Information Communication Technology and Performance of Commercial Banks in Kenya

Abstract

Many organizations are stepping up the pace to increase the size of investment in ICT due to the benefits accruing on such investments and as a result organizations, and hence ICT departments, are under increasing pressure to achieve an above-average performance using ICT. Kenyan commercial banks have continued to deploy huge investments in technology based innovations and training of manpower to handle the new technologies. Data from Central Bank of Kenya indicate that, the number of automated teller machines grew from 166 in 2001 to 2091 in 2010, debit cards increased from 160,000 in 2001 to over 6 million cards by the end of 2010 while mobile banking transactions increased from 48,000 per annum in 2007 to over 250,000 transactions per annum in 2010. Performance of commercial banks in Kenya also grew impressively between years 2001 to 2010 where profit before tax grew from Kshs 2.7 billion in 2001 to Kshs 74 billion in 2010. During the same period, total income grew from Kshs 61billion to Kshs 178 billion while total assets grew from Kshs 425 billion to Kshs 1.7 trillion. This study investigated the effect of the use of information communication technology (ICT) on firm performance of commercial banks in Kenya. The study was a cross-sectional survey. The survey was of the existing commercial banks in Kenya. The unit of analysis was individual commercial bank represented by the relevant bank staff the branches did not count as separate units. Data was collected through the use of primary and secondary data collection methods. The primary data was collected through the use of a semi-structured questionnaire, having both open-ended and closed-ended questions. Secondary data is data that already exists in various records because they are collected for other purposes other than that of the research at hand. Based on the findings, this study concludes that the banks had adopted various ICTs including; Automated Teller Machines (ATMs), Debit & Credit Cards, Point of Sale (POS) Terminals, Mobile Banking, Internet Banking and Electronic Funds Transfer. The study further concludes that the effect of bank ICT on customer deposits in the respondents bank is positive. Additionally, the study concludes that ICT has led to a positive effect on the total income of the banks specifically in relation to increasing commission fee based income, increase of interest based income and expanding the income generating potential of the bank enhancing the performance of the organizations. In addition, debit & credit cards have the highest effect on the total income of the banks followed closely by mobile banking, Automated Teller Machines (ATMs) and Point of Sale (POS) Terminals respectively. The study also concludes that the use of ICT has led to a positive effect on the return on assets of the banks.. Internet banking has the highest effect on the return on assets of the banks followed by automated teller machines (ATMs), point of sale (POS) terminals, electronic funds transfer, debit & credit cards as well as mobile banking respectively. This study recommended that the banks management should consider ICT usages through their organizational levels and try to expose the positive influences of ICT in their organizations. Moreover, this research indicates ICT can be developed to produce products for increasing performance of the organizations.