Authors :
STEPHEN NDEGWA NDERITU; DR. GORDON OPUODHO
Volume/Issue :
Volume 8 - 2023, Issue 10 - October
Google Scholar :
https://tinyurl.com/mvpzufte
Scribd :
https://tinyurl.com/yrwesmh6
DOI :
https://doi.org/10.5281/zenodo.10077286
Abstract :
Financial institutions seek investment
opportunities with limited risks and opportunities with a
higher probability of profitable returns. Kenyan
institutions of finance face a lot of risks in providing
their services. A company's possible loss if
counterparties fail to fulfill their financial commitments
is known as credit risk. Banks frequently shift credit risk
to free up capital for additional loan intermediation,
which results in cash outflow. The study investigated the
effect of financial innovation on credit risk of
commercial banks in Kenya, focusing mainly on the
effect of mobile financial feature innovation, internet
financial access innovation, plastic cards innovation and
cheque truncation on credit risk.The theories adopted
for the study include; Technology acceptance model,
Resource based theory, Diffusion Innovation theory and
Theory of Constrains. The target group that formed the
unit of analysis, was the forty-twoKenyan commercial
banks. The annual financial reports of commercial banks
that are listed were the source of secondary data for the
given time2013 to 2022 analyzed through EVIEWS. The
study adopted an experimental research in determining
the influence the independent have on dependent
variables, while using ARDL approach to examine
cointegration. Based on the findings mobile financial
feature, internet financial access, plastic card innovation
and cheque truncation system had a positive significant
influence on Credit risk quantified by Kenyan
commercial banks' under non-performing loan ratio.
Financial institutions seek investment
opportunities with limited risks and opportunities with a
higher probability of profitable returns. Kenyan
institutions of finance face a lot of risks in providing
their services. A company's possible loss if
counterparties fail to fulfill their financial commitments
is known as credit risk. Banks frequently shift credit risk
to free up capital for additional loan intermediation,
which results in cash outflow. The study investigated the
effect of financial innovation on credit risk of
commercial banks in Kenya, focusing mainly on the
effect of mobile financial feature innovation, internet
financial access innovation, plastic cards innovation and
cheque truncation on credit risk.The theories adopted
for the study include; Technology acceptance model,
Resource based theory, Diffusion Innovation theory and
Theory of Constrains. The target group that formed the
unit of analysis, was the forty-twoKenyan commercial
banks. The annual financial reports of commercial banks
that are listed were the source of secondary data for the
given time2013 to 2022 analyzed through EVIEWS. The
study adopted an experimental research in determining
the influence the independent have on dependent
variables, while using ARDL approach to examine
cointegration. Based on the findings mobile financial
feature, internet financial access, plastic card innovation
and cheque truncation system had a positive significant
influence on Credit risk quantified by Kenyan
commercial banks' under non-performing loan ratio.
