CHAPTER ONE

1.0 Introduction

This chapter covers the background to the problem, statement of the problem, research
objectives and research questions that underpin the problem, the scope, and significance of the
study and limitations of the study.

1.1 Background to the study

In trying to achieve high levels of performance, Commercial Banks have undergone a number of
challenges. Financial innovation in banking has been a relevant topic since 1970. Nowadays, also
due to the present financial system situation, it comes to further relevance. Despite the relevance
of financial innovation and ever changing world, it’s hard to list all financial innovations
specifically. Adequate performance of financial institutions is of crucial importance to their
customers. Commercial banks like many other financial service industries, facing a rapidly
changing market, new technologies, economic uncertainties, competition and demanding
customers have created an exceptional set of challenges (Lovelock, 2019).

The Cameroonian subsidiaries of telecommunication leaders MTN and Orange pioneered the
concept and officially launched it in 2012.The circumstances which prompted its launching were
similar to those of most developing countries, particularly concerning the small numbers of
members of the population who held bank accounts. As had been the case in the other countries
in which the concept had been launched, many households and Mobile money in Cameroon had
been effectively excluded from the traditional banking system and without access to funding in
the formal sector. Although the services which mobile money provides in Cameroon do not
include financing now, its introduction had significantly increased the financial inclusion rate
(57%) by 2022, from 37% in 2019. As a direct consequence, many citizens have been able to ply
trades and launch startup enterprises, which have resulted in indirect employment for over 15000
people. The introduction of mobile money has enabled Cameroonian households to incur
reduced costs by saving and reducing the risk of loss and theft which had accompanied saving in
the past, the mobile money service in Cameroon is provided through a partnership between
commercial banks, MFI and mobile network operators (MTN Cameroon, Orange Cameroon)
because only MFIs, MFI is allowed to issue electronic money, and the mobile network operators

1
own the telecommunication infrastructures and technologies to deploy the platform. This
regulating arrangement of convenience is the status currently prevailing in Cameroon and will
surely deter the significance of the Mobile money in the long run.

Although its importance is affected by factors related to regulation, infrastructures and customs,
Mobile Money appears to be the solution to the multiple problems, namely, liquidity, means of
payments, debt collection, working capital and financing faced by Mobile money. Banks operate
in a complex, competitive and highly regulated environment, with low margins and high
customer expectations. To manage this rapidly changing economic and regulatory system, banks
need a reliable way of financial innovation with concrete actions that lead to measurable results.
To increase their revenue and profits banks must improve their performance.

Commercial Banks in Buea

Commercial banking business involves accepting deposits, giving credit, money remittances
and any other financial services. The industry performs one of the very important role in
the financial sector with a lot of emphasizes on mobilizing of savings and credit
provision in the economy. .In the 21st century, banking is considered as innovative banking.
The banking philosophy has completely been transformed by technological changes along
with many financial innovations which has heightened the competitiveness of Cameroon’s
banking industry. The banking system operates under an environment experiencing huge
dynamism and challenges which has necessitated for new product, process and market
innovations. The application of information technology has yielded new innovations in
product designing and changed their mode of delivery in the banking and finance sectors.
Several initiatives are being undertaken in the banking sector to offer better customer services
with the aid of new technologies. Internet banking has been employed as a strategic resource for
attainment of higher efficiency, reduction of cost and control of operations through replacement
of labor intensive and paper based methods with automated processes hence causing
higher profitability and productivity. Innovations in the Cameroon banking sector include;
Internet banking, Short Messaging Services (SMS) banking, ATMs (Ocharo & Muturi, 2019).

