Determinants of growth of Kenya Commercial Banks in Kakamega Central sub-county, Kenya

Abstract

This research investigated some of the key determinants of commercial banks' growth in Kakamega central Sub-County. The following study objectives guided the study: to examine how macroeconomic factors influence the growth of Kenya Commercial Banks in Kakamega Central Sub-County; to establish how capital adequacy influence the growth of Kenya Commercial Banks in Kakamega Central Sub-County; to determine how asset quality influence the growth of Kenya Commercial Banks in Kakamega Central Sub-County and to establish the influence of management efficiency on the growth of Kenya Commercial Banks in Kakamega Central Sub-County. Conceptual framework guided the study illustrating how the various variables were interrelated. The study adopted a descriptive survey design. The target population consisted of 10 commercial banks, 10 supervisors, 10 branch managers and 225 employees. Simple random sampling techniques was used to select 68 employees while purposive sampling technique was used to select supervisors, human resource managers and branch managers. Data was collected by use of questionnaires and interview schedules. Validity was checked during piloting to ensure all the items in the main study were functioning. Moreover, to ensure validity of the instruments, content validity was established Pilot testing process was used to test reliability comparing with a Cronbach's Alpha Coefficient of which yielded an alpha of 0.84. The following were the study findings: The study findings indicated that there was therefore, a marginal weak association between macroeconomic factors and growth of Kenya Commercial Banks. Therefore, addressing factors like return on equity, return on asset, net interest margin and number of employees adequately could lead to enhanced growth of Kenya Commercial Banks. Correlational results between capital adequacy and the growth of Kenya Commercial Banks had a weak positive association; an indication that increases in capital adequacy could improve the growth of commercial banks. Capital adequacy had a marginally weak but positive association on the growth of Kenya Commercial Banks. There was a weak positive relationship between management efficiency and growth of Kenya Commercial Banks in Kakamega Central Sub- County. The following recommendations were made based on the findings and the conclusions of the study: The government should ensure that the interest rates suggested by the Central Bank of Kenya are adopted by both commercial banks and micro financial institutions so as to encourage the business owners to access micro credit facilities. There should be clear loaning policies to avoid misunderstanding on expectations on repayment period and the interest rate on the borrowed loan should be subsidized by the lending institutions. The government should reduce the tax rate for Kenya Commercial Banks. The researcher then analysed the data and presented the results in form of frequency tables. The findings of this study may be useful to the Ministries Trade, academicians and researchers in their improvement of pol icies and practices on Kenya Commercial Banks