To examine factors influencing diversification of income generating activities in commercial banks in Kenya
Banks, the world over, are transcending their normal business operations and diversifying their activities. The Kenyan banking Industry also has been steadily shifting away from concentrating on traditional activities such as loan - making, and diversifying into non - traditional activities that generate fee income, service charges or trading revenue, among others. Some of these non traditional activities of income generation that many banks have shifted to include installation of A TM services at various retail outlets, money transfer services, internet banking and partnerships for agency services. The purpose of this study was to examine the factors that influence diversification of income generating activities in commercial banks in Kenya. The study was carried out in fifteen commercial banks in Kenya which were randomly picked from three tiers which the banks were categorised, five from each tier. The target population was the staff working in areas of income diversification activities. The staff who participated in the study were therefore purposively sampled. The study was descriptive and structured questionnaires consisting of both open and closed ended questions were used to collect data. Data collected was ana lysed using descriptive statistics such as mean and correlation. This analysis was carried out with the help of statistical package for social sciences (SPSS). Data presentation was in the form of tables, graphs and charts. According to the findings of the study, majority of the respondents indicated that service offered, risk, competition and technology, greatly determined diversification of income generating activities in commercial banks in Kenya. The study also revealed significant statistical differences on how the variables studied influenced diversification of income generating activities in each tier. The study concluded that diversification of income generating activities was greatly determined by service offered, risk appetite, competition and technology in use. However, the degree of influence of these variables on diversification differed among the three tiers of banks studied, pointing towards customer segmentation focus as an intervening variable. This is an indication that commercial banks are focused on deepening their relationship with customers and therefore there could be a move towards segment targeting in diversification of income generating activities such that the segment of focus is what ultimately determines diversification of income generating activities. In recommendation, the researcher suggested that any diversification into other income generation activities should take into consideration how such activities will be delivered to the customers to ensure that they remain loyal to the banks. Risks in the process of diversification of income generation activities should be identified, assessed and mitigated, while any diversification of income generation activity decision need to consider the level of competition in terms of ability to attract customers for a new income generation activity. Further, banks should embrace technology that will enhance their diversification of income generation activities. And given the role of intervening variables in income generation activities diversification decisions, the researcher recommends that while diversifying, the particular segment of focus of the bank should be considered. Further research is recommended on the finding that there exist statistical differences on how much the factors studied affect decisions on income generation activities in all the tires. In particular, more research is recommended on segment focus and other intervening variables on how they influence decisions on diversification of income generation activities. The findings of the study will benefit banks, policy makers, academia and the general public.