Effects of Mobile Banking Services On the Financial Performance Of Small and Medium Enterprises in Kirinyaga County

Abstract

Small and medium enterprises (SMEs) are essential in economic development and job creation, particularly in emerging markets. The lack of access to formal financial services has usually impeded their performance in Kenya. This study aimed to determine the impact of mobile banking, namely mobile payments, savings, and lending, on the financial performance of SMEs in Kirinyaga County. The research was based on the diffusion of innovation theory, the constraints theory of innovation, the technology acceptance model, and the Resource-based View theory. The descriptive research design was used to carry out this research study. The target population was 226 SMEs that had renewed business licenses within five years. The Yamane formula was used to select a sample size of 160 SMEs. A stratified sampling method was then used to distribute the sample size to all business sectors in different towns in Kirinyaga County. Primary data was collected with the help of questionnaires. The questionnaires were distributed online and filled out using Google Forms. A pilot test was conducted in Tharaka-Nithi County to promote validity and reliability. The collected data were cleaned, edited, and analyzed using SPSS Version 29. The findings revealed that mobile payment services positively impacted financial performance, significantly improving sales revenue, profitability, and operational efficiency. Mobile savings enhanced financial discipline, liquidity, and planning, while mobile lending improved access to credit, supporting short-term financing needs and business continuity. Correlation results confirmed that all three services had significant positive relationships with financial performance, with mobile payments (r = 0.651) showing the strongest association, followed by mobile savings (r = 0.574) and mobile lending (r = 0.523). Regression analysis indicated that all three variables collectively accounted for approximately 68.4% of the variation in SME financial performance, with mobile payments having the highest individual effect (β = 0.452), followed by savings (β = 0.369) and lending (β = 0.317). The study concludes that mobile banking significantly enhances SME financial performance by improving access to financial tools that are secure, affordable, and convenient. It recommends that SMEs adopt integrated mobile banking services, financial institutions develop SME-focused digital products, and policymakers create regulatory frameworks to promote innovation while protecting small businesses. Further research is recommended to explore the long-term sustainability of mobile banking adoption amid evolving digital technologies.