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Technical Efficiency in the Kenyan Banking Sector: Influence of Fintech and Banks Collaboration

1School of Mathematics, University of Nairobi

Journal of Finance and Economics. 2020, Vol. 8 No. 1, 13-20
DOI: 10.12691/jfe-8-1-3
Copyright © 2020 Science and Education Publishing

Cite this paper:
Davis Bundi Ntwiga. Technical Efficiency in the Kenyan Banking Sector: Influence of Fintech and Banks Collaboration. Journal of Finance and Economics. 2020; 8(1):13-20. doi: 10.12691/jfe-8-1-3.

Correspondence to: Davis  Bundi Ntwiga, School of Mathematics, University of Nairobi. Email:


Efficient banks increase financial stability, intermediation and value to the shareholders. As Fintech innovations continue to alter the financial landscape in Kenya, banks will leverage on Fintech to enhance efficiency. This study investigates if Fintech and bank collaboration has an influence on efficiency in the banking sector. A two step data envelopment analysis is applied with input-orientation based on three intermediation dimension models. Efficiency scores are decomposed into technical, pure technical and scale efficiencies. Financial statement data from 2009-2018 for five banks with Fintech collaborations form the analysis. The study period is segmented into Pre-Fintech, 2009-2014 and Post Fintech, 2015-2018. Descriptive statistics summarize the data with Panel regression model testing the selected financial variables influence on efficiency of banks in the Pre-Post Fintech period. In the ten year period, technical inefficiency based on the three models for the Pre-Post Fintech period is failure to operate at the most productive scale, poor input utilization and managerial inefficiencies. For the Panel regression, loan intensity in model M1, return on asset in model M2, and cost of intermediation in model M3 had a significant and positive influence on technical efficiency. Fintech and banks collaboration has had a positive influence on efficiency in the Kenyan banking sector.