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

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.

Linkage Between Self-Control, Financial Innovations and Financial Inclusion. A Moderated Mediation Analysis Across Levels of Financial Literacy (The case of owners of Microenterprise in Kenya)

“…On the contrary, positive BF such as possession of self-control, confidence in the use of financial information, deliberate thinking, optimism, willingness to take informed risks have been suggested to lead to optimal usage of FS [11], [14], [18], [19]. However, studies that recognize BF on commonly used financial services, a departure from assets traded in securities markets as used in earlier behavioral finance studies, are at infancy stage hence the need to contribute to knowledge growth [17], [20], [21], [22]. Thus, this study contributed to enrichment thereof with attention being on self-control, which is one of the BF, theorized to influence financial decisions.…”

Present-Biased Preferences and Credit Card Borrowing

“…For example, if an individual prefers $75 today over $80 in one month, but prefers $80 in one month over $70 today, then we take $75 as the switching point and calculate the monthly discount factor as (75/80) 1/1 = 0.94. 12 Making these calculations for the two multiple price lists yields two discount measures, IdF t ,τ : IdF 0,1 , IdF 6,7 . We use the average of these calculated monthly discount factors as the IdF in the main analysis.…”