Strategic Banking Channels and Performance of Commercial Banks in Kenya
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Date
2024-11
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Publisher
Kenyatta University
Abstract
Performance in the context of commercial banks is a critical concern worldwide. Banks play a pivotal role in the financial stability and economic development of nations. Their performance is not only indicative of their financial health but also reflects the broader economic landscape. Strategic banking channels utilizing digital platforms are believed to improve the performance of banks by providing services and products to customers around the clock. However, despite the improving ratio, Kenya still remains overbanked compared to other major African economies. This study investigated the influence of strategic banking channels on the performance of commercial banks in Kenya. Specifically, it examined the impact of agency banking, mobile banking, automated teller machine (ATM) banking, and internet banking channels on the performance of commercial banks in Kenya. The study was anchored by Financial Intermediation Theory, Balance Score Card, Agency Theory, Diffusion of Innovation Theory, and Technology Acceptance Model (TAM). A descriptive research design was adopted for the study. The unit of analysis consisted of 13 commercial banks in Kenya that have implemented all the strategic banking channels. The unit of observation included 1,406 management staff at the headquarters of these banks, comprising directors, heads of departments (HODs), heads of units, and line managers. A purposive sampling method was used to select respondents based on their characteristics or relevance to the research. Subsequently, stratified sampling was employed to divide respondents into subgroups (strata) based on shared characteristics. The sample size was 311 management staff. Questionnaires were used to collect data from all respondents. These questionnaires were piloted to help the researcher reduce ambiguity and ensure the items were valid and reliable. Descriptive statistics, mainly mean and standard deviation, were used to summarize the quantitative data. Additionally, the study conducted inferential statistical analysis, including correlation and regression analysis. Data was presented using tables. The study was beneficial to the management of Kenyan commercial banks by providing insights into how these strategic banking channels can be used to improve performance in terms of profitability and customer satisfaction. It also helped the government of Kenya understand how these channels significantly influence the performance of commercial banks, which are key partners in achieving development goals through tax payments, revenue collection, and government lending. The study found that agency banking has frequently created a wider customer base across the country. Mobile banking has frequently enabled banks to allow their customers convenient access to their accounts anytime. ATMs were found to be cheaper to build and maintain, reducing a bank teller’s workload and labor costs. Internet banking has frequently enabled banks to offer funds transfer services to customers both within and outside the country. The research concluded that agency banking channels had the greatest effect on the performance of commercial banks in Kenya, followed by ATM banking channels, then internet banking channels, while mobile banking channels had the least effect. The Central Bank and the Kenyan government need to accelerate the interoperability of these strategic banking channels among commercial banks. In the long run, this will help banks reduce the cost of investing in technology individually by jointly developing and sharing available technological platforms and resources to offer products and services to their clients seamlessly.
Description
A Research Project Submitted to the School of Business, Economics and Tourism in Partial Fulfilment of the Requirement for the Award of the Degree of Master of Business Administration (Strategic Management Option) of Kenyatta University, November 2024.
Supervisor
Mary Ragui