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Salome Musau - Department Of Accounting and Finance, School of Business, Kenyatta University, Kenya


There are important trade-offs and synergies between financial inclusion and stability. Poorly implemented financial inclusion policies can impair stability, and also, there may be important synergies brought by broad use of financial services which help financial institutions diversify risk and hence aid stability. Financial stability can enhance financial inclusion through trust build in stable financial systems and hence increase the use of financial services. Excessive emphasis on financial stability can prolong involuntary financial exclusion especially in times of regulatory tightening in an attempt to boost profits and cut off risky segments. It is therefore important for financial institutions to understand the interlinkages in advancing financial inclusion and stability. This study analyzed the effect of financial inclusion on commercial banks stability with a view of establishing the significant relationship between them. The specific objectives were to analyze the effect of Branch networks, ATMs, Agents and Mobile banking on the stability of commercial banks in Kenya. The research design was explanatory non – experimental. The target population was all the 42 commercial banks in Kenya and the study used secondary data. Descriptive statistics were used to establish the trend of financial inclusion and stability of commercial banks while inferential statistics were used for testing the hypotheses. The results revealed that financial inclusion had a statistically significant effect on the stability of commercial banks in Kenya during the study period between 2007-2015. Increase in Branches, ATMs, Agents and Mobile banking were found to support stability (synergy) due to increased deposit mobilization and access to credit. Overall, the results point to the role of financial inclusion and bank stability in Kenya. Moreover, the state of financial inclusion is a major factor that determines Kenyas vision 2030. Therefore, the study recommends increasing the banking customers, advancing affordable and accessible banking services to disadvantaged groups in different regions in the country. In this regard, reforms in financial sector should aim at increasing financial inclusion through digital finance which is a cost cutting measure and to ensure that bank stability indicators commensurate in the role of deepening financial intermediation and hence forming an all-inclusive and stable financial sector over time.

Full Length Research (PDF Format)