INNOVATION IN ICT AND ITS IMPACT ON FINANCIAL DEVELOPMENT IN KENYA

  • N. V. Zacchaeus College of Human Resource Development, Jomo Kenyatta University of Agriculture and Technology, Nairobi, Kenya
  • W. M. Muturi College of Human Resource Development, Jomo Kenyatta University of Agriculture and Technology, Nairobi, Kenya
Keywords: Financial innovation; financial system; development indicators; GMM approach; Kenya.

Abstract

This study examines the relationship between financial innovation, ICT, and financial sector development by exploiting Generalized Method of Moments (GMM) framework and time series annual data over the period between 2000 and 2016. Financial innovation was measured by three indexes: currency-money ratio (CMR), e-money (EMO) and e-payment (EPY), ICT was measured by two indexes: mobile (cellular) telephone subscriptions (MTS) and percentage of individuals using the internet (PINT) as independent variables, whilst financial sector development was measured by four indicators: financial deepening (FDP) stock market development (SMD), and private credit (PCR) and bank deposit liabilities (BDL). Based on the empirical results, evidence shows that FDP, PCR and BDL had positive relationship with MTS and INT. Also, evidence shows significant impact of financial innovation (except for CMR) on financial sector variables. On average, financial innovations have significant influence on financial sector development, hence boosting market efficiency. In conclusion, in today’s world, ICT is becoming an important factor in the future development of the financial services industry, and especially in the banking industry. Financial institutions (i.e. banks) are faced with a number of important questions, for examples how to take full advantage of new technology opportunities, how e-developments change the ways customers interact with the financial services provider. Therefore, the analysis performed expertly is necessary for create change and innovation in methods and executive mechanisms exchange.

Published
2019-07-09