Effect of Financial Innovation on Credit Risk (Non- Performing Loan Ratios) of Commercial Banks in Kenya


Volume/Issue : Volume 8 - 2023, Issue 10 - October

Google Scholar : https://tinyurl.com/mvpzufte

Scribd : https://tinyurl.com/yrwesmh6

DOI : https://doi.org/10.5281/zenodo.10077286

Financial institutions seek investment opportunities with limited risks and opportunities with a higher probability of profitable returns. Kenyan institutions of finance face a lot of risks in providing their services. A company's possible loss if counterparties fail to fulfill their financial commitments is known as credit risk. Banks frequently shift credit risk to free up capital for additional loan intermediation, which results in cash outflow. The study investigated the effect of financial innovation on credit risk of commercial banks in Kenya, focusing mainly on the effect of mobile financial feature innovation, internet financial access innovation, plastic cards innovation and cheque truncation on credit risk.The theories adopted for the study include; Technology acceptance model, Resource based theory, Diffusion Innovation theory and Theory of Constrains. The target group that formed the unit of analysis, was the forty-twoKenyan commercial banks. The annual financial reports of commercial banks that are listed were the source of secondary data for the given time2013 to 2022 analyzed through EVIEWS. The study adopted an experimental research in determining the influence the independent have on dependent variables, while using ARDL approach to examine cointegration. Based on the findings mobile financial feature, internet financial access, plastic card innovation and cheque truncation system had a positive significant influence on Credit risk quantified by Kenyan commercial banks' under non-performing loan ratio.


Paper Submission Last Date
31 - December - 2023

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