2
 National Financial Credit Bank(NFC BANK)
National Financial Credit Bank (NFC Bank) was created as a Financial Institution called
National Financial Credit Company (NFCC) and was  registered at the National Credit Council
(NCC) on December 20th,  1989 with its legal Headquarters in Bamenda while its
Administrative  Headquarters is located at Avenue Charles De Gaulle in Yaoundé. It officially
began business operations as a Financial Institution on  June 15th 1990 and became a licensed
Commercial Bank, NFC  Bank on August 9th, 2006 after accreditation by COBAC. NFC Bank’s
brand strategy is captured by its “we make life easy” slogan, a phrase that reflects the importance
the company attaches  to  facilitating  customer’s  banking  transactions  and  keeping  service
culture alive. The version is “To be the dominant player by providing financial inclusive retail
banking products and services in the CEMAC sub-region and a reliable partner to SMEs, SMIs
and Corporates”. The mission is to strive continuously at providing inclusive superior retail
banking products and services that meet the needs of its diverse and valued customers while
simultaneously providing exceptional services to its corporate customers. We shall achieve this
by establishing a culture that:

 Attracts, develops, rewards and retains the best talents,

 Inspires learning, creativity and innovation,
 Is fully compliant and prudent,
 Drives leadership growth and returns.
The core values are as follow;
Transparency: In all our dealings with stakeholders.
Resilience: We are tenacious in the pursuit of our corporate goals.
Innovation: We continuously seek a better way of doing business and improving on our product
offerings and culture to better serve our stakeholders
Modesty: We believe that the customer is KING
Stewardship: We affirm our staffs are good stewards of resources and exercise frugality.

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 1.2 Statement of the problem

One of the greatest achievements in the 21st century is the rapid growth of technology which is
applied in all spheres of life. In fields such as health, agriculture, education, technology is being
used to ease processes and to provide rapid and efficient services to people. This technological
boom is being exploited by all fields to provide the finest quality services.

Presently, we still find large crowds at NFC bank counters for withdrawals or request of services,
few customers owning electronic cards such as debit cards and credit cards, few customers
having an online bank account and most importantly, less than 45% of its customers are aware of
the existence of mobile money services. The little implementation of mobile money services
affects both NFC bank and its customers.

For example the bank’s profitability is not optimized (that is profit turns to reduce by 25.5%),
cost of service provision remains high (increase by 5%), and customer’s dissatisfaction due to
financial services that sometimes take long to effect (customer satisfaction drops due to the long
period of time taken to carryout transaction such as deposit and withdrawal of funds by the
customers). All these happens because more services are provided using the traditional method
(which is time consuming and costly) instead of implementing effective technology in the
provision of financial services. This will go to increase customer base and satisfaction, reduce
cost, increase profit margins and make a better name for the banks (NFC bank).

1.3 Research questions

The research questions included the following;

i. What are the mobile money services available in NFC bank?

ii. What are the measures of financial performance in NFC bank?
iii. What is the relationship between mobile money services and financial performance of NFC
bank?

1.4 Research objectives

The study objectives include the following;

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1.4.1 Main objective

To determine the effect of mobile money on the performance of NFC bank

1.4.2 Specific objectives

i. To examine the different mobile money services available in NFC bank.

ii. To assess the measures of financial performance of NFC bank.

iii. To establish the relationship between mobile money services and financial performance of
NFC Bank.

1.5 Hypothesis of the study

This study was guided by the following null hypothesis (H0) and alternative (H1)

H0: There is no significant relationship between mobile money services and commercial banks
performance.

H1: there is a significant relationship between mobile money services and commercial banks
performance.

1.6 Significance of the study

To the Student;

The results of this study is intended to enrich the knowledge of every student in learning about
financial unit, banking activities and predicted factors affecting probability on the aspect of
mobile money services relating to banks and other banking institutions. It will enable us know
the level of mobile money services on banks.

To the Organization;

The study is of importance to the investors in the banking industry, government and regulatory
authorities in Cameroon banking industry as it will assist them in formulating policies relating to
mobile money services on banks.

Secondly, the bank management will be greatly informed by the findings of the study. It
enlightens the bank managers on how mobile money services influences the performance of

5
banks. This finding will benefit management and staff of banks who will gain insight on the
measures of financial performance.

Thirdly, the study informs the general public on how bank’s performance is influenced by
mobile money services.

To Academia

The study will lay foundation for academicians who may want to carry empirical literature to
further research in a similar field for future study on the effects of mobile money services on the
performance of commercial banks. And it will act as baseline to give guide on questions
concerning the similar situation in other commercial banks directly related to the effects of
mobile money services.

