Digital Transformation and Liquidity Risk of Commercial Banks in Kenya


  • Salome Musau Kenyatta University



There are important trade-offs and synergies between digital transformation and financial stability. Poorly implemented digital transformation policies can impair bank liquidity. Also, there may be essential synergies brought by the broad use of digital services which help financial institutions diversify risk and aid financial stability. This study analyzed the effect of digital transformation on the liquidity risk of commercial banks, intending to establish a significant relationship between them. The specific objectives were to analyze the effect of Branch networks, ATMs, Agents and Mobile banking on the liquidity risk of commercial banks in Kenya. The research design was explanatory non–experimental. The target population included 42 commercial banks in Kenya and the study used secondary data. Descriptive statistics were used to establish the trend of digital services and liquidity risk of commercial banks while inferential statistics were used for testing the hypotheses. The results revealed that digital services had a statistically significant effect on the liquidity risk of commercial banks in Kenya during the study period between2007-2015. Increase in Branches, ATMs, Agents and Mobile banking were found to support liquidity levels (synergy) due to increased deposit mobilization and access to credit. Therefore, the study recommends increasing the banking customers, advancing affordable and accessible banking services to disadvantaged groups in different regions in the country. Reforms in financial sector should aim at increasing financial access through digital finance which is a cost cutting measure.

KeywordsDigital services, Financial Inclusion, Unbankable Stability, Synergy, Trade-off

Author Biography

Salome Musau, Kenyatta University

Department of Accounting and Finance, Kenyatta University, PO BOX 43844-00100, Nairobi, Kenya


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How to Cite

Musau, S. . (2022). Digital Transformation and Liquidity Risk of Commercial Banks in Kenya. Journal of Finance and Accounting, 6(2), 121–132.