Influence of Electronic Money Transfer Services on Performance of Small and Medium Enterprises in Kenya (A CASE OF BUNGOMA COUNTY)

Abstract

According to the 2013 Economic Survey, the SME sector, contributed 18.4% of the country’s
Gross Domestic Product (GDP). This shows the importance of SMEs to the Kenyan economy
mainly as a source of employment to an ever increasing populationhe use of mobile banking
services has continued to grow over time as aapplication of the mobile phones for mobile
banking has marked a new frontier in mobile phone technology with an ever increasing
number of small and medium enterprises using it in their transactions to enhance their
performance. The role of electronic money transfer services has been viewed as a critical
element for the performance of small and medium-sized enterprises. Typically, smaller
enterprises face higher transactions costs than larger enterprises in obtaining credit
Insufficient funding has been made available to finance working capital for the SMEs (Poor
efficiency and consumer convenience practices have hampered the ability of smaller and
medium enterprises and Entrepreneur ICT Competency such as Information asymmetries
associated with lending to small scale borrowers have restricted the flow of finance to
smaller and medium enterprises. In spite of these claims however, some studies show a large
number of small and medium enterprises fail because of perceived value of m-banking and
transaction costs due to poor record keeping and lack of basic business management
experience and skills are major contributors to failure of small business. The number of uses
to which mobile banking services can be put keeps increasing with time. Small and medium
enterprises in Kenya have adopted the use of the mobile payments as a way of transacting
their business because of the relative affordability of mobile phones and the mobile banking
services they offer. However, it is not clear how mobile banking service use influences the
performance of small and medium enterprises. The study sought to determine if its use in
Bungoma County, a rural setting, has resulted in improvement on performance of small and
medium enterprises. The study will be based on a survey of 3680 small and medium
enterprises, from three major sectors of the Kenyan economy, agriculture, service and
processing sectors. Small and medium enterprises that will be studied are those that have
been in existence for more than 5 years and have experienced business without mobile
banking services before 2008, and thereafter with it. The study was built on the theories of
diffusion of innovation theory, technology acceptance model and Schumpeter’s theory. The
main purpose of this study is to establish influence of mobile banking services on
performance of small and medium enterprises in Kenya. The study was guided by the
following specific objectives: To find out the influence of mobile transfer services on
performance of small and medium enterprises in Kenya; To investigate the influence of
internet banking services on performance of small and medium enterprises in Kenya; To
examine the influence of access to finance on performance of small and medium enterprises
in Kenya; To study the influence of e-commerce on performance of small and medium
enterprises in Kenya and to establish the influence of perceived value m-banking on
performance of small and medium enterprises in Kenya The study adopted a descriptive
survey and a stratified sampling technique method was used and data was collected through
the use of questionnaires. The correlation and regression analysis was used to establish the
direction and strength of the relationship of the variables at 5% level of significance. The
analysis showed that access to finance services had the strongest positive (Pearson
correlation coefficient =.852) performance of SMEs. In addition, mobile banking services,
internet banking services and e-commerce services were positively correlated to performance