EFFECT OF DIGITAL FINANCIAL SERVICES ON FINANCIAL PERFORMANCE OF ROTATING SAVINGS AND CREDIT ASSOCIATION IN MOMBASA COUNTY

Abstract

The effect of digital financial services on financial performance includes the introduction of new financial instruments and services as well as the introduction of new sources of funding. The research objective was to determining the effect of digital financial services on financial performance of RoSCAs in Mombasa County. The specific objectives was to establish the effect of digital payment, digital savings, digital remittance and digital credit on financial performance of RoSCAs. The study discussed literature review with theories related to effect of digital financial services on financial performance on ROSCAs. The theories included: Theory of Financial Innovations, Technology Acceptance Model and Diffusion of Innovation Theory. A descriptive survey technique was used to conduct out in-depth investigations by the researchers in order to accomplish the study's goals. The study concentrated on RoSCAs that are providing ROSCA digital financial services across various sectors mainly commerce, trading and service among others as follows: Wholesaler Financial Group, Local Farmer Financial Group, Mama Mboga Financial Group, Bodaboda Financial Group and Jua Kali Financial Group. There were 880 groups of RoSCAs in Mombasa County. The study sampled 275 groups of RoSCAS. The results showed that the respondents strongly agreed with a mean of 4.52 and a standard deviation of 0.723 that digital payment has enabled effective and efficient running of the operations and reduced fraud in the RoSCAs. Findings revealed that the coefficient of determination (R-Square) was 0.715 i.e. 𝑅 2 = 0.511. The study concluded that digital payment has enabled ROSCAs to be flexible and change with the dynamic environment for convenient payment. The research study recommended that the financial firms should implement the technological structures to improve digital finance service to enhance digital payment which enabled the informal financial groups to be flexible, affordable and secure per transition. It was recommended that the management of financial firms should build up cloud-based processing equipment to help in digital savings on financial performance of RoSCAs. In order to build on this research, it was recommended that a related study be conducted over a longer time frame in order to get further data about the impact of digital financial services on RoSCAs' financial success.