In Kisumu City, Kenya, microfinance institutions (MFIs) are key in the provision of financial services to low-

income earners. Notwithstanding the evolution of financial technologies (Fintech), with its potential to provide

innovative solutions that can improve financial inclusion, there are a number of obstacles to fully exploit these

advancements. The practical problem which this study seeks to address is the knowledge gap as to how Fintech

credit and credit sharing, and banking regulations influence the performance of MFIs in Kisumu City. The

critical knowledge void is an understanding of how Fintech credit, credit sharing and banking regulations

specifically influence the financial performance of MFIs. The aim is to develop a robust understanding of how

each factor affects the financial health of MFIs so as to contribute to data-based improvement and targeted

interventions. The study is based on financial intermediary theory and asymmetric information theory that have

theoretical implications for understanding how financial technologies and regulatory frameworks may

Credit sharing and banking regulations also positively affect financial performance, though their impact is less

pronounced compared to Fintech credit. In conclusion, while Fintech credit significantly enhances MFI

performance, credit sharing and regulatory compliance also contribute positively but to a lesser extent. The

study underscores the need for further research and the implementation of data-driven strategies and supportive

regulatory frameworks to fully harness the benefits of Fintech innovations for the economically vulnerable

Microfinance institutions (MFIs) are entities that offer a range of financial services, including loans, savings

accounts, insurance, and money transfers, primarily to individuals and small businesses that generally do not

Microfinance institutions started gaining ground across the globe as a way to help the poor and marginalized

populations. The idea gained significant momentum following the establishment of the Grameen Bank in

Bangladesh by Nobel Peace Prize laureate Muhammad Yunus who showed just how impactful small loans

could be. Over time, this approach spread far and wide, with microfinance becoming a key part of financial

systems in both wealthy and poorer nations. Back in 2016, India led the way, with around 47 million people

borrowing a total of roughly 15 billion US dollars through microfinance programs.

In Africa, where a large proportion of the population lacks access to formal financial services, microfinance

institutions have become crucial drivers of economic development. Many African countries have seen the

emergence of MFIs that cater for the financial needs of the underserved population, empowering them with

opportunities to engage in income generating activities and improve their livelihoods, or rather to cater for

in Kenya being served approximately USD 1.5 billion in loans by the over 20 micro-finance institutions that

had already grown in the country. (Guti´errez-Nieto, 2009) Different MFIs kept growing in the country with

equity bank Kenya being the leading with share of loans, accounting for 73.5% of the market, translating to

over 100,000 clients. Followed by Kenya women microfinance bank taking 12.06% of the market.

Kisumu, positioned in western Kenya, lies along a bay on the eastern edge of Lake Victoria at an elevation of

1,131 meters (3,711 feet). It serves as the administrative center of Kisumu County and ranks as the second-

largest city in the Lake Victoria basin, following Kampala.

Kisumu is renowned for its vibrant economy which is mostly driven by small businesses and the informal

sector. Microfinance institutions have plays a key role in empowering local entrepreneurs by offering them

access to credit which has helped spur economic growth and reduce poverty in the region. Today, more than

of sharing credit have started to reshape how financial services are delivered and accessed. The Central Bank

of Kenya (CBK) Innovation Survey 2022 revealed that out of the 14 microfinance banks surveyed, 93%

identified credit, deposit, and capital-raising services as key areas for innovation in their short to medium term

strategies. Additionally, 96% of these institutions had implemented mobile banking solutions to support

banking operations and enhance customer relationship services.

KPMG (2017), provides a definition of fintech companies as those that leverage technology to their advantage,

causing significant disruptions within the financial services industry. They stand out from rivals by their

single-minded pursuit of excellence in service quality for customers. Moreover, they employ digital technology

in every conceivable area of financial life with great emphasis on education and entertainment apps. The use of

fintech has lowered intermediation costs for these firms and increased financial access. This has encouraged

platforms give users a larger say in matters and some are even able to let lenders pick who they lend money to

or select certain types of loans. In some cases, peer-to-peer lending is conducted through online auctions,

adding an extra degree of flexibility to the process and making it smoother (Financial Stability Board, 2017).

In Kenya, the fintech space has seen remarkable growth, with numerous companies entering the market and

offering diverse financial services that continue to attract a growing number of users. As reported by the

Communications Authority of Kenya (2018), a number of firms including Telkom Kenya Ltd, Mobile Pay Ltd,

Airtel Networks Ltd, Finserve Africa Ltd, Safaricom Plc and Sema Mobile Services were officially registered

to deliver mobile money services.

Additionally, there are companies like Cellulant, Jambopay and Pesapal which are not formally regulated but

provides a widely used payment solutions. On the lending side, firms such as Branch, Tala, Zenka and

Tchamyou and Asongu (2017) define credit data sharing as the routine exchange of information concerning the

creditworthiness of borrowers. Bos, De Haas, and Millone (2016) explain credit information sharing as the

exchange of details about a borrower's financial history and behavior that is an essential factor in the effective

functioning of credit markets.

