Mediating Effects of Financial Innovations between Behavioral Factors and Financial Inclusion of Micro Enterprises in Kenya

Keywords: Financial Inclusion, Self-control, Confidence, Behavioral factors, Social proof, Financial Innovations

Abstract

Purpose: Understanding the mediating role of the adoption of financial innovations on the relationship behavioral factors and utilization of formal financial services was the main aim of this research.   The behavioral factors examined were self-control, confidence and social proof. The study is premised on behavioral finance theories.

Design/Methodology: The positivist approach and explanatory research designs were adopted to understand the relationships between the variables under investigation. A sample of 486 owners/managers of licensed micro-enterprises in Nairobi, Kenya were selected using stratified random sampling technique. Primary data was collected through a structured questionnaire. Hypotheses were tested using Hayes and Zhao approach for mediation analysis.

Findings: The results showed that financial innovations mediated the relationship between each of the behavioral factors and financial inclusion, that is; self- control (β =.0941, ρ= .00), confidence; (β = .1019, ρ = .00) and social proof (β = .1036, ρ = .00). 

Practical implications: The study has brought into fore the mediating role of financial innovations on the relationship between the three behavioral factors and financial inclusion. Thus, practitioners are encouraged give due attention to behavioral factors and financial innovations in policy formulation and programs geared towards optimal utilization of financial services.

Downloads

Download data is not yet available.

References

Abraham, J., Akbas, M., Ariely, D., & Jang, C. (2016). Using Lotteries to Encourage Saving: Experimental Evidence from Kenya. DOI: https://doi.org/10.1257/rct.893

Al-Jabri, I. M., & Sohail, M. S. (2012). Mobile banking adoption: Application of diffusion of innovation theory. Journal of Electronic Commerce Research, 13(4), 379-391.

Allen, F., Demirguc-Kunt, A., Klapper, L., & Peria, M. S. M. (2016). The foundations of financial inclusion: Understanding ownership and use of formal accounts. Journal of Financial Intermediation, 27(C), 1-30. DOI: https://doi.org/10.1016/j.jfi.2015.12.003

Ameriks, J., Caplin, A., Leahy, J., & Tyler, T. (2007). Measuring self-control problems. American Economic Review, 97(3), 966-972. DOI: https://doi.org/10.1257/aer.97.3.966

Ando, A., & Modigliani, F. (1963). The" life cycle" hypothesis of saving: Aggregate implications and tests. The American economic review, 53(1), 55-84.

Atalay, K., Bakhtiar, F., Cheung, S., & Slonim, R. (2014). Savings and prize-linked savings accounts. Journal of Economic Behavior & Organization, 107, 86-106. DOI: https://doi.org/10.1016/j.jebo.2014.07.015

Barber, B. M., & Odean, T. (2007). All that glitters: The effect of attention and news on the buying behavior of individual and institutional investors. The review of financial studies, 21(2), 785-818. DOI: https://doi.org/10.1093/rfs/hhm079

Beck, T. (2016). Financial Inclusion–Measuring progress and progress in measuring. Paper presented at the This paper was written for the Fourth IMF Statistical Forum “Lifting the Small Boats: Statistics for Inclusive Growth. Cass Business School, City, University of London, CEPR, and CESifo.

Benton, J. E., Byers, J., Cigler, B. A., Klase, K. A., Menzel, D. C., Salant, T. J., . . . Waugh Jr, W. L. (2007). Conducting research on counties in the 21st century: A new agenda and database considerations. Public administration review, 67(6), 968-983. DOI: https://doi.org/10.1111/j.1540-6210.2007.00787.x

Binoy, T., & Subhahree, N. (2018). Behavioural Factors that Influence the Continued Usage of Formal Financial Services Among The Low Income Households. International Journal of Mechanical Engineering and Technology, 9(7), 22-36.

Cadena, X., & Schoar, A. (2011). Remembering to pay? Reminders vs. financial incentives for loan payments: National Bureau of Economic Research. DOI: https://doi.org/10.3386/w17020

Chambers, C. (2010). Financial Exclusion and Banking Regulation in the UK: Template Analysis: Lambert Academic Pub.

Creswell, J. W. (2014). A concise introduction to mixed methods research: SAGE publications.

Demirguc-Kunt, A., & Klapper, L. (2012). Measuring financial inclusion: The global findex database: The World Bank. DOI: https://doi.org/10.1596/1813-9450-6025

Demirguc-Kunt, A., Klapper, L., Singer, D., Ansar, S., & Hess, J. (2018). The Global Findex Database 2017: Measuring financial inclusion and the fintech revolution: The World Bank. DOI: https://doi.org/10.1596/978-1-4648-1259-0

Faye, I., & Triki, T. (2013). Financial Inclusion in Africa: The transformative role of technology. Ghana. African Development Bank (AfDB).