To Policy Makers

The idea provided in this study can give Policy holders an understanding of what it all entails in
mobile money services in commercial banks so as to be taken into consideration in the
constitution.

1.7 Organization of the study

The research proposal is structured as follows; chapter one provides the research background,
statement of the problem, research question, research objective, and hypothesis of the study,
significance of the study and organization of the study. Chapter two provides the literature
review in terms of theories supporting the study, conceptual literature/framework, empirical
literature. Chapter three provides research design, study population, sampling strategies and
sample size, data collection sources and instrument, data quality control and data processing and
analysis. Chapter four comprise of data analysis, presentation and interpretation. Chapter five
constitute the summary, recommendation and conclusion of the study.

Definition of key terms

Commercial banks: used according to the common usage of banks to mean institutions in Buea
that provides financial services, such as accepting deposits, giving business loans, mortgage
lending, and basic investment products like savings accounts.

6
Mobile Money: refers to use of mobile phones (mobile phone money services) to conduct
financial transactions such as sending and receiving money, paying for goods or services,
purchasing airtime, remittances, accessing bank accounts to make deposits or withdrawals,
viewing financial statements for bank accounts and/or mobile money and any other closely
related service. It is therefore related to a combination of mobile telephones and financial
services as adopted by World Bank (2010) to conduct financial transactions as outlined above.

Mobile Commerce (m-Commerce): is limited to the use of mobile money functions available
to purchase or sell goods in SMEs business transactions. This concept has beenapplied according
to the definition by Must & Ludewig (2010).

Profitability

Profitability is the ability of a business to earn a profit. A profit is what is left of the revenue
business generates after it pays all expenses directly related to the generation of the revenue,
such as producing a product, and other expenses related to the conduct of the business activities.
There are many different ways of analyzing profitability. This focuses on profitability ratios,
which are a measure of the business’ ability to generate revenue compared to the amount of
expenses it incurs (Shawn Grimsey).

Loans

The advance of a specified sum of money to a person or business (the borrower) by other persons
or businesses, or more particularly by a specialist financial institution (the lender), which makes
its profits from the interest charged on loans. The provision of loans by commercial banks,
finance houses, building societies, etc., is an important source of credit in the economy, serving
to underpin a substantial amount of spending on current consumption and the acquisition of
personal and business assets.

Revenue

The inflow of assets that results from sales of goods and services and earnings from dividends,
interest, and rent. Revenue is often received in the form of cash but also may be inthe form of
receivables to be turned into cash at a later date (Houghton Mifflin).

7
 CHAPTER TWO

LITERATURE REVIEW

2.1 Conceptual literature

The conceptual framework denotes the visual presentation of the relationship between the
variables in the study. The projected relationship of the study variables in the conceptual
framework depicts mobile money services and financial accessibility and reliability as the
dependent variable. The independent variable is the Financial Performance of commercial banks,
profitability loans and revenue with Mobile money regulation and operator support regulation
and operator support condition

Mobile money services were proposed to have an effect on the performance of commercial banks
in Cameroon. The study sought to examine the effects of mobile money services on commercial
banks

Mobile money

Mobile Money services refers to use of mobile phone (mobile phone money services) and
internet banking to conduct financial transactions such as sending and receiving money, paying
for goods or services, purchasing airtime, remittances, accessing bank accounts to make deposits
or withdrawals, viewing financial statements for bank accounts and mobile money and any other
closely related service (Desils, 2019).

Mobile money services continued to register significant growth in the year to June 2017. This
growth was propelled by the services’ convenience. Besides being an avenue for transfers from
one person to another person and bills payments, mobile money has revolutionized the banking
sector complementing the banks’ operations. Notably, banks’ customers are using mobile money
to transfer funds between their bank and mobile money accounts. They can save and borrow
through the mobile money accounts. The number of mobile money transactions increased from
809.1 million in the year to June 2016 to 1.1 trillion during the year to June 2017. The
corresponding increase in the value of mobile money transaction was from 37.4 trillion to 52.8
trillion. The number of registered mobile money users increased from 19.6 million to 22.8
million during the period (BOU, 2019).

