Digital Product Diversification Strategies and Performance of Microfinance Banks in Nairobi City County, Kenya
DOI:
https://doi.org/10.53819/81018102t5465Abstract
Microfinance banks in Kenya play a crucial role in promoting financial inclusion and economic growth by providing financial services to low-income individuals and organizations. However, statistical data indicates a decline in performance based on ROA, deposit growth and financial outreach. Therefore, the present study sought to investigate the influence of digital product diversification strategies on performance of microfinance banks in Nairobi County, Kenya. The specific objectives were to examine the influence of mobile banking, agency banking, digital lending products and digital saving products on performance of microfinance banks in Nairobi County, Kenya. The study was guided by Resource-Based View Theory, the Ansoff Matrix, and Diffusion of Innovation Theory. A descriptive design was used, targeting 963 respondents across 14 microfinance banks in Nairobi County, with 282 selected through stratified sampling. Data were collected using semi-structured questionnaires, piloted with 28 respondents from two microfinance banks in Kiambu County. Content validity and Cronbach’s alpha were used to assess validity and reliability. Qualitative data were analysed thematically, while quantitative data used descriptive statistics, Pearson correlation, and multiple regression. Findings were presented in tables and figures and showed strong positive relationships between mobile banking, agency banking, digital lending, digital savings, and MFB performance. The study concludes that increased adoption and utilization of mobile banking services are associated with improved performance. The expansion and utilization of agency banking services are associated with improved customer access, transaction activity, and overall bank performance. Greater use of digital lending products was associated with improved performance, possibly by increased access to credit and more efficient loan processing and greater adoption and utilization of digital savings products were linked with improved performance through greater customer participation in digital savings and increased mobilization of deposits. The study recommends that the microfinance bank should constantly invest in and improve its mobile banking platform to inspire greater customer adoption and use. The bank should continue expanding its agency banking network, particularly in areas that remain underserved. The bank should continue developing digital lending products that are convenient, accessible, transparent, and responsive to customer needs and that the bank should enhance the accessibility and attractiveness of its digital savings products.
Keywords: Mobile banking, agency banking, digital lending products, digital savings products, performance, microfinance banks, Nairobi City County, Kenya.
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