EFFECT OF PROCESS INNOVATION STRATEGIES ON PERFORMANCE OF TIER ONE COMMERCIAL BANKS IN KENYA

Abstract

The Kenyan banking industry is experiencing very stiff competition with banks outdoing each other from the front end of products, service delivery, and employees’ retention amongst other fronts. In Kenya, Tier One Commercial Banks have been leading in the adoption of innovations including mobile banking, online banking and use of mobile applications. Scholarly evidence regarding the effects of strategic innovation on performance of commercial banks in Kenya with specific regard to tier one banks remain scanty. Against this backdrop, the present study sought to establish the effect of process innovation strategies on the performance of tier one commercial banks in Kenya. The study adopted a descriptive survey research design. The target population consisted of 494 senior, middle and lower management staff from the 8 Tier One Commercial Banks. A sample size of 221 was reached using stratified random sampling technique Primary data was collected using structured questionnaires distributed to all management staffs of the tier one commercial banks in Nairobi. Secondary data on the other hand was collected from

journals and published financial statements within the period of 5 years from 2014 to 2019. Frequencies and percentages as well as measures of central tendency (means) and dispersion (standard deviation) were used. The regression and correlation analysis were used to determine both the nature and the strength of the relationship between two variables. Data was presented using tables. The study found that improved queuing; electronic funds transfer; and number and distribution of ATMs had improved the financial performance of the banks to a great extent. The study also concluded that process innovation strategies have a positive and significant effect on the performance of tier one commercial banks in Kenya. The study recommends that commercial banks should have an effective market research department that should conduct surveys in order to establish the new products by competitors, the advantages and disadvantages of the innovations. This will enable the banks to innovate and help in staying ahead of competition.