Digital banking services and investment decisions of female-owned small and medium enterprises in Nairobi city county

Abstract

This study investigates how digital banking services affect the investment decisions of female-owned small and medium enterprises (SMEs) in Nairobi City County. It specifically evaluates the effect of digital credit, digital savings, insurance technology (insurtech), and robo-advisory services on the investment behavior of these businesses. The research is anchored on four theories; Credit Rationing Theory, Pecking Order Theory, Risk Management Theory, and Modern Portfolio Theory which together provide a foundation for examining the link between digital financial innovations and investment decision-making. An explanatory research design was employed, using primary data collected through structured questionnaires. The study targeted 39,440 female-owned SMEs registered in Nairobi City County, from which a representative sample of 396 respondents was drawn using the Yamane formula. Simple random sampling will be utilized to ensure fair representation of various business categories. Data will be analyzed using SPSS version 29, with multiple regression analysis applied to test the hypotheses. Findings will be presented through tables and figures for better interpretation. The results revealed that insurtech services exert the greatest influence on investment decisions among female SME owners by offering accessible and affordable risk management options that boost business confidence and encourage growth-oriented investments. Additionally, robo-advisory services significantly improve investment decision quality by providing personalized, data-driven, and cost-efficient financial guidance. Overall, the study concludes that the adoption and effective use of digital banking services significantly enhance investment behavior and business performance among female-owned SMEs. Consequently, improving access, affordability, and awareness of these services is vital for promoting sustainable investment growth and empowering women entrepreneurs in Nairobi City County.