FINANCIAL INCLUSION IN RURAL KENYA: AN INVESTIGATION OF THE ROLE OF FINANCIAL TECHNOLOGY AS AN INSTRUMENT

Despite Kenya being the pioneer of financial technology including mobile banking and agency banking, financial exclusion among adults is still high among people living in the rural Kenya. The purpose of this study was to investigate the role of financial technology as an instrument in financial inclusion in the rural Kenya. In addition, the study sought to examine the influence of mobile banking, agency banking and automated teller machines on financial inclusion in the rural Kenya. This study used explanatory research design. The study focused on the rural Kenya and covered a period between January 2011 to December 2016. Secondary data on all the independent variables was obtained from CBK payment system statistics. The secondary data was quantitative in nature. The collected quantitative data was analyzed using descriptive as well as inferential statistics. In descriptive statistics included frequency distributions and percentages. In relation to inferential statistics, the study made use of analysis of variance, correlation analysis, univariate regression analysis and multivariate regression analysis. The study found that mobile banking has a positive and significant influence on financial inclusion in the rural Kenya. The adoption and utilization of mobile banking in Kenya has been increasing for the last six years, with commercial banks adopting the technology and the number of Fintech companies in Kenya increasing. This study also found that agency banking has a positive and significant influence on financial inclusion in the rural Kenya. However, unlike mobile banking, which takes advantage of the high mobile phones penetration in the rural areas, agency banking requires customers to visit agents, normally located in shopping centers. The introduction of mobile banking and agency banking led to a significant decrease in the utilization of automated teller machines. The study recommends that policy makers consider mobile banking in their formulation of policies because of the technological developments and the expected switch from physical branch networks to technologically supported banking services. In addition, all commercial banks in Kenya should adopt agency banking as a way of reducing cost of service provision and improving their financial performance and hence enhance financial inclusion. Also, commercial banks should design and develop protective measures to secure their customers money.