that the microfinance banks should continue investing in modern technologies like ATMs and issuance of debit and credit cards. This is because these kinds of technologies play an integral role of increasing access to financial services to customers in an efficient and effective manner. This brings about increased cost reduction and thus improves financial performance. The regression results found that logarithm of assets and operating efficiency variables are statistically significant in the model. On the other hand, debits and credit cards were found to be statistically insignificant because their probability (p)-values were above 5%. The limitation of this study is that it limited itself to microfinance banks that were in operation between 2010-2014. The study proposes that it would be imperative to consider carrying out a more comprehensive examination on the relationship between ICT investment and financial performance in the entire banking industry to find out whether these facts will still hold. The study also recommends that MFBs should adapt growth strategies that will help to win the clients trust thus enjoying the benefits of large scale by creating a platform for building branch networks and ATMs as a way of reaching out to many customers across the country.