Bancassurance, Sales Channels, Savings Mobilization and Financial Performance of Commercial Banks in Kenya

Abstract

This thesis set out to ascertain the relationship among Bancassurance, Sales Channels, Savings Mobilization and financial performance of commercial banks in Kenya by addressing five key gaps observed in literature.Four specific objectives were developed and analyzed namely: to ascertain the relationship between bancassurance and financial performance of commercial banks in Kenya; to determine the intervening effect of savings mobilization on the relationship between bancassurance and financial performance of commercial banks in Kenya; to establish the moderating effect of sales channels on the relationship between bancassurance and financial performance of commercial banks in Kenya; ultimately, to establish the joint effect of bancassurance, sales channels and savings mobilization on the financial performance of commercial banks in Kenya. A population of twenty seven (27) commercial banks undertaking bancassurance in Kenya licensed by the Central Bank of Kenya was covered whereby a sample of twenty four (24) responded therefore attaining a response rate of 88.9%. Basic statistical tests were executed encompassing reliability tests by utilizing the Cronbach's alpha, normality tests by employing Shapiro-Wilk measure and multicollinearity tests; descriptive statistics including the mean, standard deviation, coefficient of variation, skewness and kurtosis tests; correlation analysis by applying Spearman's rank order coefficient; and Data Envelopment Analysis (DEA) technique to determine the efficiency scores of sales channels. Ultimately, the hypotheses were tested by applying multiple regression analysis.The findings indicated that there is a statistically significant positive relationship between bancassurance and financial performance of commercial banks; savings mobilization has no statistically significant intervening effect on the relationship between bancassurance and financial performance of commercial banks; sales channels have no statistically significant moderating effect on the relationship between bancassurance and financial performance of commercial banks; finally, bancassurance, sales channels and savings mobilization have a statistically significant joint effect on the financial performance of commercial banks in Kenya. The study concludes that the connection between bancassurance and financial performance is positive, hence the higher the bancassurance transactions, the better the financial performance of commercial banks. This supports diversification by commercial banks into non-traditional financial intermediation activities. The findings of this study have contributed to existing knowledge in theory, practice and policy in the domain of bancassurance, sales channels, savings mobilization and financial performance by adducing evidence that the relationship between bancassurance and financial performance of commercial banks is direct without the intervention of savings mobilization and moderation by sales channels.Moreover, the joint effect of bancassurance, sales channels and savings mobilization on the financial performance of commercial banks was examined, a relationship that had not been investigated by prior empirical studies. Methodological values are offered by virtue of measuring financial performance of commercial banks by a weighted composite index derived from pre-tax profits, return on assets and non-interest income as a ratio of total income. The managers of commercial banks will find this findings beneficial in making diversification decisions into non-traditional financial intermediation activities to improve financial performance. Government policy makers and regulators such as the Central Bank of Kenya and Insurance Regulatory Authority will gain from the findings of this study by formulating policies and regulations that allow the blurring of operational boundaries between commercial banks and insurance companies to enhance growth of the financial sector.The study encountered the limitation of less bancassurance transactions (less data) in the initial year of study of 2011, as most commercial banks in the sample did more bancassurance business as from 2012