IDEAS home Printed from https://ideas.repec.org/a/bcp/journl/v8y2024i15p164-180.html

Digital Banking Channels, Financial Inclusion and Commercial Bank Sustainability in Kenya

Author

Listed:
  • John K. Thuranira

    (Department of Business Administration, Chuka University P.O. Box 109 – 60400 Chuka)

  • Mukaria H. Kimathi

    (Department of Business Administration, Chuka University P.O. Box 109 – 60400 Chuka)

  • Dennis K. Murithi

    (Department of Business Administration, Chuka University P.O. Box 109 – 60400 Chuka)

Abstract

The increasing use of digital banking channels has transformed the financial landscape globally, including in Kenya. While digital banking is believed to enhance financial sustainability, the role of financial inclusion in explaining this relationship remains unclear. Previous studies have examined the impacts of digital banking and financial inclusion separately, but little research has explored how financial inclusion influences the link between digital banking and financial sustainability in commercial banks. This study explored the relationship between digital banking channels, financial inclusion, and the financial sustainability of commercial banks in Kenya. Specifically, it investigated whether financial inclusion explains the relationship between digital banking and financial sustainability. The study applied the Transaction Cost Theory (TCT) in evaluating how financial inclusion explains the relationship between digital banking channels and financial sustainability. The study used a quantitative research design with secondary data from Kenyan commercial banks between 2018 and 2023. Data were analysed using various econometric models, including Generalized Method of Moments (GMM) and Ordinary Least Squares (OLS), to assess the relationships between digital banking channels, financial inclusion, and financial sustainability. The findings showed a significant positive relationship between digital banking channels and financial sustainability, with mobile banking having the strongest impact. Financial inclusion also significantly improves as digital banking adoption increases. Moreover, the study revealed that financial inclusion partially explains the relationship between digital banking and financial sustainability, indicating its important role in enhancing the effectiveness of digital banking. This study highlights the critical role of financial inclusion in strengthening the impact of digital banking on the financial sustainability of banks. The results suggest that banks should prioritize both digital banking and financial inclusion strategies to achieve long-term financial health. The findings contribute to a deeper understanding of the interconnectedness between digital banking, financial inclusion, and sustainability, with implications for both banking practice and policy development.

Suggested Citation

  • John K. Thuranira & Mukaria H. Kimathi & Dennis K. Murithi, 2024. "Digital Banking Channels, Financial Inclusion and Commercial Bank Sustainability in Kenya," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 8(15), pages 164-180, November.
    • Handle: RePEc:bcp:journl:v:8:y:2024:i:15:p:164-180
    as