8
Must and Ludewig (2020) trace the rise of mobile money to the rapid and worldwide penetration
of mobile phones back to 1999. However, mobile phone enabled commerce or services may have
started as early as 1997 when mobile phone enabled Coco Cola vending machines and mobile
phone banking services were introduced in Finland. Jenny & Isaac (2020) concentrated on Africa
and they explored the history of mobile money services in different countries. Jack and Sun
(2020) researched on the effect of reduced transaction costs and effect on household
consumption in Kenya complementing the earlier research findings from Hughes and Lonie
(2018). This data revealed that research on mobile money globally, regionally and locally is
recent due to novelty of this technology.

Commercial Banks

Commercial banking business involves accepting deposits, giving credit, money remittances
and any other financial services. The industry performs one of the very important role in
the financial sector with a lot of emphasizes on mobilizing of savings and credit
provision in the economy. .In the 21st century, banking is considered as innovative banking.
The banking philosophy has completely been transformed by technological changes along
with many financial innovations which has heightened the competitiveness of Cameroon’s
banking industry. The banking system operates under an environment experiencing huge
dynamism and challenges which has necessitated for new product, process and market
innovations. The application of information technology has yielded new innovations in
product designing and changed their mode of delivery in the banking and finance sectors.
Several initiatives are being undertaken in the banking sector to offer better customer services
with the aid of new technologies. Internet banking has been employed as a strategic resource for
attainment of higher efficiency, reduction of cost and control of operations through replacement
of labor intensive and paper based methods with automated processes hence causing
higher profitability and productivity. Innovations in the Cameroon banking sector include;
Internet banking, Short Messaging Services (SMS) banking, ATMs (Ocharo & Muturi, 2019).

9
2.1.2 Conceptual Framework of the study

Dependent variable
Independent variable

Mobile money services Financial Performance of

Commercial banks

Financial accessibility Mobile money Profitability loans

and reliability regulation and and revenue
operator support
regulation and
operator support
condition

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2.2 Theoretical Review

This section reviews the various theories related to mobile money and financial innovation and
will help guide the study. The theories will include Diffusion theory which seeks to establish
why financial innovation evolution has led to improved financial efficiency. Silber’s constraints
theory of Innovation shows attempts by profit maximizing firms to reduce the impact of various
types of constraints that reduces profitability. The third theory to review will be Kanes’ theory of
innovation which deals with reduction of potential risk to minimum, response to financial costs
created by changes and improving performance to attract customers despite the regulative
burden. Studies on the performance of banks started in the early 1980s with the application of
two industrial organizations models: the market power and Efficiency structure theories
(Anthanasoglou et al. 2006). The balanced portfolio theory has also added greater insights into
the study of bank profitability (Nzongang & Atemnkeng 2006)

2.2.1 Diffusion Theory

Rogers (2018) defined diffusion as the process by which an innovation is communicated through
certain channels over time among the members of a social system. Rogers’ theory of diffusion
contains four elements that are present in the diffusion of innovation process. The first is
innovation which he defines as an idea, practice, or object that is perceived as new by an
individual or other unit of adoption. The other is communication channel which is the means by
which messages get from one individual to another. Time is the other that encapsulates
innovation-decision process, relative time (innovation is adopted by an individual or group) and
innovation’s rate of adoption. Last element is social 11 system which is a set of intelTelated units
that are engaged in joint problem solving to accomplish a common goal.

This theory is therefore relevant to this study in that, the social systems can understand the
importance of the innovation despite high costs and work towards streamlining the processes.
This can explain how financial innovation has evolved over time in the commercial banks in
Buea.

Even though it seeks to explain how, why and at what rate new ideas and innovations spread
through cultures, it has some limitations, this new idea has to be accepted by all stakeholders,

11
Banks efficiency due to innovation takes time as it involves transmission of new ideas and
processes to its customers and employees.

