Impact of Islamic Banking on the Financial Performance of Conventional Banks Offering Islamic Banking Products in Kenya

Abstract

Islamic banking is a quickly developing segment of the financial sector in Kenya everer since its inception. The effect of Islamic banking on the budgetary performance of conventional banks is of great importance to investors in the industry. The study therefore, sought to determine the impact of the financial Islamic banking on performance of conventional banks in Kenya.The study adopted a descriptive research design. The study comprised of 6 conventional banks offering Islamic banking products. Secondary data on Islamic banking products for the financial years 2009-2015 was obtained from the financial statements of conventional banks that provide Islamic banking data and products was analyzed using Statistical Program for Social Sciences form (SPSS) and excel as the fundamental computer strategy for data analysis. The study found that Murabaha, Musharaka, Tawarruq, Mudaraba, Ijara, Bank size and Liquidity has positive and significant impact on the financial performance of the conventional banks in kenya. The study specifically found that bank size and liquidity had the most statisticall significance on the financial performance. The study also established that Murabaha and Musharakais the most influential Islamic banking product on conventional banks performance. Therefore, commercial banks should promote and market the Murabaha and Mudaraba products among its customers so as to foster bank performance. They should also market Tawarruq, Musharaka and Ijara, as they also have a positive and significant influence on financial performance.The study recommended that conventional banks in Kenya should sensitize its customers on the need to promote partnership through financing business ideas. Conventional banks should also diversify and increase their Islamic banking products to reach a larger market.