Determinants Of Financial Performance Of Commercial Bank Fintechs In Kenya

The main objective of this research was to investigate the determinants of financial performance of commercial banking Fintechs in Kenya. Three specific objectives of the study were: to assess the effect of capital adequacy on the financial performance of commercial Banking Fintechs in Kenya; to assess the effect of size of customer base on the financial performance of commercial Banking Fintechs in Kenya; to assess theeffect of size of loans advanced to customers on the financial performance of commercial Banking Fintechs in Kenya. The theoretical foundation of this study was guided by four theories: Innovation Diffusion theory, Technology Acceptance model, Resource Based theory and Schumpeterian Innovation theory. Philosophical approach was positivism while panel data research design was employed. The population of the study was 33 banking Fintechs and 10 commercial banks used as a control sample in Nairobi, Kenya. Purposive sampling method was used to select the 33-commercial banking Fintechs and 10 traditional commercial banks in Kenya during the study period of years 2014-2018. For data collection, secondary data related to capital adequacy, size of loans advanced and total customer base was used. Content validity was applied with data reliability measured using data from audited financial statements. To comply with research quality of data collected, diagnostic tests were conducted. Panel data analysis method where STATA data analysis software was used, anchored data analysis. The findings showed that capital adequacy (-0.352) has significant and negative relationship with financial performance of commercial banks. This implies that for every increase by one unit of capital adequacy, financial performance of Fintechs decreases by 35.2%. Findings established that customer numbers (-0.194) has significant and negative relationship with the financial performance of commercial banks. The study findings revealed that size of loans advanced (-0.028) has a negative but no significant relationship with financial performance of commercial banks in Kenya.