2.2.2 Silber’s Constraints Theory of Innovation

Silber (2013) attributes financial innovation to attempts by profit maximizing firms to reduce the
impact of various types of constraints that reduces profitability. The theory points out that the
purpose of profit maximization of commercial banks is the key reason of financial innovation.
Moreover, their decrease in profitability, which can be attributed to external competition or
government regulation, has provided these firms with the necessary motivation to increase
profitability. The suggestion in the work of Silber is that investment in innovation is a rational
response to an unfavorable competitive position

This theory is relevant to this study in that, by using the concept of financial innovation, he
provides us with a wider spectrum of potential reason contributing to the innovating process that
helps to improve the performance of 12 financial institutions. Successful innovations are the
extensive use of cost reducing information technology and elaborate new finance theories in the
financial sector and several new products designed to cope with the rising yield of assets in order
to attract new funds.

The theory is limiting in that, profit maximization of commercial banks is not the only reason for
financial innovation, the exist others which include; technological advancements and payment
system, competition, market failures, financial insecurity etc.

2.2.3 Kane’s theory of Innovation

Kane (1984) sees financial innovation as an institutional response to financial costs created by
changes in technology, market need, and political forces, particularly laws and regulations.
Financial industry is special, it has stricter regulations and financial institutions have to deal with
these regulations in order to reduce the potential risks to minimum. Members are able to operate
without being subjected to regulatory oversight for unregulated activities. An example of an
unregulated activity is a credit default swap (CDS). Kane approaches innovation as an arbitrage
instrument trying to take advantage of regulation lags. Innovation takes the form of product
substitution in order to circumvent regulation sometimes by just rearranging contracts and by just
simply moving along different financial systems. He defines regulation’s burden as a form of

12
taxation imposed on banks. In order to attract customers despite the regulative burden, they used
a mixture of means initially covering non-monetary benefits to indirect benefits and at the end
mainly monetary advantages. But on the other hand regulators developed their own defenses and
adopted new approaches resulting in the emergence.

This theory is relevant to this study in that, his contribution is essential for the better
understanding of the existence of dialectic between financial institutions (banks) and exogenous
factors that leads to permanent evolution under the process of financial innovation which
include; mobile money services.

This theory is limiting in that, this parallel banking system essentially caused the credit market to
freeze, due to lack of liquidity in the banking system of which Banks cannot operate in such a
manner. Kane approaches innovation as an arbitrage instrument trying to take advantage of
regulation lags.

2.3 Empirical Literature

Nader (2018) in his study on the profit efficiency of the Saudi Arabia Commercial banks
sampled 6 Saudi commercial banks, out of 11 ones working in the Saudi banking market. Data
collected covered the period 2007 to 2018 for each bank; the study indicated that availability of
mobile banking had a positive effect on profit efficiency of Saudi banks. The results showed that
the most important determinants of ~profit efficiency” are the “availability of phone banking”
and the “number of ATMs”. Thus, this result was consistent with his idea that availability of
mobile banking” is what determines profit efficiency rather than any other determinant in the
study.

Ravichandran and Sharma (2012) analyzed the efficiency and performance of selected
commercial banks in Saudi Arabia. The study considered 8 commercial banks for a period of 10
years (2000-2009). CRAMEL model (Capital Adequacy, Resource Raising ability, Asset
Quality, Management Quality, Earnings Quality and Liquidity) was adopted to assess the
efficiency and performance of Saudi banks. The results of the study shows that all the Saudi 22
commercial banks were performing well and the only area all the banks has to concentrate was
asset quality. The study also noted that concentration over public deposits was very low when

13
compared to the loans. The results of the ranking based on CRAMEL ration performance shows
that Al Jazira Bank was rated as best bank when compared to the other Saudi Arabian banks.

Uppal R.K. (2010) studies the extent of mobile banking in Indian banking industry during the
years 2006-2019. The study concludes that among all e-channels, ATM is the most effective
while mobile banking does not hold a strong position in public and old private sector but in new
private sector banks and foreign banks m-banking is good enough with nearly 50 Pc average
branches providing m-banking services. M -banking customers are also the highest in e-banks
which have positive impact on net profits and business per employee of these banks. Among all,
foreign banks are on the top position followed by new private sector banks in providing m-
banking services and their efficiency is also much higher as compared to other groups.

