EFFECT OF MOBILE BANKING ON FINANCIAL PERFORMANCE OF SMALL SCALE AND MEDIUM ENTERPRISES IN KAKAMEGA COUNTY

Abstract

This study sought to establish how mobile banking has affected the financial performance of SMEs. The research was conducted as an exploratory research. The target population of study for the research comprised of the SMEs that provide financial services within the Kakamega County. The study used random sampling technique. A sample size of 373 SMEs was used. Semi-structured questionnaires were used for collecting information from SMEs entrepreneurs. Trained research assistants were contracted to collect data from the field using the sample codes. A pilot study was done using twenty five questionnaires. Data capturing was done using Excel software. The data from the completed questionnaires were cleaned, coded and entered into the computer using the statistical package for social sciences (SPSS) for Windows analysis. The findings revealed that SMEs used mobile banking services to send and receive money, check account balance, knowing when to deposit or withdrawal from their bank account. The results also revealed that there was positive relationship between financial performance of SMEs and accessibility (R=0.704**), Efficiency (R=0.607**) and convenience (R=0.524**). However, there was negative relationship between cost of mobile banking services and financial performance of SMEs (R=-0.660**). The study concluded that mobile banking services had significant effect on the financial performance of SMEs in Kakamega County as it significantly accounted up to 65.2% (R square=0.652) variation in financial performance. The study recommended that mobile banking services should be affordable to SMEs through exemption of various taxes imposed by the government so as to improve the growth of SMEs in Kenya. This would enable SMEs to use various mobile banking services such payment of bills, accessing of credit facilities to boost their businesses.