Digital Financial Innovation and Financial Inclusion in Commercial Banks in Kenya
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Date
2025-09
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THE CATHOLIC UNIVERSITY OF EASTERN AFRICA
Abstract
This paper mainly aimed at examining the causal relationship between digital financial innovation and financial inclusion in the banking industry in Kenya. General objective of this research was to examine the relationship between digital financial innovation and financial inclusion in commercial banks in Kenya. The specific objectives were: To establish the effect of mobile banking solutions, digital payment, agent banking services on financial inclusion in commercial banks in Kenya and To assess the influence of digital credit on financial inclusion in commercial banks in Kenya. A number of theoretical frameworks such as Financial Innovation Theory, Financial Intermediation Theory, Technology Acceptance Model (TAM) and Rational Choice Theory were used as the foundation of the study. Samples were taken as 39 commercial banks in Kenya and a five-year period (2013 to 2024). The census strategy was taken. Secondary data on financial inclusion, mobile banking, digital payment, agent banking services and digital credit via CBK Bank Supervisory reports, annual bank reports and Audited Financial Statements of individual banks of the concerned period. Secondary data was collected through data extraction checklist. In this research, secondary data was quantitative. Quantitative data was coded and keyed into Eviews version 10 to analyse. Particularly, the quantitative data analysis was used to establish inferential and descriptive statistics. Descriptive statistics appear in form of frequency distributions, percentages, standard deviation and mean. There were also Normality test and Diagnostic tests. These tests are Shapiro-Wilk Normality Test, autocorrelation test, heteroscedasticity test, linear test, Stationarity Test and Hausman test. To investigate the impact of independent variable on the dependent variable, regression analysis was employed. The regression coefficients reflected positive relationships with financial inclusion were all statistically significant, suggesting that a strong direct impact on increasing access to financial services in the country. Mobile banking solutions (beta=0.73934, p-value =0.0053), Digital payments (beta=0.534400 p-value 0.0408, Agent banking services (beta= 0.978870, p-value=0.0000) and Digital credit (beta=0.828504, p-value=0.0000). Future studies should investigate the expected benefits and challenges of digital financial innovations across different geographical areas (urban, peri urban, and rural contexts). Future studies could include the demographic groups such as women, youth, older adults, and low income individuals to gain a better understanding of their needs, and how digital innovations can be further leveraged to support their continued and enhanced financial inclusion.
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Digital financial innovation, fintech, financial inclusion, digital banking, access to financial services.