Gakure (2013) from their study it is seen that bank innovations have a moderate influence on
profitability of commercial banks in Kenya. The analysis produced a coefficient of determination
of 47.8% which shows the percentage of variations in profitability which is explained by bank
innovations. The significance test showed that influence of bank innovations on bank
profitability was statistically significant. This means that the combined effect of the bank
innovations in this research is statistically significant in explaining the profits of commercial
banks in Kenya. Banks in Kenya have achieved more than a decade of boosting their earning
capability and controlling costs through adoption of innovations like the mobile banking, internet
banking and recently the agency banking. Responses presented on the influence of mobile
banking on the profitability of commercial banks in Kenya are proved that incomes from mobile
banking have high margin and that maintenance costs of mobile banking are low.

Aini (2014) conducted a triangulation study utilizing both primary and secondary data to
establish the issues and challenges facing mobile banking in India. Primary data was used
in the study. The results indicate that approximately 61.33% respondents find the mobile
banking less costly and time saving and58.67% respondents would wish to try this
service. The paper also established a number of factors such as availability and ease of
use of mobile banking related technologies, which explain why consumers are not using
mobile banking and other technologies in banking

Tchouassi (2012) sought to use empirical studies from selected Sub –Saharan Countries to
establish whether mobile phones actually contribute in extending banking services to

14
the unbanked. The aim of the study was to find how mobile phones could be used to the
unbanked and poor segment of the population. The findings revealed that poor and
vulnerable households in Sub-Saharan Africa

19countries are often incur high financial transactions while undertaking basic financial
transactions. Therefore, the use of mobile phone could improve the provision of financial
services in this segment and that economic and technological innovation, regulatory and
policy innovation was required to extend this services

Gaps in literature

Tchouassi(2012) focus was to find how mobile phones could be used to the unbanked and
poor segment of the population in Sub-Saharan countries the focus of study was in sub-
Saharan Africa whereas the current focus is Cameroon buea to precise

15
 CHAPTER THREE

RESEARCH METHODOLOGY

3.1 Scope and Area of Study

3.1.1 The scope of the study

This research will focus on Commercial Banks with reference to NATIONAL FINANCIAL
CREDIT Bank, abbreviated NFC bank. Data for the study will be within the year 2019 to 2023.
It is limited to the operation efficiency mobile money services and the different mobile money
services available, measures of financial performance, relationship between mobile money
services and financial performance of NFC Bank.

In other to attain the objective of this research, that is; to determine the effect of mobile money
on the performance of NFC bank, to examine the different mobile money services available in
NFC bank, To assess the measures of financial performance of NFC bank, to establish the
relationship between mobile money services and financial performance of NFC Bank. The scope
will be defined to embody all relevant aspect of mobile money services in banking operations.
These services may include; check deposits, balance inquiry, withdrawals and payment transfers.

3.1.2 Study Area

Cameroon is found in Central Africa, a country of fairly distinct region: mangrove swamps,
coastal plains, central plateau, the Great Chad plain in the north, and the heavily wooded lands in
the South East and an important range of mountains which begins from the South with Mount
Cameroon and stretches to the North at the Adamawa. The capital city of Cameroon is Yaoundé.
Yaoundé was founded in 1888 by the Germans under the name Jaude Ads a base for ivory trade
and agricultural research station. It later became occupied by the Belgian troops during world
war one after German defeats, France became the colonial master in Eastern Cameroon.
Yaoundé consequently became the capital of French Cameroon and continued as capital of the
Republic of Cameroun at independence.

National Financial Credit Bank (NFC Bank) was created as a Financial Institution called
National Financial Credit Company (NFCC) and was  registered at the National Credit Council
(NCC) on December 20th,  1989 with its legal Headquarters in Bamenda while its

16
Administrative  Headquarters is located at Avenue Charles De Gaulle in Yaoundé. It officially
began business operations as a Financial Institution on  June 15th 1990 and became a licensed
Commercial Bank, NFC  Bank on August 9th, 2006 after accreditation by COBAC.

The study was on mobile money services on the performance of commercial banks. It has the
following variables;- performance of commercial bank been the dependent variable while loan
and revenue on the profitability of commercial bank case study NFC bank BUEA as the
independent variable.

