Abstract: Commercial banks have continued to use huge investments in technology based innovations and training of manpower to handle new technologies. The relationship between the growing investment in technology based bank innovations and bank financial performance in Rwanda needs to be studied and establish whether drivers of bank innovations have contributed to the financial performance of commercial banks in Rwanda. This research studied innovations in automated teller machines, debit and credit cards, internet banking, mobile banking, electronic funds transfer and point of sale terminals. The general objective of this study was to determine the effect of financial innovation on financial performance of commercial banks in Rwanda. A descriptive survey design was used while a questionnaire was used to gather primary data. Secondary data was also used to validate the communicative and pragmatic validity of primary data. The target study units for this research were all 14 commercial banks registered by National Bank of Rwanda. The variables were subjected to correlation analysis and the Software Package for Social Sciences (SPSS) was used to analyze data. Frequency distribution tables and percentages were adopted to present the data. The relationship between the variables was tested using the Pearson’s correlation technique. Ethical issues related to the study were addressed by maintaining a high level of confidentiality of the information given by the respondents. According to the findings, mobile banking (P=0.029), agent banking (p=0.041) and internet banking (p=0.006) were all significant in predicting the profits of the banks since all the p values were less than 0.05. However, as it can be seen Bank assurance had a p=value of 0.047 which that it was not as significant as the rest of the factors which had lower values of p. Since a low value indicates high significance of the variable on the dependent variable and vice versa. This is because agent banking was not practiced in many banks in Rwanda and therefore the number of the banks which had agent banking was few. The aggregate of the values was therefore not coming out as strongly as the rest of the factors which were almost in all the banks. Based on the findings of the study, it can be concluded that bank innovations influence financial performance of commercial banks in Rwanda positively. The adoption of innovations by commercial banks has a high potential of improving financial performance and hence better returns to the shareholders.
Keywords: Financial Innovation, Financial Performance, Commercial Banks.
Title: EFFECT OF FINANCIAL INNOVATION ON FINANCIAL PERFORMANCE OF COMMERCIAL BANKS IN RWANDA: A CASE OF 14 LICENSED COMMERCIAL BANKS OPERATING IN KIGALI CITY
Author: Vestine Uriho, Dr. Patrick Mulyungi
International Journal of Management and Commerce Innovations
ISSN 2348-7585 (Online)
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