Fernandes, D., Lynch Jr, J. G., & Netemeyer, R. G. (2014). Financial literacy, financial education, and downstream financial behaviors. Management Science, 60(8), 1861-1883. DOI: https://doi.org/10.1287/mnsc.2013.1849

Francis, E., Blumenstock, J., & Robinson, J. (2017). Digital credit: A snapshot of the current landscape and open research questions. CEGA White Paper.

FSD. (2016). Central Bank of Kenya, Kenya National Bureau of Statistics, FinAccess Household Survey 2015. Harvard Dataverse, 4.

Garson, G. D. (2012). Testing statistical assumptions. Asheboro, NC: Statistical Associates Publishing.

Gathergood, J. (2012). Debt and depression: causal links and social norm effects. The Economic Journal, 122(563), 1094-1114. DOI: https://doi.org/10.1111/j.1468-0297.2012.02519.x

Grohmann, A. (2018). Financial literacy and financial behavior: Evidence from the emerging Asian middle class. Pacific-Basin Finance Journal, 48, 129-143. DOI: https://doi.org/10.1016/j.pacfin.2018.01.007

Hair, J. F., Black, W. C., Babin, B. J., & Anderson, R. E. (2014). Multivariate data analysis: Harlow. UK: Pearson Education Limited.

Hayes, A. F. (2013). Introduction to mediation, moderation, and conditional process analysis: Methodology in the Social Sciences. Kindle Edition, 193.

Jones, L. E., Loibl, C., & Tennyson, S. (2015). Effects of informational nudges on consumer debt repayment behaviors. Journal of Economic Psychology, 51, 16-33. DOI: https://doi.org/10.1016/j.joep.2015.06.009

Jukan, M. K., & Softic, A. (2016). Comparative analysis of financial inclusion in developing regions around the world. Economic Review: Journal of Economics and Business, 14(2), 56-65.

Jurevičienė, D., & Ivanova, O. (2013). Behavioural finance: theory and survey/Finansinė elgsena: teorija ir tyrimas. Mokslas–Lietuvos ateitis/Science–Future of Lithuania, 5(1), 53-58. DOI: https://doi.org/10.3846/mla.2013.08

Kaminski, J. (2011). Diffusion of innovation theory. Canadian Journal of Nursing Informatics, 6(2), 1-6.

Karlan, D., McConnell, M., Mullainathan, S., & Zinman, J. (2016). Getting to the top of mind: How reminders increase saving. Management Science, 62(12), 3393-3411. DOI: https://doi.org/10.1287/mnsc.2015.2296

Karlan, D., Morten, M., & Zinman, J. (2012). A personal touch: Text messaging for loan repayment: National Bureau of Economic Research. DOI: https://doi.org/10.3386/w17952

Karp, N., & Nash-Stacey, B. (2015). Technology, Opportunity & Access: Understanding Financial Inclusion in the US. BBVA Research paper(15/25).

Kast, F., Meier, S., & Pomeranz, D. (2018). Saving more in groups: Field experimental evidence from Chile. Journal of Development Economics, 133, 275-294. DOI: https://doi.org/10.1016/j.jdeveco.2018.01.006

Kim, M., Zoo, H., Lee, H., & Kang, J. (2018). Mobile financial services, financial inclusion, and development: A systematic review of academic literature. The Electronic Journal of Information Systems in Developing Countries, 84(5), e12044. DOI: https://doi.org/10.1002/isd2.12044

KNBS. (2016). Micro, Small and Medium Establishment (MSME) Survey Basic Report.

Lanie, T. (2017). Demand-driven determinants and self-reported barriers to financial inclusion in the West African Economic and Monetary Union (WAEMU). Journal of Economics and International Finance, 9(11), 120-130. DOI: https://doi.org/10.5897/JEIF2017.0875

Lown, J. M., Kim, J., Gutter, M. S., & Hunt, A.-T. (2015). Self-efficacy and savings among middle and low income households. Journal of Family and Economic Issues, 36(4), 491-502. DOI: https://doi.org/10.1007/s10834-014-9419-y

Lule, I., Omwansa, T. K., & Waema, T. M. (2012). Application of technology acceptance model (TAM) in m-banking adoption in Kenya. International Journal of Computing & ICT Research, 6(1).

Mbugua, S. (2015). Role of Agent Banking Services in Promotion of Financial Inclusion in Nyeri Town Kenya. Research Journal of Finance and Accounting, 6(3), 2222-2847.

Meier, S., & Sprenger, C. (2010). Present-biased preferences and credit card borrowing. American Economic Journal: Applied Economics, 2(1), 193-210. DOI: https://doi.org/10.1257/app.2.1.193

Neaime, S., & Gaysset, I. (2018). Financial inclusion and stability in MENA: Evidence from poverty and inequality. Finance Research Letters, 24, 230-237. DOI: https://doi.org/10.1016/j.frl.2017.09.007

Nye, P., & Hillyard, C. (2013). Personal financial behavior: The influence of quantitative literacy and material values. Numeracy, 6(1), 3. DOI: https://doi.org/10.5038/1936-4660.6.1.3

Olaniyi, E., & Babatunde, A. (2016). Determinants of Financial Inclusion in Africa: A Dynamic Panel Data Approach. University of Mauritius Research Journal, 22, 310-336.

