Bank Competitive Landscape and Competition in the Banking Sector in Kenya
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Date
2019
Authors
Omolo, Jacob
Mdoe, Jackson
Wawire, Nelson
Journal Title
Journal ISSN
Volume Title
Publisher
African Review of Economics and Finance
Abstract
This study investigates the evolution of competition among commercial banks
in Kenya with changes in the bank competitive landscape. Employing system
GMM and the performance dynamics approach, the study establishes that bank
consolidation has an inverted U effect on competition in the banking sector in
Kenya, growth in technology spurs competition among commercial banks in
the short run but is impotent in the long run and the progressive increase in
the core capital requirement for commercial banks from KES250 million in
2008 to KES1 billion in 2012 slowed competition in Kenya’s banking sector
by 3.3 percentage points. Arising from the findings the study concludes that
consolidation of commercial banks is a short to medium term instrument for
promoting competition in the banking sector in Kenya, growth in technology is
effective in promoting competition in Kenya’s banking sector in the short run
rather than in the long run and blind increases in the core capital requirements
can lead to undesired outcome of reduced competition in the banking sector in
Kenya.
Description
Keywords
Bank competitive landscape; Intermediation efficiency; Exceptional profits