Browsing by Author "Korane, Mohamud Dubow"

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    Financial Risks and Financial Performance of Tier IIICommercial Banks in Kenya
    (IJCAB Publications Group, 2025-11) Korane, Mohamud Dubow; Musau, Salome
    Kenya commercial banks’ financial performance is influenced by myriad of challenges that can impact their profitability, operational efficiency and overall stability. Therefore, this review endeavored toascertainfinancial risksimpactson Kenya’s commercial banks financial performance, specifically targeting operational, credit, liquidityand market risk impacts. Theories of Miller and Modigliani, financial distress, financial intermediationand modern portfoliounderpinnedthe review.Employingdescriptive research,all 22tier IIIbanksformedthe target populaceand censuswasused.Financial data wascollated from existing published statements using secondary designated collection sheet from2019-2023.Data collected wasanalyzed using descriptivetechniques (mean, median and standard deviation)and inferential statistics(multiple regression.The study revealed that operational, credit, liquidity and market risks had a positive significant effect on Tier III Kenya’s commercial banks’ financial performance. The research concludes that operational risks have the potential to result in operational failures, which may incur additional costs for mitigation and compliance, thereby placing financial strain on banks. The credit risk may occur in a situation whereby the bank does not effectively evaluate the borrower’s creditworthiness resulting to increased number of loan defaulters which also leads to more provisioning costs for bad debts affecting negatively the bank's profitability. The existence of liquidity risk can hinder a bank's ability to effectively manage its liquidity, leading to increased costs related to borrowed funds necessary to meet its obligations, which ultimately diminishes profit margins and impacts the bank's overall financial performance. Fluctuations in interest rates have an impact on the net interest income of banks, which constitutes their revenue stream. This can lead to a reduction in their ability to adapt to such changes, thereby influencing their financial performance. The research suggests that Tier III banks ought to improve their investment in technology by upgrading their information technology systems and implementing more advanced security protocols to reduce the risk of cyber threats. The Tier III banks should adopt a diversified loan portfolio to minimize more reliance of certain industries that could bring higher risks upon economic fluctuations. Tier III banks can properly manage liquidity risks through maintenance of a wider range of financing base such as mix of deposits, loans and other sources of capital. The Tier III banks should adopt a comprehensive structure managing risks, carry out a frequent stress test and have a more diversified lending portfolio to solve the possible losses.