Ozili, P. K. (2018). Impact of digital finance on financial inclusion and stability. Borsa Istanbul Review, 18(4), 329-340. DOI: https://doi.org/10.1016/j.bir.2017.12.003

Park, C.-Y., & Mercado, R. (2015). Financial inclusion, poverty, and income inequality in developing Asia. Asian Development Bank Economics Working Paper Series(426). DOI: https://doi.org/10.2139/ssrn.2558936

Rogers, E. M. (2004). A prospective and retrospective look at the diffusion model. Journal of health communication, 9(S1), 13-19. DOI: https://doi.org/10.1080/10810730490271449

Ryan, B., & Gross, N. C. (1943). The diffusion of hybrid seed corn in two Iowa communities. Rural sociology, 8(1), 15.

Sarma, M. (2008). Index of financial inclusion: Working paper.

Sethi, D., & Acharya, D. (2018). Financial inclusion and economic growth linkage: Some cross country evidence. Journal of Financial Economic Policy, 10(3), 369-385. DOI: https://doi.org/10.1108/JFEP-11-2016-0073

Shefrin, H. M., & Thaler, R. H. (1988). The behavioral life‐cycle hypothesis. Economic inquiry, 26(4), 609-643. DOI: https://doi.org/10.1111/j.1465-7295.1988.tb01520.x

Siddik, M. N. A., Sun, G., Yanjuan, C., & Kabiraj, S. (2014). Financial inclusion through mobile banking: a case of Bangladesh. Journal of Applied finance and Banking, 4(6), 109.

Strömbäck, C., Lind, T., Skagerlund, K., Västfjäll, D., & Tinghög, G. (2017). Does self-control predict financial behavior and financial well-being? Journal of Behavioral and Experimental Finance, 14, 30-38. DOI: https://doi.org/10.1016/j.jbef.2017.04.002

Thaler, R. H., & Benartzi, S. (2004). Save more tomorrow™: Using behavioral economics to increase employee saving. Journal of political Economy, 112(S1), S164-S187. DOI: https://doi.org/10.1086/380085

Thrift, N., & Leyshon, A. (1999). Moral geographies of money. Nation-States and Money: The Past, Present and Future of National Currencies. London, Routledge, 159-181. DOI: https://doi.org/10.4324/9780203450932_chapter_9

Waweru, N. M., Mwangi, G. G., & Parkinson, J. M. (2014). Behavioural factors influencing investment decisions in the Kenyan property market. Afro-Asian Journal of Finance and Accounting, 4(1), 26-49. DOI: https://doi.org/10.1504/AAJFA.2014.059500

Wentzel, J. P., Diatha, K. S., & Yadavalli, V. S. S. (2013). An application of the extended Technology Acceptance Model in understanding technology-enabled financial service adoption in South Africa. Development Southern Africa, 30(4-5), 659-673. DOI: https://doi.org/10.1080/0376835X.2013.830963

Yang, S., Lu, Y., Gupta, S., Cao, Y., & Zhang, R. (2012). Mobile payment services adoption across time: An empirical study of the effects of behavioral beliefs, social influences, and personal traits. Computers in Human Behavior, 28(1), 129-142. DOI: https://doi.org/10.1016/j.chb.2011.08.019

Yeo, J. H., & Fisher, P. J. (2017). Mobile financial technology and consumers’ financial capability in the United States. Journal of Education & Social Policy, 7(1), 80-93.

Yong, A. G., & Pearce, S. (2013). A beginner’s guide to factor analysis: Focusing on exploratory factor analysis. Tutorials in quantitative methods for psychology, 9(2), 79-94. DOI: https://doi.org/10.20982/tqmp.09.2.p079

Zaleskiewicz, T. (2006). Behavioral finance. Handbook of Contemporary Behavioral Economics, New York: Sharpe, 706, 728.

Zhao, X., Lynch Jr, J. G., & Chen, Q. (2010). Reconsidering Baron and Kenny: Myths and truths about mediation analysis. Journal of consumer research, 37(2), 197-206. DOI: https://doi.org/10.1086/651257

Zins, A., & Weill, L. (2016). The determinants of financial inclusion in Africa. Review of Development Finance, 6(1), 46-57. DOI: https://doi.org/10.1016/j.rdf.2016.05.001

Article History
Received: 2019-09-10
Published: 2019-11-20
Dimensions
How to Cite
Byegon, G., Cheboi, J., & Bonuke, R. (2019). Mediating Effects of Financial Innovations between Behavioral Factors and Financial Inclusion of Micro Enterprises in Kenya. SEISENSE Journal of Management, 2(6), 49-64. https://doi.org/10.33215/sjom.v2i6.227
Copyright & License

Copyright (c) 2019 Gladys Byegon, Josephat Cheboi, Ronald Bonuke

Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.