Abstract:
Globally Online Banking has gained worldwide acceptance as a new delivery channel for
performing banking transactions. In Kenya 44.12% of the population has access to online banking with majority accessing the service through mobile. Recent studies on online banking focused on commercial banks. However, little is known on the usefulness of online banking to Micro financing institutions in Kisumu city. The purpose of the study was customers’ adoption of online
banking on financial performance of micro financing institutions in Kisumu city, Kenya. The study was anchored on transaction costs theory. Time series design was adopted, and a sample of 384 employees comprising of 11 branch managers of MFIs, 11 product development managers, 11 research and development managers and 351 employees were obtained from the target population of 436 employees of the MFIs. The study adopted primary data collection method using questionnaires. Data collected was analyzed using descriptive and inferential. The study revealed
that customer adoption of online banking had a positive impact on financial performance of MFIs (β=.331, p=.000). The study concluded that all the selected factors had an impact on financial performance of MFIs and recommended that MFIs should improve their online banking among their customers in order to increase their return on equity. The research findings will enable managers and staff of MFIs to formulate marketing strategies, make policy changes and give empirical findings on relationship between online banking and financial performance.
