Abstract:
Purpose:
The purpose of this study was to establish the effect of online banking on
performance of microfinance banks in Kenya.
Methodology: The study adopted positivism philosophy approach and descriptive research
design was used. The study used census survey and the target population was the thirteen
Microfinance Banks regulated by the Central Bank of Kenya. Primary data was collected using
self-administered questionnaires. Data was analysed using the Statistical Package for Social
Science. Descriptive and inferential statistics were used for preliminary analysis. Factor
analysis was conducted to reduce the number of factors and Kaiser Meyer Olkin and Barlett’s
test of Sphericity were tested, total variance explained, scree plot and rotated component matrix
were drawn.
Findings:
The descriptive statistics findings disclosed that online banking has a positive effect
on performance of MFBs. The overall standard deviation was 1.47, an indication of reasonably
high deviation from the mean. This shows that the respondents had fairly varied view on online
banking. The relationship between online banking and performance was positive with a p value
of 0.018 showing that the model was statistically significant for the data set. Online banking
explains 22.6% of the variation in performance of MFBs.
Unique Contribution to Theory, Practice and Policy: The MFBs needs to invest more on
online banking to improve performance. Partnership with government institutions and
telecommunication companies would provide the network connections and training to the
population on the use of online banking services.