International Journal of Scientific and Research Publications, Volume 8, Issue 5, May 2018 624 ISSN 2250-3153 http://dx.doi.org/10.29322/IJSRP.8.5.2018.p7779 www.ijsrp.org Effect of Financial Inclusion on Financial Performance of Banks Listed At the Nairobi Securities Exchange in Kenya ODERO JOSHUA ORANGA 1 DR. IBRAHIM TIRIMBA ONDABU (PhD) 2 MBA Finance, Jomo Kenyatta University of Agriculture and Technology 1 Research Fellow, Jomo Kenyatta University of Agriculture and Technology 2 DOI: 10.29322/IJSRP.8.5.2018.p7779 http://dx.doi.org/10.29322/IJSRP.8.5.2018.p7779 ABSTRACT: This study sought to determine the effect of financial literacy programs, usage of agents and representatives, increased proliferation of ATMs and Mobile banking services on the financial performance of listed banks in Kenya and to determine the effect of bank branch spread on performance of listed banks in Kenya. The main theories reviewed in this study were the Grameen Model of Banking, Bank Led Theory, Financial intermediation theory and Contemporary Banking Theory. The study adopted a descriptive research design, and the study population included management and operational level employees of the 11 banks listed on the Nairobi Securities Exchange. A census study was conducted with primary data being collected using questionnaires. The NIC Bank provided data for pilot testing to determine the reliability and validity of the research instruments. The analysis of data based on SPSS software (version 2.3) and regression analysis presented using charts and tables. The results of the studied determined that financial inclusion elements have a positive and strong impact on the financial performance of banks in terms of return on equity. The study determined that financial literacy programs have positive but weak impact on financial performance of banks. The use of agents and representatives had positive and strong effect on performance of banks. The proliferation of ATMs and Mobile banking services had positive but weak effect on financial performance of banks. Bank branch spread had positive but weak effect on financial performance of banks. The study recommends that policy makers in the financial institutions such as banks should make use of financial inclusion elements to improve financial performance of banks. The study recommends further research using moderating and intervening variables such as size and ownership of business entity. Key Words: Financial literacy programs, usage of agents and representatives, increased proliferation of ATMs, Mobile banking services, financial performance 1. Introduction The business of banks involves taking deposits and using the same deposits to make loans (Fuhrmann, 2017). It could be complicated, but this is the basic model used in banking. In the past Kenyan banks have been accused of not reaching out in areas where the transaction or deposit size is very low. In places with low deposits, the volumes are usually low, and the costs of serving are high. The banks did not see any sense to open up branches in areas with low volumes and the high cost of operation. The above situation has changed though, and most firms have embraced the concept of financial inclusion where they strive to open up to the new areas by biometric devices and mobile money. This practice has opened up access to financial services even in the remotest areas of the country. The policy changes by the government permitted banks to use agents to deliver financial services through (Finance Act, 2009). Most of the financial institutions have been encouraged to use this model due to the cost advantages to the financial institution, the agents, and the customers. For the client, the advantages include the lower cost of the transaction, the shorter lines, longer operational hours and easy access by the illiterate part of the population who feel intimidated by the set up in branches. The relationship between financial inclusion and banks profitability forms two ideological perspectives. It is a multiple of low costs, multiple locations and small deposits that amounts to huge deposits and high levels of profitability (Okun, 2012). The low costs incurred by banks mean that the population in the rural and semi-urban settings can gain access to loans. In a typical sense, the loans are given collateral free, meaning that they are charged at very high-interest rates. The financial institutions gain from such strategy