According to Tchamyou (2019), lending data movements between financial institutions are designed to shield

collect any defaulted loans. This benefit gives banks more freedom to follow the credit background of all

applicants in the past, reducing the cost of gathering credit details directly from borrowers and even helps

make borrowers more aware of their borrowing habits. Moreover, it serves as a deterrent against borrowing

What 's more, at some stage sharing credit information may damage the trust between banks and customers

that often has been built up over years. It also gives banks superior information that could change the power

balance, perhaps leading at some future date to tension or even dislocation in the way they lend money.

Morduch, 2009). Regulation of banking influences how microlenders (MFIs) perform and what they are able

to do. These guidelines are meant to ensure financial stability, protect consumers and promote fair and

responsible lending practices across the sector. However, their impact on MFIs isn’t always clear-cut.

Depending on the regulatory framework, how effectively an institution is managed and the broader economic

conditions, regulations can have both positive and negative effects. While well-crafted rules can strengthen

compliance with broader areas of law. Some of these include:

Data Protection and Privacy: Every individual's right to privacy, encompassing the protection of personal and

private information, is safeguarded under Article 31 of the 2010 Kenyan Constitution. The Data Protection Act

(DPA) of 2019 was introduced to enforce the constitutional right to privacy by regulating how personal data is

handled. It clearly states the rights of individuals (data subjects) and the responsibilities of those who collect

and manage data, known as data controllers and processors. This law holds particular importance for fintech

companies, as their operations often depend on gathering and handling sensitive customer information, like

Know Your Customer (KYC) details and records of financial transactions. As a matter of fact, under the E-

commerce Law of Thailand, the definition of personal data is loosely based on a catch-all phrase. It's intended

to cover literally any information relating directly or indirectly to an identifiable individual. These regulations

are designed to guarantee that all personal data is processed and utilized in compliance with the law, both

diligently and responsibly. For example, the Consumer Protection Act of 2012 is the principal legislation in

place today to defend consumer rights and curb practices by businesses which are unfair. It should be noted

advertising and obtain written prior consent from the Central Bank of Kenya (CBK) before bigger credit terms

are changed. And also the National Payment System Regulations 2014 lay down specific regulations on

consumer protection. They deal with disclosure, customer service, dealing with complaints, service agreements

and the confidentiality of information received from members of public who hold accounts in a participant

bank's data networks system.

The Money Remittance Regulations also address consumer protection. Anti-Money Laundering (AML)

obligation falls under the jurisdiction of the Proceeds of Crime and Anti-Money Laundering Act (POCAMLA)

2009. According to Section 2, "Financial institution" is anything or entity that engages in providing financial

services, which would include processing payments using instruments such as credit or debit cards, cheques,

where, for the various services it provides, it has to seek multiple permits. For example, a Fintech firm that was

operating a mobile money product would have to obtain licenses both from the Central Bank of Kenya and

from Communications Authority Kenya. Moreover, it must comply with laws governing data protection,

consumer protection and antimony laundering.

According to Al-Matari, Al-Swidi, and Fadzil (2014), financial performance is defined as a company's ability

to meet specific financial objectives, especially in terms of profitability. It acts as an indicator of how

effectively an organization achieves or exceeds its financial aims. Baba and Nasieku (2016) emphasize that

financial performance indicates how efficiently a firm utilizes its assets to generate revenue, providing

essential insights for stakeholders. Nzuve (2016) points out that the stability of the banking sector is largely

influenced by the performance of individual banks, as it reflects their operational strengths and weaknesses.

Financial performance can be measured through several ratios, such as Return on Assets (ROA) and Net

& Morris, 2012). This ratio is calculated by dividing operating profit by total assets, indicating earnings

derived from all of the company's financial resources. In contrast, NIM measures the difference between the

interest paid to the bank's creditors (liabilities) and the interest income earned by the bank relative to its assets.

The NIM is expressed as net interest income divided by total earning assets (Gul et al., 2011).

Fintech companies play a crucial role in improving financial performance by making use of digital financial

platforms. By harnessing advanced technologies, these firms are able to compete with traditional banks and act

as important players in delivering financial services more efficiently and accessibly. The Kenyan market

possesses all the conducive conditions for the growth of fintech companies and the advancement of financial

Mutua (2013) states rapid technological progress in the payments space has greatly enhanced financial

inclusion and transforms how traditional banking systems operate. Although these advances have been made,

most of Kenya's financial market are still unpenetrated territory, and there is plenty of room for fintech

companies to enter the crowd. However, the combined tide of globalization, changing customer needs, and

severe competition in the financial sector altogether serve to make the struggle for market shares even more

brutal.

The purpose of this study is to deeply investigate the impact of fintech credit, credit information sharing and

on challenges arising in these changing environments. It should therefore provide a useful, evidence-based

guidebook for policymakers, microfinance managers and other stakeholders to make sensible and practical

decisions. It also examines how regulatory frameworks shape the relationship between fintech and