3.1.3 LIMITATIONS

It is limited to the operation of mobile money services and the different mobile money services
available, measures of financial performance, relationship between mobile money services and
financial performance of NFC Bank. The study takes into consideration only one bank which is
National Financial Credit bank abbreviated NFC Bank.

3.2 Research design

The research design used for this study was the descriptive research design. A descriptive survey

is a design that involves establishing what is happening as far as a particular variable is

concerned and the design has been used to investigate the effect of mobile money services on the

performance of commercial banks in Cameroon with case study NFC. Descriptive design was

used because it addresses the objectives of the study and takes into consideration aspects such as

sample size in relationship to target population, the variable under study, the approach of the

study and the methods use in data collection.

3.3 Sources and Method of Data Collection

3.3.1 Sources of data collection

The research used both primary data and secondary data. Primary data was collected using
questionnaires where all the issues on the questionnaires were addressed. The essence of using
primary data was because of the nature of the study data, which essentially involve the use of
published work and in order to meet the information requirement, as well as for accuracy and

17
precision of data. The data used in this study was obtain from the annual report specifically the
balance sheet and profit and loss accounts of NFC for a period of 5years (2019 to 2023). The
period was chosen to cover to a reasonable extent the period of various reforms in the banking
sector and because of the availability of data. Secondary data was collected from annual reports
and financial statements, Print Medias (Newspapers and Magazines). This helped to provide
already existing data to facilitate the study.

3.3.2 Method of data collection

Primary data collected for this study was analyze with the help of Statistical Package for Social
Science version 25 (SPSS v25), and Microsoft Office Excel 2016.The researcher analyzed the
data collected from secondary sources by using Multiple Regression and Correlation Analysis
method. Correlation was used because this research was out to study the relationship that exists
between profitability and mobile money services. Also, a 5% (0.05) level of significance or 95%
confidence level was chosen for the purpose of this study. ANOVA and Pearson’s correlations
would also be calculated.

3.4 Methodology of the study

Analyzed data was presented using frequency tables. Data was analyzed using both descriptive
and inferential statistics. Statistical tally system was used to generate frequency counts from the
responses so as to prepare frequency distributions. Percentages were calculated from the
responses out of the total study sample response per item. The hypotheses was also tested using
Pearson’s correlations, Analysis of variance (ANOVA) and multiple Regressions.

Interpretations of the results were done based on the methodology applied in the study, and the
findings were arranged in a logical sequence without bias of interpretation. Percentages and
frequencies where used for interpreting the results. Percentages and frequencies gave a clear
picture of the differences in the results, and thus the result that was significant in the study.

3.5 validity and reliability of instrument

Validity; refers to the accuracy of a measure (whether the results really do represent what they

are supposed to measure).This is defined as the extent to which the instruments measure what it

supposed to measure (Allen and Yen 1979). Content validity pertains to the degree which the

18
instrument fully assesses or measures the construct of interest. The questionnaire will be

carefully designed and tested with a few members of the population for further improvements.

This was done in order to enhance its validity and accuracy of data to be collected for the study.

Validity as a concept refers to an instrument that measures what it intends to measure.

Reliability; Reliability refers to the consistency of a measure (whether the result can be
reproduced under the same conditions). The reliability of the questionnaires was improved
through pretesting of pilot samples from the field which enabled the rephrasing of some
questions. The reliability of the researcher instrument concerned the extent to which the
instrument yields the same results on repeated trials. Although unreliability was always present
to a larger extent, there was generally a good deal of consistency in the results of a quality
instrument at different times. The tendency towards consistency found in repeated measurements
is referred to as reliability (Carmines and Zeller, 1979). Getting valid and reliable data is the
main aspirations of the research.

3.5.1 Pre-test

Diagnostic tests are performed in a study to ensure that the data is adequate for analysis. The

study conducted diagnostic test for hausman tests.

Hausman Test

The hausman test is carried out to determine the best model to use in carrying out a panel

regression output. The null hypothesis is that the preferred model is random effect while the

alternative hypothesis is that the preferred model is fixed. A p value of less than 0.05 rejects the

null hypothesis therefore the fixed effect model is used.

3.5.2 Post-test

19