    Download full text from publisher

    File URL: https://www.rsisinternational.org/journals/ijriss/Digital-Library/volume-8-issue-15/164-180.pdf
    Download Restriction: no
    File URL: https://rsisinternational.org/journals/ijriss/articles/digital-banking-channels-financial-inclusion-and-commercial-bank-sustainability-in-kenya/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Peterson K. Ozili, 2022. "Sustainability and Sustainable Development Research around the World," Managing Global Transitions, University of Primorska, Faculty of Management Koper, vol. 20(3 (Fall)), pages 259-293.
    2. Hui Zhou & Lin Xu, 2023. "Bank Digital Transformation and Enterprise Innovation—Evidence from China," Sustainability, MDPI, vol. 15(22), pages 1-25, November.
    3. Jimmy Ebong & Babu George, 2021. "Financial Inclusion through Digital Financial Services (DFS): A Study in Uganda," JRFM, MDPI, vol. 14(9), pages 1-18, August.
    4. Franklin Allen & Elena Carletti & Robert Cull & Jun Qian & Lemma Senbet & Patricio Valenzuela, 2014. "Resolving the African Financial Development Gap: Cross-Country Comparisons and a Within-Country Study of Kenya," NBER Chapters, in: African Successes, Volume III: Modernization and Development, pages 13-62, National Bureau of Economic Research, Inc.
    5. Yongjie Zhu & Shanyue Jin, 2023. "COVID-19, Digital Transformation of Banks, and Operational Capabilities of Commercial Banks," Sustainability, MDPI, vol. 15(11), pages 1-17, May.
    6. Gamze Ozturk Danisman & Amine Tarazi, 2020. "Financial inclusion and bank stability: evidence from Europe," The European Journal of Finance, Taylor & Francis Journals, vol. 26(18), pages 1842-1855, December.
    7. Nera Marinda Machdar, 2020. "Financial Inclusion, Financial Stability and Sustainability in the Banking Sector: The Case of Indonesia," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(1), pages 193-202.
    8. repec:ajn:jobafd:2019:p:1-9 is not listed on IDEAS
    9. Musaed S. AlAli, 2019. "The Use of DuPont Modified Financial Model in Evaluating the Financial Performance of Kuwaiti Banks," Journal of Banking and Financial Dynamics, Eastern Centre of Science and Education, vol. 3, pages 1-9.
    10. Ying Chu & Shujun Ye & Hongchang Li & Jack Strauss & Chen Zhao, 2023. "Can Digitalization Foster Sustainable Financial Inclusion? Opportunities for Both Banks and Vulnerable Groups," Sustainability, MDPI, vol. 15(8), pages 1-21, April.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. John K. Thuranira & Mukaria H. Kimathi & Dennis K. Murithi, 2024. "Digital Channels and Financial Sustainability in Commercial Banks," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 8(15), pages 181-195, November.
    2. Sadeq Damrah & Mohammad I. Elian & Mohamad Atyeh & Fekri Ali Shawtari & Ahmed Bani-Mustafa, 2023. "A Linear Mixed Model Approach for Determining the Effect of Financial Inclusion on Bank Stability: Comparative Empirical Evidence for Islamic and Conventional Banks in Kuwait," Mathematics, MDPI, vol. 11(7), pages 1-17, April.
    3. Shouchao He & Zhi Jin & Yuanxiao Hong & Lindong Ma & YE Jiang & YuJing Chen, 2025. "The Impact of Digital Transformation on Commercial Banks’ Business Performance: An Empirical Study of 39 Listed Commercial Banks," SAGE Open, , vol. 15(4), pages 21582440251, November.
    4. Sindisiwe Nyide & Mulala Danny Simatele & Stefan Grab & Richard Kwame Adom, 2023. "Assessment of the Dynamics towards Effective and Efficient Post-Flood Disaster Adaptive Capacity and Resilience in South Africa," Sustainability, MDPI, vol. 15(17), pages 1-25, August.
    5. Chandralekha Ghosh & Rimita Hom Chaudhury, 2019. "Gender Gap in case of Financial Inclusion: An Empirical Analysis in Indian Context," Economics Bulletin, AccessEcon, vol. 39(4), pages 2615-2630.
    6. Lei Yang, 2023. "An “Interactive Learning Model” to Enhance EFL Students’ Lexical Knowledge and Reading Comprehension," Sustainability, MDPI, vol. 15(8), pages 1-18, April.
    7. Moeti Damane & Sin Yu Ho, 2026. "Effects of financial inclusion on financial stability: evidence from SSA countries," International Economics and Economic Policy, Springer, vol. 23(2), pages 1-27, May.
    8. Felipe Mendes Girotto & Cássia Rita Pereira da Veiga & Zhaohui Su & Claudimar Pereira da Veiga, 2025. "Enhancing operational efficiency in nonprofit organizations through demand forecasting," International Review on Public and Nonprofit Marketing, Springer;International Association of Public and Non-Profit Marketing, vol. 22(4), pages 1047-1072, December.
    9. Sagir Danladi & M. S. V. Prasad & Umar Muhammad Modibbo & Seyedeh Asra Ahmadi & Peiman Ghasemi, 2023. "Attaining Sustainable Development Goals through Financial Inclusion: Exploring Collaborative Approaches to Fintech Adoption in Developing Economies," Sustainability, MDPI, vol. 15(17), pages 1-14, August.
    10. Thorsten Beck & Robert Cull, 2013. "Banking in Africa," CSAE Working Paper Series 2013-16, Centre for the Study of African Economies, University of Oxford.
    11. repec:rza:wpaper:754 is not listed on IDEAS
    12. Peterson K. Ozili & Paul Terhemba Iorember, 2024. "Financial stability and sustainable development," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(3), pages 2620-2646, July.
    13. Amuakwa-Mensah, Franklin & Klege, Rebecca A. & Adom, Philip K. & Amoah, Anthony & Hagan, Edmond, 2018. "Unveiling the energy saving role of banking performance in Sub-Sahara Africa," Energy Economics, Elsevier, vol. 74(C), pages 828-842.
    14. Chris Doucouliagos & Jakob de Haan & Jan-Egbert Sturm, 2022. "What drives financial development? A Meta-regression analysis [A new database of financial reforms]," Oxford Economic Papers, Oxford University Press, vol. 74(3), pages 840-868.
    15. Sant'Anna, Dário A.L.M. & Figueiredo, Paulo N., 2024. "Fintech innovation: Is it beneficial or detrimental to financial inclusion and financial stability? A systematic literature review and research directions," Emerging Markets Review, Elsevier, vol. 60(C).
    16. Ahmad Hassan Ahmad & Christopher Green & Fei Jiang, 2020. "Mobile Money, Financial Inclusion And Development: A Review With Reference To African Experience," Journal of Economic Surveys, Wiley Blackwell, vol. 34(4), pages 753-792, September.
    17. Wang, Rui & Luo, Hang (Robin), 2022. "How does financial inclusion affect bank stability in emerging economies?," Emerging Markets Review, Elsevier, vol. 51(PA).
    18. Saba Iqbal & Safia Nosheen, 2023. "Moderating impact of non-performing loans on the relationship between sustainable development goals and the financial performance of banks," Future Business Journal, Springer, vol. 9(1), pages 1-12, December.
    19. Walter Leal Filho & João Henrique Paulino Pires Eustachio & Lucas Veiga Ávila & Maria Alzira Pimenta Dinis & Paula M. Hernandez‐Diaz & Karina Batista & Bruno Borsari & Ismaila Rimi Abubakar, 2025. "Enhancing the contribution of higher education institutions to sustainable development research: A focus on post‐2015 SDGs," Sustainable Development, John Wiley & Sons, Ltd., vol. 33(2), pages 1745-1757, April.
    20. Abdelaziz Hakimi & Hichem Saidi & Lamia Adili, 2025. "Achieving a More Inclusive Financial System: What Does the MENA Region Need? A Sensitivity Analysis for GCC and Non-GCC Countries," Economies, MDPI, vol. 13(7), pages 1-19, July.
    21. Giorgio Caselli & Catarina Figueira, 2023. "Monetary policy, ownership structure, and risk‐taking at financial intermediaries," The Financial Review, Eastern Finance Association, vol. 58(1), pages 167-191, February.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bcp:journl:v:8:y:2024:i:15:p:164-180. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Dr. Pawan Verma (email available below). General contact details of provider: https://rsisinternational.org/journals/ijriss/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.